With the end of financial year fast approaching here are our three quick small business tax tips for 2018.With the end of financial year fast approaching here are our three quick small business tax tips for 2018.
Maximise depreciation deductions.
Small business with an aggregated annual turnover of less than $10 million can still get an immediate tax deduction for nearly all individual assets purchased by 30 June 2018 that cost less than $20,000. Such assets must be used by the business for an income-producing purpose and they must be installed ready for use by 30 June 2018.
For businesses registered for GST, the $20,000 threshold is calculated on a GST-exclusive basis, but for businesses not registered for GST, the threshold is calculated on a GST-inclusive basis.
A depreciating asset that is not immediately deductible (an asset costing $20,000 or more) will be automatically depreciated at a flat rate of 15 per cent in the financial year of purchase to the extent the asset is used for income-producing purposes, and is used or installed ready for use by 30 June 2018. The adjustable value of such an asset can be depreciated, on that basis, at 30 per cent in subsequent years.
It is important to note that it is proposed that this measure be extended until 30 June 2019.
Write-off bad debts.
Businesses can only obtain income tax deductions for bad debts when various conditions are met.
A deduction will only be available if the debt still exists at the time it is written off. Thus, if the debt is forgiven or compromised before it is written off as bad in the accounts, no deduction will be available. The debt must also be effectively unrecoverable and written off in the accounts as bad in the year the deduction is claimed.
The bad debt must have been previously brought to account as assessable income or lent in the ordinary course of carrying on a money-lending business. Certain additional requirements must be met where the creditor is either a company or trust.
Pay any outstanding superannuation entitlements.
The Australian Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee (SG) contributions for periods prior to 1 April 2018.
Employers who voluntarily disclose and pay previously undeclared SG shortfalls during the Amnesty and before an SG audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period.
The announcement is subject to approval by the Parliament.
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If you have any questions please touch base with us as we are more than happy to discuss these tips in more detail.
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