5 Things for Small Businesses to Consider Before the End of Financial Year

Earlier this month, we brought you some general tax planning considerations. In this instalment, we turn our focus to tax planning considerations for owners of small business.

The ATO recently changed its definition of small business to include businesses with aggregated turnover under $10 million – if you fall into that turnover space between $2 million and $10 million, this may be a boon from the tax office straight to your coffers. Here are a few things you may want to consider before 30 June:

Asset low value pools
Businesses with aggregated turnover under $10 million now have access to accelerated depreciation via the small business low value pool regime. This pool also allows you to an immediate write off for assets under $20,000 purchased between 1 July 2016 and 30 June 2017. Have a think about whether there are any new assets you need before end of financial year – if so, it  may be opportune to lock in that purchase now. Assets must be installed ready for use by 30 June 2017.

Trust distributions
If you are structured as a trust, don’t forget to make sure the resolution distributing income to beneficiaries is made before 30 June 2017 or earlier, if dictated by your trust deed.

Service trusts
Ensure that arrangements between your business and your service trust follow the steps outlined by the ATO in regards to commercial benefits. This includes making sure the service trust’s expenses have a necessary connection to the business activity, and the service fee markup is correctly calculated. This is a complex area so, if in doubt, ensure you consult an expert.

Division 7A
If your company has a debit loan owing to it by you at 30 June 2017, this could end up being treated as a deemed dividend by the ATO. This is a complex area of tax law so, if you fall in this category, we recommend you consult your tax practitioner for advice (preferably before 30 June).

Superannuation
Paying your employees’ superannuation before 30 June will make the expense tax deductible. Consider making the payment as part of your final payroll of the year. As owner employees, you should also take care not to exceed annual caps for concessional and non-concessional superannuation contributions.

​Every small business is different and, if you have any questions relating to your specific tax planning requirements, we would be delighted to assist. Make sure you reach out as soon as possible so that you can get your business affairs in order before 30 June.