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The prime objective of end of financial Year strategies is to minimise your tax liabilities. This article focuses on some of the most important strategies for small business with an aggregated turnover not exceeding $2 million.

 

Defer the Derivation of Income

This strategy applies to businesses that recognise income when the Invoice is raised ( accrual basis). You can delay raising the invoice until after 30 June, thereby delaying the derivation of assessable income until the next tax year.

 

Consider Pre-Paying Deductible Expenses

Small businesses and individual non-business taxpayers may prepay expenses up to 12 months ahead and claim a deduction in the current tax year. Consider this strategy only if your cashflow permits and the payment is on a commercial basis. Some example of expenses that can be prepaid are:

  • Consumables such as Office supplies and consumables.
  • Insurance premiums including workers compensation.
  • Interest on business related loans and travel and accommodation expenses for trips to be undertaken in the next tax year.

 

Instant Business Asset Write-Off

This strategy is for business entities with a turnover threshold not exceeding $2 million during the 2016 tax year. You may be eligible for the $20,000 instant asset write-off. This applies to most new and used depreciating assets acquired, used and/or installed ready for use in the business in the 2016 tax year.

 

Business Start-Up Costs – Immediate deductibility

Small business entities are entitled to an immediate deduction for all start-up costs incurred in the 2016 tax year. Currently there is a $2 million threshold for this tax relief. However there is a budget proposal to extend this relief from 1 July 2016, to entities with a turnover of less than $10 million.

 

Small business Capital Gains Tax (CGT) Concessions

Generally, if you are selling your small business (i.e. turnover less than $2 million) you may qualify for the small business CGT concessions. Capital Gains Tax and the small business CGT concessions can both be complex. It is recommended that you consult your Accountant before entering into the transaction.

 

Superannuation and Self-employed individuals

Self employed individuals, can make tax deductible contributions which are taxed at a maximum of 15% in comparison to your marginal tax rate, which can be up to 47% for the year ended 30 June 2016.

To claim a tax deduction for superannuation contributions in the current income tax year, the superannuation fund must physically receive the contribution on or before 30 June. So ensure that the payment is made early to enable receipt by the fund and a tax deduction in the current income tax year.