EOFY Frequently Asked Questions - Business

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June 1, 2022
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Strategies for Business

With the end of the financial year approaching, it’s a great time to make smart decisions about your finances. Taking action before 30 June can open up more opportunities for you. We know that there isn’t a one-size-fits-all solution to accounting, wealth management and business growth. So we’ve outlined some tax-effective strategies that you may benefit from. We can help you find what strategies are right for you and/or your business

Question: Can I claim a tax deduction for payments made to workers/contractorsNo, deduction will apply if the business does not meet its PAYG withholding obligations. However, a deduction will apply to salary, wages, commissions and bonuses paid to employees. It will also apply to payments for the supply of services where a contractor has not provided their ABN.Question: Is my audit insurance tax deductible?Yes, the premium paid for audit insurance is tax-deductible. It also covers the cost of defence in the event of a claim. The ATO continues to benchmark businesses, with cash businesses become a major focus. Technology is becoming more advanced so be aware of information sharing and matching between government and non-government institutions.How much is the instant asset write-off?The instant asset write-off caps at $30,000. However, due to COVID-19, from 12 March to 30 June the instant asset write-off was increased to $150,000 excluding GST.What is the depreciation limit for motor vehicles?The depreciation limit for the 19/20 FY is $57,581 – it applies to both the depreciation as well as the GST credits claimable.Can I use the work vehicle for private use to reduce the possible FBT?The ATO continue to focus on the use of work vehicles for private use. Business owners may consider limiting the length per trip and total km per annum.Can I delay the receipt of income to the following tax year to defer the tax payable?Yes, if the businesses accountant is using the income on a cash basis method. Delaying receipt until after 30 June, will delay the tax liability by a full tax year. If however, the business uses the accrual method, it is important to hold back issuing of invoices for the deferral to apply.Can I delay the receipt of income to the following tax year to defer the tax payable?Yes, if the businesses accountant is using the income on a cash basis method. Delaying receipt until after 30 June, will delay the tax liability by a full tax year. If however, the business uses the accrual method, it is important to hold back issuing of invoices for the deferral to apply.If accounting on a cash basis, should I pay creditors by 30 June?If cash flow allows, creditors' accounts should be paid by 30 June to maximize deductions.The 12 month rule will apply to prepayments for expenses such as registrations, insurances and subscriptions. Accounts under $1,000 are excluded from the 12-month rule.Should I restructure my business to a corporate entity for tax reasons?Depending on your circumstances, consider restructuring to a corporate entity to take advantage of the flat company tax rate. Companies with a turnover of $50 mil or less will be taxed at 27.5% in 2019 FY (this is expected to drop to 26% from 1 July 2020).Should I introduce a corporate beneficiary to a discretionary trust for tax reasons?If a re-structure to a corporate entity is not feasible, consider making a distribution to a company to maximize tax at 30%.Should I write off bad debts?Consider paying dividends to shareholders before the end of the financial year to utilise the higher rate of imputation credits, which will lower post 30 June.Have I taken advantage of the Government Stimulus packages available to my business?The Australian Government has released a number of relief packages to help businesses owners through the impact of the COVID-19 pandemic, click here to take a look and speak with an RJS Professional on 1300 27 28 29. Running a business is a never-ending business. We can help.

June 1, 2022

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