Pre-30th June Tax Minimisation Strategies

PONDER THE FOLLOWING PROSPECTS

CONSIDER THE FOLLOWING PROSPECTS

  1.  Delay Deriving Assessable Income

One effective approach is to delay stemming your income until after June 30, 2018 by:

a. Delaying the Timing of the Derivation of Income until post June 30.

b . Timing of Raising Invoices for Incomplete Work (Businesses)

Where this strategy will not unfavorably affect your cash flow, consideration should be given to conceding the recognition of income until after 30 June 2018. Please note, banking amounts received before June 30 until after June 30 does not qualify because the income is deemed to have been earned when the money is received, or the goods or services are provided (contingent on whether you are on a cash or accruals basis of accounting).

  • Cash Basis Income – Some income is taxable on a cash receipts basis rather than on an accruals basis (e.g. rental income or interest income in certain cases). You should consider whether some income can be deferred in those instances.
  • Consider delaying your invoices to customers until after July 1 – this will push the derivation of the income into the next financial year and defer the tax payable on that income. If you operate on the cash basis of accounting, you only need to delay accepting the money from your customers and clients until after June 30.
  • Lump Sum Amounts – Where a lump sum is likely to be accepted close to the end of a financial year, taxpayers should consider whether this amount (or part thereof) can be deferred or spread over future periods.

2. Bringing Forward Deductible Expenses or Losses

Prepayment of Expenditures – In some circumstances, Small Business Entities (SBE) and individuals who derive passive type income (such as rental income and dividends) should consider pre-paying expenses prior to 30 June 2018. A tax deduction can be brought forward into this financial year for expenses like:

  • Employee Superannuation Payments including 9.5% Superannuation Guarantee Payments for the June 2018 quarter (that have to be received by the Superannuation Fund by June 30, 2018 to claim a tax deduction).
  • Superannuation for business owners, directors and associated persons.
  • Motor vehicle expenses such as registration and insurance
  • Subscriptions and memberships to professional associations and trade journals
  • Accounting fees
  • Printing, stationery and office supplies
  • Wages, bonuses, commissions and allowances
  • Contractors
  • Rent for July 2018 (and possibly extra months)
  • Insurances
  • Travel and accommodation expenses
  • Utility expenses – telephone, electricity and power
  • Trade creditors
  • Advertising including directory listings

A deduction for prepaid expenses will generally be allowed where the payment is made before 30 June 2018 for services to be rendered within a 12-month period. While this strategy can be effective for businesses operating on a cash basis (not accruals) basis, we never recommend you spend money on items you don’t need. However, paying expenses in June that are due in July could save you some tax this year and provided your cash flow permits, it makes good business sense.

Superannuation Contributions – some low or middle-income earners who make personal (after-tax) contributions to a superannuation fund may be entitled to the government co-contribution. The amount of government co-contribution will be contingent on your income and how much you contribute. (Refer to the Superannuation Section for more information)

Capital Gains/Losses – the timing of the sale of assets is critical and deferring the sale until after June 30 will defer the tax exposure on the profit. Of course, if you have made other capital gains during the financial year it could be worth bringing forward the sale and crystallizing the loss so you can offset it against the other capital gains. Note that the contract date is often the key date for when a sale has occurred for capital gains tax purposes, not the settlement date.

Accounts Payable – If you operate on an accruals basis and services have been provided to your business, ensure that you have an invoice dated June 30, 2018 or before so you can take up the expense in you accounts for the year ended 30th June 2018.