2019 tax planning for small businesses
As 30 June 2019 is fast approaching, we would like to advise you of some key tax planning opportunities that your business may be in a position to take advantage of before the end of the financial year.
Extension and increase of instant asset write-off
The $20,000 instant asset write-off for small business has been increased to $30,000 from 2 April 2019. The scheduled end date of the write-off has been extended from 30 June 2019 to 30 June 2020.
Also, there is another limit of $25,000 which is available from 29 January 2019 to 2 April 2019.
For medium-sized business, which is defined as being over $10m in aggregated turnover but under $50m, an entitlement to a $30,000 instant write-off is allowed until 30 June 2020. The assets must be purchased after 2 April 2019.
Company tax cuts
For 2018/19 income year, companies with an annual aggregated turnover under $50m will have a reduced tax rate of 27.5%. To be eligible for the reduced rate, the company must be a base rate entity.
Single touch payroll
Entities who are employers are required to report the following information to the ATO from 1 July 2019:
• withholding amounts and associated withholding payments, on or before the day by which the amount is required to be withheld
• salary or wages and ordinary time earnings information on or before the day on which the amount is paid, and
• superannuation contribution information on or before the day on which the contribution is paid.
There are some exceptions to the single touch payroll allowed for employers who only make payments to closely held employees.
Fodder storage assets allowed immediate write-off
For primary producers, a new law has been enacted which allows fodder storage assets to be immediately written off.
Fodder storage assets may include silos and hay sheds, and are used to store grain and other animal feed. The immediate write-off will apply if the asset is purchased and first installed ready for use on or after 19 August 2018.
Trust tax planning should be undertaken as soon as possible. The resolution appointing or distributing income to beneficiaries needs to be made on or before 30 June 2019, or earlier if required by the trust deed.
Capital losses realised before year's end can be used to offset capital gains of that year.
Deferral of income
Subject to cash-flow considerations and anti-avoidance rules, income could be deferred to the following year, particularly if:
• income in the following year is likely to be lower, or
• tax rates for the following year are expected to be lower.
Note: For cash businesses - deferral of income can be risky, especially when the deferral puts them outside the ATO small business benchmarks.
Subject to cash-flow considerations, deductible purchases could be made by year's end in order to accelerate deductions. This applies particularly if the income in the following year is expected to be lower than in the current year.
For obsolete stock, or in other special circumstances, a special lower valuation could be adopted. Also, no adjustment for closing stock is necessary when a reasonable estimate of closing stock is within $5,000 of opening stock.
A properly authorised resolution is required when writing off a bad debt and claiming a tax deduction. A GST adjustment may also be required on the original invoice.
To claim a current year deduction for directors' fees, the company should have definitively committed itself to the payment, ie by passing a properly authorised resolution.
For the quarter ending 30 June 2019, employer superannuation contributions must be made before 30 June for a deduction to be available in the 2018/19 year.
For family businesses, it is important that annual caps for concessional and non-concessional superannuation contributions are not exceeded. The caps for superannuation contributions in 2018/19 are:
• Concessional contributions: $25,000
• Non-concessional contributions: $100,000
Information sourced using CCH iknow