Year End Tax Planning 2010

It is that time of the year when you need to consider transactions to be processed before 30 June! This will be particularly relevant if you are expecting a healthy profit OR if you have made a capital gain this year.  Some things to consider may include:

Capital Gains
If you have made a capital gain this year, do you have other assets that are worth less than cost, for example, listed shares? You should consider transferring these assets to a spouse, super fund or associated entity to realise the loss. It is only realised losses that can be offset against capital gains.

Super contributions

1. All super contributions must be received and banked by the fund before 30 June to receive a tax deduction this year. Staff super guarantee contributions must be paid at least quarterly, the June quarter is due 28 July.  If you want the tax deduction this year, pay it before 30 June. 
2. Age based limits have halved in 2010. They are $50,000 if 50 years or over otherwise $25,000. If you normally contribute to your maximum please check what you have contributed during the year to date and catch up before 30 June.
3. Clients who wish to transfer large undeducted amounts to super have a limit of $150,000 each per year, or you can pay $450,000 (three years' contributions) in one year if you are under 65. Please check that you have not exceeded these limits.
4. If you are 60 or over and have a large balance in super consider drawing a pension, your fund will be totally tax free. This may involve drawing a minimum amount from the fund before 30 June.

Stalling Income/Accelerating expenses
If you are concerned that 2010 is likely to be a better year than 2011 you may like to defer some income. This should not be done aggressively as it is normally a timing issue only. Invoices that would normally be raised in the last week of June could be stalled until the first week of July. Similarly if you can chase invoices from your suppliers before 30 June, the expenditure should be incurred this year.

Prepayment of expenses up to 12 months in advance will only be a tax deduction for individual investors (eg interest on property loans) or small business enterprises with a turnover of less than $2 million. If your business turnover exceeds $2 million, prepayments cannot be claimed.

Shareholder Loans
If you have borrowed money from your company during the year or have a shareholder loan from prior years, we will most likely need to pay a dividend when we prepare your 2010 accounts. That may not be the most tax effective outcome. If you personally have cash reserves or a line of credit, consider repaying part of the loan before 30 June. If personal cash flow is tight and the company has excess funds you are not precluded from taking a new loan from the company in the new year. If you’re not sure of the most efficient figure to repay, call us to discuss.

Bad Debts
If you have debts you know are bad, write them off in your system before 30 June to get the tax deduction this year. You can still chase them for payment and declare the income if and when it is recovered. 

If you would like to discuss these or any other issues please call us on 9981 2300. Remember though, with year end tax planning issues you may need to take action before 30 June.

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