Tax planning tips for 30 June 2010 and onwards

There is just a few weeks to go until 30 June 2010 now is the time to consider potential tax planning/cash flow saving tips.

We outline a few for your consideration.

1.    Contribute to super by 30 June 2010

Concessional super contributions are limited to:

  • $25,000 for workers below 50 years of age
  • $50,000 for workers 50 years and over

Note that the increase of $50,000 in concessional contributions for workers below 50 years are to apply from 1 July 2012 only  – this is not in effect for the 2010 year.

For excess deducted contributions above age-based limits this will attract additional tax of 31.5%.

Concessional super contributions include super guarantee contributions and contributions claimed as tax deductions generally by self-employed persons.

Note, the current maximum non concessional (i.e. non deducted) remains unchanged. The maximum non concessional contributions are $150,000 per member per annum or $450,000 upfront per member for a 3 years term.

2.     Defer income and bring forward business expenses

Consider your estimated taxable position for the year ending ahead.  Can you bring forward expenses which would otherwise be paid or incurred after 30 June 2010?  Can you defer deriving income which would otherwise be derived before 30 June 2010? 

3.     Are you eligible for the SBE concessions?

Are you carrying on a business and your aggregate turnover is less than $2 million?  If yes, you may be considered to be an SBE and be eligible to access all small business tax concessions, including simplified depreciation rules to assist with streamlining compliance for small businesses.

4.     Prepay expenses

Most businesses must apportion the deduction for prepaid expenses over the period the expenditure relates to.  However, individual non-business and SBE taxpayers can prepay some expenses up to 12 months in advance and receive an upfront tax deduction on these prepayments.

5.     Bad debts

Ensure you review all debts before 30 June 2010. Applicable for businesses which recognise income on an accruals basis (ie. not cash basis), bad debt expenses can be claimed as a tax deduction only if they are “bad” and written off.  Effectively for 30 June 2010, to claim bad debt expenses, the amount would have been previously recognised as assessable income and a commercial judgment has been made to substantiate the write-off. 

Examples provided by the Australian Taxation Office (ATO) where a debt will be a “bad debt” include the debtor cannot be traced, the debtor company is in liquidation or receivership, there is little or no likelihood of the debt, or the part of the debt, being recovered.  Reminder and formal demand notices served on the debtor as well as a record of follow up calls made indicate you would have taken steps to recover the debt.

6.    Trading stock

Assess you valuation methodology of either the lower of cost, market value or replacement. It is important to run an inventory report at 30 June 2010 as this will substantiate your financial accounts.

Identify any obsolete stock as a special valuation rule may apply. Ensure you scrap unwanted stock by 30 June 2010 and account for these write offs. Small business entity taxpayers do not undertake a stock valuation if the difference between opening and closing value is less than $5,000.

 7.     Review effective life of business assets

Review your business asset register to determine if any furniture and fittings, plant and equipment items are obsolete, scrapped, sold or accurate valued.  Remember that the small business tax break is available for the 2010 year for assets acquired before 31 December 2009 where a tax deduction can be claimed in addition to the usual allowable depreciation rate.  For small business entities (SBEs), this equates to 30% of tangible eligible business assets, and for all other non-SBEs, the rate is 10%.

8.     Directors’ and Employees’ Entitlements

Conduct shareholders’ meetings before 30 June 2010 to approve directors’ fees to get deductions for year 2010.

With regards to arrangements for employee bonuses based on 2009/2010 results, ensure these are improved by Directors and are in place before 30 June 2010 with employees notified of the bonuses due and owing.

9.     Company Loan Agreements

Private company loans have been a spotlight of the ATO and court activity over the last 12 months.

These loans that extend beyond the end of the 2010 year are to be properly documented to ensure that a tax liability is not triggered under the Division 7A tax rules. Minimum annual repayments of a properly documented loan are also required. Non-compliance with the rules can result in the loan balance being deemed as a dividend.

