Year End Tax Planning

Transcription

1 Year End Tax Planning 2014/15 Individual Tax Return Checklist Yur Checklist Claims fr deductins ü Receipts fr deductins ü Car claims and lg bks ü Please review the infrmatin belw and cntact ur ffice if yu need assistance. Tax saving strategies prir t 1 July 2015 A gd strategy t reduce tax payable is nrmally t accelerate any incme tax deductins int the current incme year, which will reduce verall taxable incme in the current year. The tax rates fr resident (adult) individual taxpayers fr the 2014/15 incme year are as fllws: Taxable Incme threshld Tax payable 1 0 $18,200 Nil $18,201 $37,000 19% f excess ver $18,200 $37,001 $80,000 $3, % f excess ver $37,000 $80,001 $180,000 $17, % f excess ver $80,000 $180,001 and ver $54, % 2 f excess ver $180, The Medicare levy f 2% generally applies in additin t these rates. 2. This rate includes the 2% 'Temprary Budget Repair Levy' which applies frm 1 July 2014 t 30 June 2017 n that part f a persn's taxable incme that exceeds $180,000. Cmmn wrk- related claims made by individuals The fllwing utlines cmmn types f deductible expenses claimed by individual taxpayers, such as emplyees and rental prperty wners, plus sme strategies that can be adpted t increase deductins fr the 2014/15 incme year. 1. Depreciable plant, etc, csting $300 r less Salary and wage earners and rental prperty wners will generally be entitled t an immediate deductin if certain incme- prducing assets csting $300 r less are purchased befre 1 July Sme purchases yu may cnsider include: bks and trade jurnals; briefcases/luggage r suitcases; calculatrs, electrnic rganisers; electrnic tablets;

2 sftware; statinery; tls f trade. 2. Clthing expenses Purchase r pay fr wrk- related clthing expenses prir t the end f the incme year, such as: r cmpulsry (r nn- cmpulsry and registered) unifrms, and ccupatin specific and prtective clthing; r ther expenses assciated with such wrk- related clthing, such as dry cleaning, laundry and repair expenses. 3. Self educatin expenses Cnsider prepaying the fllwing self educatin items befre the end f the incme year: curse fees (but nt HECS- HELP fees), student unin fees, and tutrial fees; interest n brrwings used t pay fr any deductible self educatin expenses. Als bring frward purchases f statinery and text bks (i.e., thse which are nt required t be depreciated). 4. Other wrk- related expenses Emplyees can prepay any f the fllwing expenses prir t 1 July 2015: unin fees; subscriptins t trade, prfessinal r business assciatins; magazine and newspaper subscriptins; seminars and cnferences; incme prtectin insurance (excluding death and ttal/permanent disability). Nte: When prepaying any f the expenses abve befre 1 July 2015, ensure that any services being paid fr are t be prvided within a 12 mnth perid that ends befre 1 July Otherwise, the deductins must generally be claimed ver the perid f the prepayment. Infrmatin Required We will need yu t bring infrmatin t assist us in preparing yur incme tax return. Please check the fllwing and bring alng payment summaries, statements, accunts, receipts, etc., t help us prepare the return. Incme/Receipts: r payment summaries fr salary and wages; r lump sum and terminatin payments; r gvernment pensins and allwances; r ther pensins and/r annuities; r allwances (e.g., entertainment, car, tls); r interest, rent and dividends; r distributins frm partnerships r trusts; r details f any assets sld that were either used fr incme earning purpses r which may be caught by capital gains tax (CGT). Deductins (in additin t thse mentined abve): award transprt allwance claims; bank and gvernment charges n depsits f incme, and deductible expenditure; bridge/rad tlls (travelling n business); car parking (when travelling n business); cnventins, cnferences and seminars; depreciatin f library, tls, business equipment (incl. prtin f hme cmputer); gifts r dnatins; hme ffice running expenses: cleaning cling and heating depreciatin f ffice furniture lighting

3 telephne and internet; interest and dividend deductins: accunt keeping fees nging management fees interest n brrwings t acquire shares advice relating t changing investments (but nt setting them up); interest n lans t purchase equipment r incme- earning investments; mtr vehicle expenses (business/wrk related); vertime meal allwances; rental prperty expenses including: advertising expenses cuncil/water rates insurance interest land tax legal expenses/management fees genuine repairs and maintenance telephne expenses travelling t inspect prperty; superannuatin cntributins by sle traders r substantially unsupprted taxpayers; sun prtectin items; tax agent fees; telephne expenses (business); tls f trade.

