by Stephen Graham
24 March 2014
Now is the time to make tax savings. Businesses have survived another tough year and there is a good chance to get maximum tax savings by making some organised checks before balance date on 31 March. It’s always well worth the effort.
What you can do is:
write off bad debts before balance date
Review debtor accounts to assess the likelihood of collection, considering the age of the debt, efforts already made to collect the debt and any facts known about the debtor that may indicate the debt is bad and should be written off – and they must be written off before balance date to get a tax deduction. Writing off a bad debt doesn’t mean you can’t continue to seek recovery.
All businesses that trade in stock must value their stock at balance date each year. If you are carrying obsolete or non-saleable stock now is the time to dispose of it. You may not have to count every single item. If you can reasonably estimate stock to be worth less than $10,000 you can use the same closing stock figure as the previous year, provided your annual turnover is less than $1.3 million.
schedule employee leave
If you employ staff they may have annual leave owed to them at balance date. If it is agreeable to them and you, encourage your staff to take any leave they have accrued within 63 days of balance date. Then you don’t have to wait until they take their holidays to claim their holiday pay as a tax deduction. You can claim it in the 2013/14 year.
review fixed assets
Review your fixed assets (plant and equipment).Any that are no longer in use and would cost more than they are worth to dispose of can be written off, giving the business a tax deduction.
Certain expenses can be claimed in the year they are paid, even if the goods or services are not used until the next financial year. They include rates, insurance, advertising and rent. There are time and dollar limits, so ask your adviser what deductions are available to your business.
look at the timing of upcoming expenses
Careful timing of transactions such as purchases and sales of assets could have tax benefits. Bringing forward depreciation claims and losses on sale of assets is possible, as is deferring gains on sales of assets.
out of the ordinary
Seek advice sooner rather than later if anything ‘out of the ordinary’ has happened – it pays to have these dealt with correctly.