There are a number of end-of-year tax planning issues and strategies all businesses should consider between now and 30 June.
Taking action before the end of the financial year can save a business considerable tax.
Following are twenty five points to check, but probably the most important is to see your tax adviser who can relate the various opportunities to the particular circumstances of your business.
Generally, it is advantageous to defer income until after the year end, and to claim deductions in the current income year.
Consider the timing of year-end dividend payments, particularly in light of the new Simplified Dividend Imputation rules.
Minimise the possibility of having a loan received from the business deemed to be a dividend.
Simplified Tax System
For the reasons outlined in Neil Wickenden's article on page 5, small businesses should consider becoming a Simplified Tax System taxpayer.
Consider the application of the prepayment rules which can give a business a tax deduction in the current year.
Consider the commerciality and key issues of any investment arrangements made by the business, and if there is a Product Ruling.
Review the "effective life" of new plant and consider self-assessing effective life.
Review the status of all plant to see what is obsolete and what can be written off.
Review classification of expenditures between asset acquisition and maintenance items.
Consider the timing of asset disposals to utilise capital losses and defer possible assessable gains.
Consider whether recent changes to the small business CGT concessions apply to any capital gains.
If the business is a trust, consider whether a family trust election should be made. Trust losses Ensure that the trust loss provisions are considered if the trust has made losses.
Non commercial losses
Determine whether the non commercial loss rules apply.
Review your operating structure and ensure that the PSI measures have not been breached.
Ensure that superannuation contributions are made by no later than 30 June 2007 so that the deduction is in this financial year.
Make appropriate adjustments to GST already paid or credits claimed.
Review intra-group transactions as there may be a liability to pay GST (eg. management fees, commercial rent etc) charged to another group entity.
General Value Shifting
Consider whether the new General Value Shifting rules apply to your company or trust.
Consider the benefits of entering the Tax Consolidation regime.
Review your Thin Capitalisation position as the measures now apply to both inward and outward investments.
If you have business debts that may be written off as "bad", ensure that you satisfy the relevant criteria for bad debt deductibility.
Check that your motor vehicle log book satisfies the substantiation requirements.
Statute barred loans
Consider how your company will address any statute barred loans prior to year end.
Review the application of the debt/equity rules to the company.
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.