Andrew Grima, Rebecca Hegarty, Morris Maroon , Dung Lam
Getting the financial affairs of your business in order as we head towards 30 June is critical. Have you:
- issued invoices for all goods/services;
- chased invoices that are 30 days past the due date;
- sent unpaid invoices of 30 days or more to Coleman Greig for collection action;
- reviewed the documentation of your credit account customers to confirm if the documentation has been properly signed/agreed to;
- reviewed whether you need to obtain or have on file any signed personal guarantees;
- reviewed whether any of your terms with customers give or gave rise to a security interest in any personal property you supplied;
- registered all security interests on the Personal Property Security Register (PPSR);
- registered all your security interests on the PPSR correctly or asked Coleman Greig to review these registrations to ensure they have been correctly registered?
As the new financial year approaches take some time and review those key aspects of your business to ensure a successful year ahead. Now is a good time to consider whether:
- you have in place current, written agreements with key customers or suppliers;
- any contracts are coming up for renewal or if you need to exercise any option to renew in this coming year;
- you hold all necessary licenses and authorisations for your business, and are these up to date;
- your insurance policies need to be reviewed to ensure they are appropriate and adequate for your current business operations;
- your trading terms are up to date, with the current copy provided to all customers;
- there are any PPSR security interests registered over your business which may no longer be required, either because you have paid off hired equipment or no longer purchase goods from a particular supplier;
- your company register, trust documents or partnership agreements are up-to-date and reflect the current structure of your business; and,
- you are thinking about a possible sale of business, and whether you should obtain advice from Coleman Greig now about how to get your business "sale ready."
As EOFY approaches, you might consider as part of your planning for the next year certain aspects of your premises lease, being a major and critical part of your business:
- whether a reconciliation is due to be provided by your Landlord for actual outgoings versus amount you have paid;
- your rent review may not be due on 1 July, but you may need to budget for any increase in the year ahead;
- if you're a retailer, you may need to provide audited sales figures shortly after the start of the new financial year; and,
- your lease may be due to expire or renewed in the new financial year so this may be a time to carry out a cost benefit analysis of renewing your current lease or relocating to a new premises.
- Review the current values of capital assets with the view to determining whether there are any opportunities to restructure their ownership to achieve a commercial objective such as asset protection or estate planning.
- The $150,000 instant asset write off concession has been extended to 31 December 2020.
- Review values of closing stock at 30 June 2020 and write down the value of the stock to market selling value where market selling value is less than cost.
- Scrap depreciable assets laying idle and are not expected to be used.
- Review debtors to identify bad debt and write off the bad debts before 30 June 2020.
- Review the tax loss profiles of loss entities to ensure losses are not locked in the wrong entity.
- Employee bonuses to be approved or declared before 30 June 2020.
- Small businesses can make prepayments before 30 June 2020 for periods of up to 12 months.
- Non-residents to sell their former Australian home before 30 June 2020 to access the CGT main residence exemption.
- Individuals should consider making tax deductible personal contributions to superannuation before 30 June 2020 - this boosts your super and reduces your tax. Individuals up to the age of 75 years may access this benefit (persons over the age of 65 years need to meet a work test). The $25,000 concessional contributions cap limits the amount of tax deductible personal contributions that can be made. The sum of an individual's personal tax deductible contributions, superannuation guarantee contributions and salary sacrificed contributions cannot exceed the $25,000 concessional contributions cap. There is notice procedure that needs to be met to claim this deduction.
- Where an individual did not fully exhaust their $25,000 contribution cap in the 2019 financial year and their total superannuation balance as at 30 June 2019 was less than $500,000 then the individual may make a 'catch up' or 'carry forward' contribution equal to the unused amount of their $25,000 contribution cap in the 2019 financial year. Provided this contribution is made by 30 June 2020, a tax deduction may be claimed on the contribution for the 2020 income tax year. This contribution is an addition to any concessional contributions the individual may receive up to their $25,000 concessional contributions cap in the 2020 financial year.
- If an individual wishes to boost their superannuation with after tax contributions then provided their total superannuation balance as at 30 June 2019 is less than $1.6 million, the individual may make non-concessional contributions up to the $100,000 non-concessional contributions cap.
- Where an individual is 65 years or less at any time in the 2020 financial year and the individual's total superannuation balance as at 30 June 2019 was less than $1.5 million then the individual may use the three-year-bring-forward rule to increase the amount of non-concessional contributions they can make in the 2020 financial year. The three-year-bring-forward rule allows the individual to make a non-concessional contribution in a financial year up to 3 times the $100,000 non-concessional contributions cap. The amount that can be contributed under the rule depends on the individual's total superannuation balance as at 30 June 2019.
- If your spouse's assessable income in this financial year is less than $40,000 consider making a superannuation contribution for their benefit. You may claim a tax offset of up to $540 provided your spouse's total superannuation balance was less than $1.6 million as at 30 June 2019.
- If your total assessable income for the 2020 financial year is less than $53,564, you are less than 71 years, engaged in employment and have a total superannuation balance of less than $1.6 million as at 30 June 2019, then consider making an after tax non-concessional contribution to superannuation. The government will make a co-contribution of 50 cents for every $1 contributed up to a maximum of $500.
- For estate planning purposes (and for the love of your spouse), consider whether you wish to split your 2019 concessional contributions in favour of your spouse if they are under preservation age or under 65 years and still working. An individual has up to 30 June 2020 to request a split, which is the lesser of 85% of their concessional contributions or $25,000 concessional contributions cap. This may assist in equalising spouse superannuation balances for estate planning purposes.
- Think ahead for the 2021 financial year as COVID-19 may adversely affect your total superannuation balance as at 30 June 2020. Whilst your total superannuation balance as at 30 June 2019 may be high (e.g. over $1.6 million), it may fall below that on 30 June 2020. Where this occurs there may be opportunities in the 2021 financial year to make non-concessional contributions to superannuation. Some forward thinking with regards to cash flow may be useful for next year.
- Individuals drawing account-based pensions and market linked income streams should ensure that the minimum pension amount has been paid by 30 June 2020. Don't forget for the 2020 financial year the minimum pension percentage has been halved. Review your pension instructions and consider whether they cater for the fact that the minimum pension percentage has also been halved for the 2021 financial year.
- Individuals who are affected financially by COVID-19 and are unemployed, receiving certain government benefits or, on or after 1 January have had work hours reduced by 20% or if a sole trader has had their turnover reduce by 20%, may access up to $10,000 of their superannuation in the 2020 financial year under the COVID-19 early release provisions. Such released superannuation is tax-free. An affected individual is also permitted to access another $10,000 of their superannuation in the 2021 financial year.
- Employers should make the quarterly superannuation guarantee contributions required by 28 July 2020, before 30 June 2020 to accelerate the tax deduction.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.