TAX NEWS - June 2010

Australia Tax: End of financial year tax tips

With the end of the financial year fast approaching, what do small businesses need to prepare? For some tax tips and how to stay clear of the tax traps, Joe Kaleb, CEO of Australianbiz.com.au joins Peter Switzer on his Sky News Business Channel program – SWITZER.

Kaleb advises there are a few tax strategies to look at before the end of financial year. One of the major ones is superannuation contributions (salary sacrificing) of $50,000 for people over 50 years old and $25,000 for under 50.

"You've got those thresholds, but … you've got the excess contributions. You've got to be careful that you don't go over those limits because you potentially get slugged 46.5 per cent," he says.


Small biz tax tips


For small businesses, Kaleb explains that with any purchases of equipment under $1000 you can get a full 100 per cent tax deduction.

"Anything over $1000, you get an immediate 15 per cent deduction in that year and 30 per cent the next year, so that's a good incentive."

Next, Kaleb says many small businesses don't realise they can claim a deduction for expenses they haven't yet paid for.

"If you had a repair bill – someone came in and did some repairs to your office or to some equipment, this month, last month and hasn't yet sent you the invoice, if you ask them for the invoice, you can actually claim the expenses as a deduction at 30 June," he says.

So should businesses ask people to not make payments if you think you're going to have a big tax slug? Kaleb explains this depends on whether you're on a cash or accruals basis.

"If you're on an accruals basis, you get taxed as you invoice for the goods and services, whereas when you're on a cash basis, it's when the money comes in," he says. "So if you're on a cash basis, sure, ask your customers to pay you after June. Mind you, you can't stick the cheques in the drawer, if you receive them before the end of June and bank them in the new year."


Bad debt write-off

A non-cash tax tip is to write off bad debts before the end of June, Kaleb says. If any of the debts have been outstanding for more than 12 months, small businesses can claim the GST credit back.

"That can be substantial for some businesses if there are some large debts – some big company's gone bust and owes you a lot of money – there's a potential cash flow benefit there."