As we approach the end of the financial year it’s a good time to start thinking about what you could do to minimise your tax liability.
New items for the 2021 financial year
- The company tax rate for base rate entity companies has reduced to 26% for base rate entities (a drop from 27.5%). From 1 July 2021, the tax rate will drop to 25%.
- In last year’s budget, loss carry-back measures were introduced. This means eligible companies can claim a refundable tax offset using the new loss carry-back measures when they lodge their 2021 financial year tax returns.
- Where your business has claimed JobKeeper & Cash Flow Boost payments throughout the 2021 financial year, ensure that records are kept to prove eligibility.
- Temporary full expensing for asset purchases and instant asset write off: please refer to our detailed summary here.
- Carry-forward unused concessional contributions: individuals can claim an additional tax deduction if a superannuation contribution is made to use up unused concessional contributions from the 2019 and 2020 financial years. Please refer to our detailed summary here.
General Tax Planning Tips
- Capital Gains Tax: If you have made a capital gain during the 2021 financial year, you may consider realising a capital loss (if appropriate) on another asset to offset the capital gain
- Cash flow: Vary PAYG instalments for the June 2021 quarter (if appropriate). This is best done in conjunction with an estimate of your 2021 tax position
- Plant & equipment: Consider whether you have any obsolete plant & equipment to write off
- Personal superannuation contributions can be made up to your $25,000 cap (which includes contributions from your employer). To claim, your super fund will need to have received the contribution prior to 30 June and you will need to provide them with a notice of intent to claim a deduction.
- Home office expenses: You can claim 80 cents per hour for the 2021 financial year where you worked from home. Make sure you have detailed records of the periods you worked from home.
- Ensure that you retain receipts or substantiation for any expenses you would like to claim
- If you travel over 5,000kms in your motor vehicle for work, consider whether you should have a log book or whether you need to complete a new one (to be completed every five years). If you are relying on a log book prepared from a previous year you also need to record the odometer reading as at 30 June.
- Trading stock: Conduct a stocktake at 30 June, write off any obsolete or damaged stock and choose your stock valuation method. You can use cost, market selling value or replacement value, and this can be changed each year. If you are a small business entity and your trading stock value has not moved by more than $5,000 you do not have to do a stocktake.
- Trust minutes/resolution: Under ATO guidelines all trusts have to resolve where they would like to distribute their income for the 2021 financial year prior to 30 June 2021. We prepare trustee resolutions for our clients and will send these out ahead of 30 June.
- Superannuation (businesses): Pay your super before 30 June in order to get a tax deduction for the 2021 financial year. Super contributions need to have been received by the superannuation fund by 30 June.
- Prepaid expenses: If your business is a small business entity, you are entitled to a tax deduction where expenses covering a period of up to 12 months are prepaid
- Bad debts: Review and write off bad debts
Can we give you a hand?
If you would like any further detail on the above, or for an estimate of your tax position for the 2021 financial year, please contact your Holman Hodge advisor.