15 more tax tips for entrepreneurs

Last week, we spoke to a panel of tax experts to provide you with 15 tips to see you through the end of the financial year.

But 15 isn’t enough. So we’ve asked them all for 15 more to give you that extra advantage in tax season.

1. Trusts – don’t forget those unpaid entitlements

If you’re organising a trust, then you need to be very careful about unpaid entitlements this year. Tax experts say if your entitlement is unpaid you have to clearly identify and deal with the unpaid income distribution.

For instance, this could occur if a trust owes money to a company.

Pitcher Partners executive director Theo Sakell says you can leave amounts unpaid if you put the unpaid distribution on certain commercial terms.

“So, in other words, the trust enters into a legal agreement with the company and then under that agreement the trust will pay out that money over a longer period of time. But, each year, the trust needs to pay interest.”

“The Australian Tax Office is really concerned with the interest fees being paid annually.”

2. Capital gains tax can be a pain

Most capital gains tax issues will be unchanged this year, but Crowe Horwath tax director Tristan Webb warns there’s one thing you need to be aware of in regard to the CGT discount.

For all capital gains accrued after May 8, the Federal Government intends to remove the CGT discount – but only for non-residents. The discount will remain available for capital gains accrued prior to that date.

“It’s quite prudent to get a valuation of your CGT asset. You’ll need to know what the gain is up until May 8,” Webb says.

3. Interest and term deposits

Most people won’t have earned too much interest income to be worried about, but the odd entrepreneur needs to be wary here.

Sakell says while “the average person isn’t a bank”, you still need to be careful about your interest income, especially as the ATO will crack down on any undisclosed amounts.

“Also, related to this, if you’re looking at rolling over your term deposits, then you may want to think about having them mature after the end of the financial year to put it in the next year.”

4. Don’t get caught in a CGT contract trip

Other tax experts say there’s something else you should watch out for when it comes to capital gains tax – the actual contract date. When you sign contracts to achieve a capital gain, you need to be careful.

“Let’s say you’re selling an asset and you sign a contract on June 29, but the deal doesn’t settle until the end of July,” says Pitcher Partners’ Ray Cummings. “That gain will still be realised in the current financial year.”

“It starts from when you sign the contract. Some people miss that, so you should watch out for it.”

5. Don’t forget your currencies

It’s been a shocking year for currency exchange, with the Australian dollar surging upwards of parity and then dropping down to US97c in just the past few weeks. For businesses trading in currencies, it’s been a stressful and confusing time.

That stress can be exacerbated during tax time, so Sakell says it’s worth trying to get all your currency exchanges in order before it’s too late.

“There are plenty of businesses trading in currencies right now, and if you’ve bought or sold currencies then you need to get everything sorted out.”

“It’s important to do some calculations in order to figure out what you might want to crystallise as an unresolved loss, or whether it’s worth doing that at all? You may want to think about transferring that money to another investment.