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Tax and cash flow planning at EOFY

The end of the financial year is an important time to consider a number of tax planning initiatives to help minimise your tax liability and increase any potential refund. Timing is a traditional hallmark of tax planning, so keep in mind that 30 June falls on a Tuesday this year.

While there are a number of tried and tested tax planning and cash flow planning strategies for business, the economic stimulus initiatives around the Coronavirus pandemic present even more considerations and opportunities.

Here's our top list of tax planning and cash flow planning strategies for 2019-2020:

For business

  1. Plant and equipment – scrap obsolete plant and equipment by 30 June 2020.

    Also, if you run an eligible business, the instant asset tax write-off that was available in past financial years has been increased to $150,000 extended to 30 June 2020 - you can read more about the latest instant asset write-off details in our Coronavirus Economic Stimulus blog. Remember that any eligible assets under the scheme need to be installed and ready for use by 30 June 2020 – our Small Business Instant Asset Write-Off fact sheet has all the important details.

  2. Pre-pay deductible expenses – if you have expenses that are tax-deductible, consider paying them before 30 June in order to bring forward your tax deduction to the current financial year. 

  3. Write off bad debts before 30 June and ensure you document these actions.

  4. Employee superannuation guarantee contributions - depending on the financial impact of Coronavirus, pay your workers' April-June quarter super the week prior to 30 June. This will trigger a tax-deduction in the 2019-2020 financial year, but remember that adequate cash flow is the priority in these challenging times. If these super pre-payments include employee salary sacrifice contributions, care is needed to ensure the concessional contributions cap is not exceeded.

    Calculating the super guarantee (SG) liabilities on employee wages that include JobKeeper payments can also be complex, as SG will apply in some situations and not in others – if you have any doubts, contact your adviser at The Peak Partnership.

  5. Know your business economic stimulus entitlements – this is probably the most critical advice for business owners in the current economic environment. The Federal and State Governments have introduced numerous financial concessions, relaxations and deferrals to keep businesses operating, but pay-back time will come. Understanding which financial incentives your business can take advantage of (and the longer term impact) will be critical this tax time.

  6. Maintain good records – there is nothing more frustrating than not being able to find receipts and payment records when tax time arrives. The Peak Partnership's free mobile app is an ideal solution for recording expenses and maintaining your vehicle log book.

This year, due to the Coronavirus pandemic and stimulus measures implemented by the different levels of government, there are far more cash flow impacts to monitor. These include measures your business may have utilised such as loan repayment deferrals, JobKeeper subsidies, deferral of current tax debts including recent Activity Statements, obtaining refunds of prior PAYG tax instalments, Payroll Tax deferrals etc. 

Taking up some or all of these options could amount to large payments that need to be managed and paid later in the year.

We can help you work through a cash flow plan to show you the impacts of these measures on your finances when payments fall due and when the stimulus initiatives are wound back.

PERSONAL PLANNING

  1. Pre-pay deductible expenses – if you have expenses that are tax-deductible, consider paying them before 30 June in order to bring forward your tax deduction to the current financial year.

  2. Planning to retire, or stop working? – if so, consider deferring your plans to stop working until early in the next financial year. Any lump sums you receive from your employer such as payments for accrued annual and long service leave, will be taxed in the financial year in which they are received. If your tax rate is likely to drop in the 2020 financial year, deferring leaving work may result in a lower rate of tax being payable.

  3. Tax deductible superannuation contributions – from 01 July 2017, claiming a tax deduction for personal superannuation contributions got easier. Tax deductions are now available to a much wider group of taxpayers. However, contributions are subject to limits and can generally only be made by people under the age of 65, unless they continue to work. Speak to us about this opportunity.

  4. Maintain good records – there is nothing more frustrating than not being able to find receipts and payment records when tax time arrives. The Peak Partnership's free mobile app is an ideal solution for recording expenses and maintaining your vehicle log book.

  5. Net Medical Expenses Offset – this financial year is the last year the offset will be available for costs associated with disability aids, attendant care, and aged care fees.

  6. Private health insurance – having your own private health insurance may deliver a number of benefits including:
    a. being eligible to receive the private health insurance rebate;
    b. avoiding the Medicare levy surcharge; and
    c. avoiding the lifetime health cover loading if private insurance is not taken out before turning 30 years of age.

In Summary

Effective tax and cash flow planning this EOFY will be more important than ever, particularly for businesses facing uncertain trading conditions. In these unique times, our best advice is to seek professional advice – our Accounting and Financial Advisers are across all the Coronavirus-related changes to taxation, employment, superannuation and more.

If you have questions, or if you'd like us to review any aspect of your business or personal tax planning, feel free to contact our advisers at The Peak Partnership.

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