10 more end of financial year tax tips for SMEs

Last week, we brought you 10 great tips for minimising your tax bill at the end of the financial year. But there’s more.

We’ve asked our experts for 10 more helpful tips. With less than a week left until June 30, it’s time to put your skates on.

1. Employee bonuses

As you prepare for the end of the financial year, Crowe Horwath tax partner Tim Holloway recommends SMEs sign off on any bonuses for employees.

While Holloway told SmartCompany the “fool-proof” way to make sure you record employee bonuses is to inform the employee in writing, he said the actual bonuses do not have to be paid before June 30. What’s important is a definite commitment has been made and there is a record of the commitment.

Holloway says employee bonuses are usually finalised within the last few weeks of the financial year, so there’s still time to get organised.

2. R&D tax incentive

Pitcher Partners tax partner Peter Braine says some SMEs may be able to bring forward spending on research and development into the current financial year, to make advantage of the current level of the R&D tax incentive.

“On July 1, the rate of the R&D tax rebate will drop by 1.5%,” explains Braine. “That reduction is being driven by the reduction in the company tax rate from July 1, 2015. So where possible, businesses can consider bringing forward R&D spending in the current financial year to claim the biggest benefit.”

However, Braine says this only applies to a small number of firms which engage in research and development.

3. Review your depreciables

The end of the financial year is also the time to review your depreciable assets, says Holloway.

“It’s worth reviewing your depreciation register to see whether you’ve got the rates right,” he says. “And you don’t always have to accept the Tax Office’s rate, but the rate does have to be reasonable.”

Each year the Tax Office publishes a taxation ruling about the effective life of assets and Braine suggests business owners use this as a guide when calculating depreciation rates. But like Holloway, Braine says the ATO’s ruling is just a guide.

“You are not required to follow the ATO’s guidance if you can determine that the life of an asset is different to the ATO’s,” says Braine. “If you can determine that the effective life is shorter than the ATO’s, you can increase the depreciation deductions you are claiming in your tax return.”

4. Black hole expenditure

Your business may also have expenditure that does not fit into other boxes such as depreciables or capital gains but can still be claimed, says Holloway. This expenditure is called “black hole expenditure”.

According to Holloway, expenditure on things such as professional business advice may be tax deductible as ‘black hole expenditure’ over a five-year period. However, he recommends asking your accountant to determine if this applies to you.

5. SMSF pensions

Last week’s tips covered superannuation contributions – both for yourself and for your employees – but Grant Field, chairman of accounting firm MGI, also recommends getting your self-managed super fund pension right at tax time.

“If you are currently drawing a pension from your self-managed super fund it is important to ensure that you have paid yourself the minimum pension required by law,” says Field.

“Where there is also a maximum limit (i.e. under 60 years of age) you should also ensure that you have not exceeded that limit,” he says. “If you don’t, the ATO view seems to be that the fund will pay 15% on its earnings rather than zero. Depending on the size of your super fund, this could be significant.”

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