With 30 June 2013 just behind us, these are some strategies that you may find helpful when looking towards 30 June 2014.
For most small business owners the end of the financial year requires a review of their operations – not only their tax planning strategies but also their cash flow requirements. Small businesses, defined as having a turnover of less than $2 million, normally account for their income and expenditure on a cash basis.
For this reason there is a need to plan the year end to provide yourself with an optimum tax strategy while not creating significant cash flow issues for yourself. This is particularly important if you have deferred income until after 30 June. For example, income derived from construction contracts is generally taxed when the progress payments are owing or received.
To ensure that you have optimised your position from a tax planning strategy the following should be considered:
- Bad debts should be written off in your Book of Accounts before 30 June.
- Employer and/or self-employed superannuation contributions should be paid, or received by 30 June. Take special care these payments are within the Superannuation Contribution limit.
- Ensure prepaid expenses are claimed up to 12 months in advance.
- Take care with the payment of wages to related parties – for example a spouse or family member. These payments should reflect a ‘reasonable income’ for the work that has been performed.
- Fixed assets subject to depreciation need to be installed before 30 June if there is going to be a claim for depreciation.
- Trading stock should be carefully reviewed and, if necessary, obsolete stock should be identified.
For more information on these matters contact your Chartered Accountant.