4 2014/15 Year- end Checklist fr Business Many f ur business clients like t review their tax psitin at the end f the incme year and evaluate any year- end strategies that may be available t legitimately reduce their tax. Traditinally, year- end tax planning fr small businesses is based arund tw simple cncepts i.e., accelerating business deductins and deferring incme. Hwever, Small Business Entities ('SBEs') have greater access t year- end tax planning due t particular cncessins that nly apply t them. The SBE system replaced the previus Simplified Tax System ('STS') n 1 July Taxpayers that qualify as an SBE can generally pick and chse which f the cncessins they wish t use each year (althugh see belw regarding the simplified depreciatin rules). The basic requirement t be eligible fr the SBE cncessins is that the business taxpayer's annual turnver (including that f sme related entities) is less than $2 millin. The fllwing are a number f areas that may be cnsidered fr all business taxpayers. Maximising deductins fr nn- SBE taxpayers Nn- SBE business taxpayers shuld endeavur t maximise deductins by adpting ne r mre f the fllwing strategies: r r r Prepayment strategies; Accelerating expenditure; and Accrued expenditure. Prepayment strategies nn- SBE Any part f an expense prepayment relating t the perid up t 30 June is generally deductible. In additin, nn- SBE taxpayers may generally claim the fllwing prepayments in full: expenditure under $1,000; expenditure made under a 'cntract f service' (e.g., salary and wages); r expenditure required t be incurred under law. Editr: Prepayments can be a little cnfusing, s befre yu cmmit t making a payment please feel free t call us with any queries r assistance if required. Accelerating expenditure nn- SBE This is where a business taxpayer brings frward the expenditure n regular, n- ging deductible items. Hwever, business taxpayers are generally entitled t deductins n an 'incurred basis'. Therefre, there is generally n requirement fr the expense t be paid by 30 June As lng as the expense has genuinely been incurred, it will generally be deductible. Checklist The fllwing may act as a checklist f pssible accelerated expenditure: r Depreciating assets csting $100 r less can be written ff in the year f purchase. Depreciating assets csting less than $1,000 can be allcated t a lw value pl and depreciated at 18.75% (which is half f the full rate f 37.5%) in their first year regardless f the date f purchase. r Repairs repairs t ffice premises, equipment, cars r ther business items. r Cnsumables/spare parts. r Client gifts. r Dnatins. r Advertising. r Fringe benefits any benefits t be prvided, such as prperty benefits, culd be purchased and prvided prir t 1 July 2015.

5 r Superannuatin cntributins t a cmplying superannuatin fund, t the extent cntributins are actually made (i.e., they cannt be accrued but must be paid by 30 June). Accrued expenditure nn- SBE Nn- SBE taxpayers (and sme SBE taxpayers) are entitled t a deductin fr expenses incurred as at 30 June 2015, even if they have nt yet been paid. The fllwing expenses may be accrued: Salary r wages and bnuses the accrued expense fr the days that emplyees have wrked but have nt been paid as at 30 June Interest any accrued interest utstanding n a business lan that has nt been paid as at 30 June Cmmercial bills the discunt applicable t the perid up t 30 June 2015, where the term f the bill extends past 30 June. Cmmissins where emplyees r ther external parties are wed cmmissin payments. Fringe benefits tax if an FBT instalment is due fr the June 2015 quarter, fr example, but nt payable until July, it can be accrued and claimed as a tax deductin in the 2015 incme year. Directrs fees where a cmpany is definitively cmmitted t the payment f a directr s fee as at 30 June 2015, it can be claimed as a tax deductin. Maximising deductins fr SBE taxpayers Deductins can be maximised fr SBE business taxpayers by accelerating expenditure and business expenses. prepaying deductible Frmer STS taxpayers wh have cntinued t use the STS cash methd since befre 1 July 2005 cannt accrue expenses, but ther SBE taxpayers n an accruals basis can accrue expenses (see abve regarding accruing expenditure). Accelerating expenditure SBE Frmer STS taxpayers wh have cntinued t use the STS cash methd since befre 1 July 2005 and wh qualify as an SBE are generally nly entitled t deductins if they have paid the amunt by 30 June. All SBE taxpayers can chse t write- ff depreciable assets csting less than $1,000 in the year f purchase. Als, assets csting $1,000 r mre are allcated t an SBE general pl and depreciated at 15% (which is half the full rate f 30%) in their first year. Therefre, where apprpriate, SBE business taxpayers shuld cnsider purchasing/installing these items by 30 June It shuld be nted that SBE taxpayers chsing t use the SBE depreciatin rules are effectively 'lcked in' t using thse rules fr all f their depreciable assets. STOP PRESS: It is imprtant t nte that prpsed changes t the SBE capital allwance regime will impact the 2015 incme year. Under the prpsals, the small instant asset write- ff threshld will be temprarily increased t 'less than $20,000', fr assets acquired and installed ready fr use between 7.30 pm (AEST) 12 May 2015 and 30 June The increased threshld will als be available t SBEs wh previusly 'pted ut' f the SBE capital allwance prvisins. On 28 May 2015, the Tax Laws Amendment (Small Business Measures N.2) Bill 2015, was intrduced t give effect t this measure. Prepayment strategies SBE SBE taxpayers making prepayments befre 1 July 2015 can chse t claim a full deductin in the year f payment where they cver a perid f n mre than 12 mnths (ending befre 1 July 2016). Otherwise, the prepayment rules are the same as fr nn- SBE taxpayers. The kinds f expenses that may be prepaid include: r Rent n business premises r equipment. r Lease payments n business items such as cars and ffice equipment. r Interest check with yur financier t determine if it s pssible t prepay up t 12 mnths interest in advance. r Business trips. r Training curses that run n r after 1 July 2015.

6 r Business subscriptins. r Cleaning. Infrmatin Required This is sme f the infrmatin we will need yu t bring t help us prepare yur incme tax return: r Stcktake details as at 30 June. r Debtrs listing (including a list f bad debts written ff) as at 30 June. Nte: In rder t claim a deductin, the debt must be written ff n r befre 30 June. r Creditrs listing as at 30 June.