Most businesses, including small businesses, are taxed on an accruals basis – meaning income is taxable when it is invoiced. Accordingly, where invoices can be delayed until July, they will not be taxed until the 2015 year.
Business Income and Expenses
Where possible, consideration should be given to deferring income until after 30 June 2014 (especially if you expect income in the 2014/15 year to be lower than in 2013/14). Businesses should also ensure they comply with the requirements to claim certain deductions in the 2013/14 year, including:
- Review debtors for any bad debts to be written off, and ensure the decision to take the write-off is properly recorded in the accounts before 30 June;Review fixed asset and stock listings to identify any obsolete assets or stock on hand that can be written off;
- Superannuation contributions can only be claimed in the current year when actually paid to, and received by, the relevant superannuation fund before 30 June;
- Employers should review their records to ensure that superannuation contributions have been made for all eligible employees (broadly, anyone over 18 years who earned at least $450 before tax in a month), at the correct rate of 9.25% and before the relevant due date (generally, 28 days after the end of each quarter);
- Depreciation can only be claimed on most capital items if they are installed, ready for use, before 30 June;
- Any wages paid to family members, including spouses, must be reasonable for the amount and type of work performed;
- Small businesses (those with a turnover of less than $2 million) can claim expenses prepaid up to 12 months in advance; and
- Where relevant, revaluations of stock (to the lower of cost or market value) should be considered to reduce taxable income (although consideration should also be given to expected taxable income in the 2014/15 year before making any decisions).
Personal Income and Tax Deductions
- Where you hold underperforming or unwanted capital assets (such as shares), consider selling them before 30 June so any capital losses can be applied against capital gains realised earlier in the year;
- If you expect your taxable income to be lower in the 2014/2015 financial year (due to retirement or other factors), consider deferring income until after 30 June when you may be in a lower tax bracket;
- If possible, arrange for out of pocket medical expenses to be grouped in the same income year to maximise the opportunity of meeting the Net Medical Expense Rebate threshold (although only those who claimed a rebate in the 2012/2013 year will be able to access it in the 2013/2014 year and future years); and
- If you are considering making a tax deductible donation, ensure it is paid and invoiced before 30 June and is in the name of the highest income earner in your family.
The concessional deductible contributions cap for the 2013/2014 year is $25,000 per person, and $35,000 per person for those aged on or over 59 on 30 June 2013. As noted above, superannuation contributions need to be received by the relevant superannuation fund before 30 June 2014 to be counted in this year, so should be made in plenty of time to ensure they clear before this date.
The Government has also announced that the Australian Taxation Offices' new powers to penalise non-compliance by trustees of Self Managed Superannuation Funds (SMSFs) will come into effect from 1 July 2014.
Accordingly, anyone who is concerned about any aspect of their SMSF, or has any questions in relation to any transactions undertaken, should take action as soon as possible, to ensure any potential issues can be rectified before 30 June.
Should you have any questions about your 2013/14 tax, or any of the points raised above, you should contact your GCC advisor directly on 02 9899 3044.