10.    Trusts

The ATO has only recently released a Law Administration Practice Statement and a Decision Impact Statement in relation to how trust income is distributed to beneficiaries and how it is taxed. When considering distributions from trusts for the 2010 year, the 'proportionate' approach (as regards to dividends, distributions, franking credits) should be adopted as the distribution method as opposed to the 'quantum' approach (which has been a common alternative method in which trust distributions are with reference to amounts and not same proportions of dividends, distributions and franking credits).

Further consideration should be made to any unpaid present entitlements for distributions previously made to bucket companies following the ATO's recent announcements and views on potential Division 7A exposure.

11.  Claiming motor vehicle mileage expenses

For the 2010 year, the cents per kilometre rates for calculating motor vehicle expenses will not change from the 2009 year rates:

  • Small car (non-rotary - not exceeding 1600cc; rotary - not exceeding 800cc) - 63c/km;
  • Medium car (non-rotary - 1600-2600cc; rotary - 800-1300cc) - 74c/km;
  • Large car (non-rotary - exceeding 2600cc; rotary - exceeding 1300cc) - 75c/km.

12.  Sale of Investments

Where CGT assets will be realised for a gain, consider whether delaying the sale (if property the date of exchange) until after 30 June 2010. This is unless you have losses that may be lost because of the company or trust loss rules.

Further, potentially crystallise capital losses to offset against capital gains the loss may be disallowed in the event of a wash sale where the loss asset or a similar asset is reacquired or continues to be controlled by taxpayer. This can create a deferral of tax to a future year.

If assets have been held for less than 12 months consider delay of sale until 12 months to advantage of the CGT discount concessions Consider the small business concessions require the taxpayer to be a small business entity or to derive an annual turnover of less than $6 million. Also consider any potential superannuation contributions before the due date of lodgement of a tax return if applying superannuation retirement exemption for a sale of an active asset.

13.  Year End Tax Effective Investments

Consider the following if deciding to invest into any tax schemes, investment products or making donations:

  • Has the promoter obtained a product ruling
  • Is it the subject of an ATO Taxpayer Alert
  • Is it a registered charity and not for profit organisation
  • Consider the impact of Part IVA and integrity measures with any schemes

Please note the ATO warning signs include:

  • Arrangement contrived or artificial
  • Limited or non-recourse funding
  • Minimal cash outlay
  • In-built exit strategies
  • High management fees or promoters’ commission
  • Arrangement not economically viable without the tax benefit
  • The arrangement has not been independently assessed for economic viability; and
  • There are prepayments involved (may not be fully Deductible in current year).

NSW State Budget Update

The NSW State Budget released on Tuesday, 8 June 2010 indicated that there will be $180 million in new tax cuts for the 2011 year.

The payroll tax cut due in January 2011 will be brought forward to 1 July 2010. The payroll tax will be again be cut on 1 January 2011 to 5.45 per cent.

*          *          *


The above information is of a general nature only and is not intended to address the circumstances of any particular individual or entities nor does it constitute advice from Azure Group that you may rely upon. Consequently Azure Group accepts no responsibility to any person who acts on information herein without consultation with Azure Group.


If you would like to discuss any of the above, please feel free to contact us

Azure groups CFO networking event a success
Tax tips for the end of the financial year - 2010

About Author

Azure Group
Azure Group

Azure Group is the leading Chartered Accounting, Business Advisory and Strategic Advisory firm supporting the growth & success of fast growing entrepreneurial businesses.

Related Posts
R&D Tax Incentive: A Checklist for Registering Your R&D Activities
R&D Tax Incentive: A Checklist for Registering Your R&D Activities
ATO Urges Taxpayers To Be Wary Of Fake MyGov Messages
ATO Urges Taxpayers To Be Wary Of Fake MyGov Messages
It’s Fringe Benefits Tax Time – Lodge & Pay Your FBT by 22 May or 26 June
It’s Fringe Benefits Tax Time – Lodge & Pay Your FBT by 22 May or 26 June


Subscribe To Blog

Subscribe to Email Updates