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With the end of the 2013 income tax year fast approaching, it is now an opportune time to consider some tax planning strategies and compliance issues to ensure you and your business are in good tax health.

Individuals

1. Bring forward tax deductible expenditure

  • Repairs to an investment property;
  • Subscriptions to professional journals and memberships to professional associations;
  • Business travel expenditure (even if the trip will take place in the 2014 financial year);
  • Prepayment of interest (no longer than 12 months) on investment loans.

2. Manage your exposure to Capital Gains Tax

  • Consider whether it is appropriate to crystallise capital losses;
  • If you are selling an asset (such as property), note that Capital Gains Tax is assessed as at the date of contract, not settlement.

3. Max out your concessional superannuation contributions

  • Remember that 30 June is a Sunday, ensure that your contributions have been received in the week before;
  • Beware of the $25,000 limit on concessional contributions.

4. Consider any out of pocket medical expenditure that may be eligible for the net medical expenses offset (currently qualifying out of pocket expenditure in excess of $2,120). There is a proposal before Parliament to increase this threshold to $5,000 for the year ended 30 June 2013 and phase out the rebate by excluding those who do not claim the rebate in the year ended 30 June 2013.

5. Self-funded retirees should review their current minimum pension amount and ensure that appropriate payments have been made for the 2013 financial year.

Businesses

1. Push income into next financial year

  • Delay raising invoices for accrued income (such as Work in Progress), subject to cash flow requirements;
  • Account for income received in advance appropriately on the balance sheet;
  • Defer cash receipts from interest, royalties, rent, and dividends until after 30 June if possible.
  • By raising invoices or receiving the cash payments after 30 June it is possible to defer the point at which the income is taxed.

2. Bring forward tax deductible expenditure

  • Bonuses and directors’ fees that are quantifiable and committed to by 30 June are deductible even if only paid after 30 June;
  • Order short term consumables such as office supplies and stationery;
  • Unpaid workers’ compensation insurance premium instalments.

3. Small business asset write-offs (turnover less than $2m)

  • Immediate deduction available for assets costing less than $6,500 acquired during the 2013 financial year (previously $1,000);
  • Immediate deduction of $5,000 for motor vehicles with the balance depreciated over the effective life of the vehicle (15% in the first year, 30% each year after).

4. Manage your private company loans

  • Ensure that the minimum principal and interest repayments are made on private company loans or that the interest repayments are made where a sub-trust arrangement exists;
  • Identify any new private company loans and discuss the best tax treatment with your advisor.

5. Consider whether any bad debts can be written off

  • Bad debts must be physically written off by 30 June in order to qualify for a deduction in the 2013 financial year.

6. Consider whether any plant and equipment is obsolete

  • Review your asset register to identify and scrap obsolete equipment that is no longer required and claim a deduction for any undepreciated amounts.

7. Value trading stock a the lower of cost, market value or replacement value

  • A lower closing value of trading stock for tax purposes will generally result in less taxable income in the current financial year.

8. Pay employee superannuation contributions prior to 30 June

  • Superannuation contributions must be physically paid prior to 30 June in order to receive a tax deduction in the 2013 financial year.

9. Ensure your trust distribution resolutions are made prior to 30 June

  • Consider how your family trust will distribute its income this financial year and ensure that the resolution is documented. Failure to do so may result in the trustee paying tax at 46.5%.

Should you wish to know more, please contact Murray Howlett our Taxation Services Division on (07) 3023 1300.