Tips to reduce tax liabilities

Mid-tier accounting firm RSM Bird is advising business owners to review their tax liabilities before 30 June to maximise tax opportunities.

The end of financial year presents opportunities for business owners to reduce their tax liabilities and ensure they are in the best position for the new financial year, said Andrew Graham, national head of business solutions, RSM Bird Cameron.

Below are key opportunities for business owners to reduce their tax liabilities.

Superannuation: The minimum super business owners must pay is 9.25% of each eligible employee’s ‘ordinary time earnings’. Payments must be made at least four times a year within 28 days after the end of each quarter, including the quarter ending 30 June 2014. Business owners can generally claim a tax deduction for super contributions that are paid on time. However, super is one contribution that can’t be claimed until it is paid. Business owners need to pay the contribution in sufficient time so it is banked by the fund before 30 June to claim it in the 2014 year.

Personal super: Business owners need to pay their personal super contributions so that it is banked by the fund trustee prior to 30 June to get a deduction. The fund trustee needs to be notified of the intended deduction as well.

Bad debts: Business owners should go through their debtors list and write off anything that is not collectible. These should be written off prior to 30 June to be eligible for a deduction.

Review carrying value of assets: Business owners should review the carrying written down value of assets on the business’s depreciation report and if applicable write off any assets which are no longer used in the business.

Stocktake: A 30 June stocktake is required to determine the correct value of closing inventory and find any obsolete or damaged stock. Business owners can choose to value the stock at cost, replacement or market sale price depending on what is lower. Stock that is obsolete or damaged can be written off or reduced in value for tax purposes and claimed as a deduction.

Bring forward expenses: Business owners should undertake forward planning and look at expenditure for the next few months. There may be some expenses, such as training, repairs, maintenance or prepaying interest (only for Small Business Entity taxpayers), that would be better brought forward.

Shareholder loans: Ensure that loans are set up properly or repaid by the end of the financial year to avoid a deemed dividend and unexpected tax.

Trust distributions: If operating a trust, make sure the trustee decides how the profit will be distributed prior to 30 June and that this is recorded and signed off before the end of the financial year.