Planning to beat the taxman?

AccomNews Sunday, May 3, 2015

0 3 minutes read

How time flies, less than two months to go to the end of another financial year. To most people Christmas comes in December each year, but get your tax planning right, and your Christmas can come early.

Each year tens of thousands of Australian small business operators pay more tax than they need to and management rights operators are no different. There are always legal and cost effective measures that can be put in place prior to the end of the financial year that can save you significant amounts of money.

Importantly, to be effective, most tax planning measures must be in place before midnight on 30 June each year so time is fast running out. Taking the time to meet with your accountant before 30 June just makes smart financial sense. Your accountant should review your current business structure to ensure it is the most appropriate for you to access all possible tax effective opportunities.

They should be able to also provide you with a strong indication of what your tax obligations will be for the current year a full 12 months before it is due. A proactive accountant will also go to the next level providing you with a customised menu of options for legally minimising your tax liability.

The good news is that there is still time to sort things out, and with this checklist you can feel confident that you are on top of your tax:

Get on top of your records – If you’ve been organised this year then you deserve to give yourself a big pat on the back! However, taxpayers who have fallen behind on any record keeping, are advised to take any necessary steps to get up to date, including seeking external assistance. Record keeping is critical and it is imperative to stay on top of your responsibilities.

Seek advice about legislation changes – These changes may be from the last financial year, and, therefore, require you to take certain steps in the next few weeks. There may also be additional changes that will be announced in the upcoming May budget. It is important to be aware of any impending changes as they may influence your tax strategy and decisions as June 30 approaches.

Refinancing your mortgage – Refinancing your mortgage usually incurs a couple of one-off costs and fees. Investors who are planning on refinancing their mortgage may care to consider doing so before June 30 in order to claim these costs as a deduction in the 2014-15 financial year.

Pre-pay interest – Property investors who have sufficient funds to pre-pay interest on a loan can do so and claim the deduction in the current financial year. It is also possible to pre-pay (and claim a deduction for) your upcoming property insurance premiums.

Bring forward maintenance expenditure – If there are maintenance tasks that you know will need to be completed on an investment property, then you may wish to complete them before June 30 in order to minimise your tax bill in the current financial year.

Stay on top of your paperwork – Make sure that you are aware of the depreciations on any fittings or repairs, as well as any other costs you have incurred, for example, strata fees, management fees or rental losses. There are also a number of small business tax breaks that it pays to be aware of as the end of financial year approaches.

Simplified depreciation – Small businesses can immediately write off the value of business assets that were less than $1000. The depreciation on assets valued at over $1000 can be calculated as a single pool that depreciates at 15 per cent in the first year and 30 per cent every year after that. However, there are some assets that are excluded from the simplified depreciation rules.

Businesses that are using the simplified depreciation should seek advice on any assets that may require a different method of calculating depreciation.

CGT concessions – There are four CGT tax concessions available to small businesses that can be extremely effective in minimizing, or even eliminating CGT liability. These concessions are:

• The retirement exemption: Available to small business owners over the age of 55, or when the capital gain is contributed to a superannuation account

• The 15 year exemption: Available to retiring small business owners who have held the asset for over 15 years

• The 50 per cent active asset reduction: Where an asset is considered to be ‘active’ the CGT liability may be reduced by 50% (the requirements here are complex and it is advisable to seek professional advice)

• The CGT rollover: If the business asset is disposed of and the business plans to purchase a similar replacement asset, then the CGT bill may be deferred for at least two years.

Ultimately, successful business operators appoint specialists in the industry from the outset and are guided by their sound advice along the way.

The accommodation industry has a long established history of delivering strong returns to operators at a relatively low level of business risk particularly where the right advice has been followed along the way. Make sure you maximise those returns by ensuring you aren’t paying any more tax than is necessary.