Tax Planning 2020

Tax Planning 2020

With 30 June fast approaching, it’s time to ensure you have maximised your planning to minimise your tax. These tax planning tips will enable you or your business to ensure you have everything in place before it’s too late:

Businesses

• Write off bad debts

Review your debtors and write off any unrecoverable amounts prior to 30 June 2020. You will get a deduction for these in your 2020 tax return.

• Pay any outstanding super

Whilst the super accrued from 1 April 2020 – 30 June 2020 is not due for payment until 28 July 2020, if you pay before 30 June 2020 you will get to claim it as a tax deduction in your 2020 tax return.

• Take advantage of the $150,000 instant asset write off

The government’s COVID 19 stimulus package has seen the instant asset write off increase from $30,000 for $150,000 for assets purchased, installed and ready for use prior to 30 June 2020. If you met these conditions, you can claim an immediate deduction in your 2020 tax return on asset purchases costing less than $150,000.

• Review your asset register

Review your asset register for any assets that have become obsolete, and write them off.

• Prepay any expenses for the 2021 financial year

In order to be able to claim a tax deduction in your 2020 tax return, the prepaid expense must have an eligible service period not exceeding 12 months, and the eligible service period must end prior to 30 June 2021.

• Make trust resolutions prior to 30 June

Trustees of discretionary trusts are required to make and document resolutions on how the income of the trust should be distributed to beneficiaries. If a valid resolution is not executed before 30 June, and default beneficiaries become entitled to the trust incomes income, or worse still, any income not distributed can mean the trustee is potentially liable and assessed at the highest marginal tax rate on taxable income of the trust.

• Document the streaming of trust capital gains and franked dividends to beneficiaries

If the trust deed allows, trustees must document a resolution to stream capital gains and franked dividends to different beneficiaries.

• Consider restructuring

Did you know that small businesses can transfer their active assets from one entity type to another without incurring an income tax liability? We recommend reviewing your business structure or contacting us, so we can help assess if your structure is right for you.

• Review your private company loan balances

If you personally owe an amount to your private company, ensure you have entered into a complying division 7A loan agreement. If you have already entered into a complying loan agreement and minimum repayments have not been made, dividend income will need to be factored into your personal tax calculation.

• Prevent deemed dividends in respect of unpaid trust distributions

An unpaid distribution owed by a trust to a related private company beneficiary will be treated as a loan by the company, if the trustee and the company are controlled by the same family group.  In these circumstances, the associated trust may be taken to have derived a deemed dividend for the unpaid trust distribution in 2018-19.

However, a deemed dividend may be prevented if the unpaid distribution is paid out, or a complying loan agreement is entered into before the company’s 2018-19 income tax return needs to be lodged.

Individuals

• Update your motor vehicle log book

If you use your motor vehicle for work related purposes, ensure you have kept a valid log book to maximize the deductions you can claim.

• Working from home COVID19 home office rates

If you have worked from home during COVID19, you can use the ATO’s new COVID19 shortcut rate of 80 cents per hour for home office expenses incurred between 1 March 2020 – 30 June 2020. Outside of these dates the fixed rate method of 52 cents per hour will apply.

• Have you thought about income protection?

If you take out an income protection policy (outside of your superannuation) you can claim a tax deduction for the cost of your policy.

• Collate receipts

Ensure you have receipts and tax invoices for all work-related expenses you wish to claim.

If you need any assistance with your tax planning Bishop Collins Accountants have a specialized business services team, ready to help. Please contact us using the below contact form or call us on (02) 4353 2333.

If you are looking for further information regarding tax planning you can read some of our other blogs here.

We have also created a tax planning cheat sheet that you can download and use to ensure you are covering the main areas of tax you should be considering. You can download this cheat sheet by clicking here.