Businesses – 2021 Year End Tax Planning Series
As we move towards the end of the 2021 financial year, it is a good idea to start considering what tax planning strategies to put in place now to minimise your tax liability. In this eight-part series, we will outline a number of suggestions that may assist taxpayers to legitimately minimise or defer their taxation exposure.
Please note these suggestions are of a general nature only and should not be relied upon without seeking specific personal advice. With 30 June fast approaching, you need to act quickly, and we encourage you to contact our office on 1300 620 345 to schedule a meeting as soon as possible to assess your options and discuss the steps you need to take.
If cash flow and business reality allow, consider deferring the derivation or receipt of income until the next financial year. This is especially relevant for companies with the change in tax rate. If on a cash basis, consider trying to defer the receipt of cash. If reporting income on an accruals basis, defer the derivation of income by holding back invoices if possible until after 30 June.
Prepayment of Expenses
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. Most prepayments now are not deductible until the period to which they relate (some exceptions apply), although small businesses and individuals may be able to deduct 12 months of prepayments in the year paid.
Write-Off Bad Debts
Review your debtors and if any are unlikely to be recovered, write them off as bad debts before 30 June. This will reduce your income tax and should generate a GST refund (for taxpayers registered for GST on a non-cash basis).
Motor Vehicle Logbooks
If you use a Motor Vehicle in producing your income you may need to record Motor Vehicle Odometer readings as of 30 June 2021 and prepare a logbook for 12 continuous weeks if your existing one is more than 5 years old.
Please note, if you commence the logbook prior to the 30 June 2021, the usage determined will still be appropriate for the whole of 2020/21. As such, it is not too late to start preparing one for the current financial year.
Prepare for a stock take on 30 June. Identify any obsolete or old stock and scrap it or write it down to its correct market value. Individual items of trading stock can be valued at cost, market value, or replacement value for tax purposes. The tax value may differ to the accounting value.
Vary June 2021 PAYG Instalments
If you are a taxpayer on the PAYG Instalment system and you plan to use some of these tax planning tips to reduce your 2021 taxable income, you may be able to vary the June quarterly instalment (due 28 July) to a lower amount to assist with your cashflow.
Small Business Income Tax Offset
The small business income tax offset has been increased to 13%, up from 8%. The tax offset is a 13% discount of the income tax payable on the business income received from a small business entity (other than a company) with an aggregated turnover of less than $5m, up to a maximum of $1,000 a year.
Taxable Payments Annual Report (TPAR)
If your business provides any of the following services, you will need to lodge a Taxable Payments Annual Report (TPAR):
- Building and Construction services
- Cleaning Services
- Courier Services or Road Freight Services
- Information Technology (IT) Services
- Security, Investigation or Surveillance Services
- Government entities
The details you need to report for each contractor includes:
- Name and Address
- Gross amount you paid to them for the financial year (including any GST)
Your TPAR is due by 28 August each year.