Other Tax Effective Strategies For Businesses
BUSINESSES SHOULD ALSO CONSIDER THE FOLLOWING ITEMS
Company Loss Carry-Back OffsetThe loss carry-back offset introduced in the 2020/21 budget will be extended by a further 12 months, allowing corporate entities to carry back tax losses for the 2022/23 income year for up to four income years, as far back as the 2018/19 income year. The loss carry-back offset is available to corporate tax entities with aggregated turnover of less than $5 billion and is intended to complement the temporary full expensing measure where tax losses are generated through significant capital investments that give rise to immediate deductions. The measure allows for cash refunds with the lodgement of the tax return rather than future tax savings from carrying forward tax losses to later years and can provide additional cash flow to support working capital for companies who make tax losses after previously being in a taxable position.
The loss carry-back offset is limited to a company’s franking account balance and this limitation may prevent entities from accessing the measure where they have paid out franked dividends during the year.
- Stock Valuation Options - Review your Stock on Hand and Work in Progress listings before June 30 to ensure that it is valued at the lower of Cost or Net Realisable Value. Any stock that is carried at a value higher than you could realise on sale (after all costs associated with the sale) should be written down to that Net Realisable Value in your stock records.
- Compulsory Superannuation Guarantee – as mentioned in Tax Minimisation Strategies, if you want a tax deduction in the 2020/21 financial year, the superannuation fund must receive the funds by 30 June 2021. The Tax Office doesn’t consider a contribution to be made until the amount is actually credited to a super fund’s bank account so an electronic transfer to another bank account on June 30 is not necessarily considered paid. We strongly recommend you make the payment a week or so before June 30 and then follow up with the super fund to ensure the funds have been received. Don’t risk the tax deductibility of what can often be a significant amount by leaving the payment to the last minute.
- Write-Off Bad Debts – if you operate on an accruals basis of accounting (as distinct from a cash basis) you should write off bad debts from your debtors listing before June 30. A bad debt is an amount that is owed to you that you consider is uncollectable or not economically feasible to pursue collection. Unless these debts are physically recorded as a ‘bad debt’ in your system before 30th June 2021, a deduction will not be allowable in the current financial year.
- Repairs and Maintenance Costs – Where possible and cash flow allows, consider bringing these repairs forward to before June 30. If you don’t understand the distinction between a repair and a capital improvement please consult with us because some capital improvements may not be tax deductible in the current year and could be claimable over a number of years as depreciation.
- Obsolete Plant and Equipment - should be scrapped or decommissioned prior to June 30, 2021 to enable the book value to be claimed as a tax deduction.
- Also see Small Business Write-Off for Individual Assets
Other 2021 Year End Tax Planning Opportunities
- Back to the overview of the 2021 Year End Tax Planning Guide
- Round Up of Other Year End Tax Issues
- Immediate Write-Off For Individual Small Business Assets & Temporary Full Expensing
- Key Tax Minimisation Strategies
- Superannuation Tax Planning Opportunities
- Download the full PDF
Disclaimer: This newsletter contains general information only and no responsibility can be accepted for errors, omissions or possible misleading statements. It is not designed to be a substitute for professional advice and does not take into account your individual circumstances. Therefore, no responsibility can be accepted for any action taken as a result of any information contained in this newsletter.