The 2012 Financial Year Is Coming To An End

End Of Year Tips

• A reduction in the higher cap for superannuation contributions for people aged over 50 with under $500,000 invested in superannuation in 2012/13.  The government had originally announced that persons aged over 50, with less than $500,000 invested in superannuation, could contribute $50,000 per annum instead of the normal contribution limit of $25,000 per annum in 2012/13.  If you're in this category, then consideration could be given to maximising the contribution, up to $50,000, in the year ending 30th June 2012.

• The government also announced that taxation on superannuation contributions for persons with pre-tax incomes of $300,000 and over, will double from 15% to 30% from 1st July 2012.  If you're in this category perhaps consider maximising your contributions to either $25,000 or $50,000, whichever is applicable, prior to 30th June 2012.

• The government has announced the introduction of means testing to the medical expense rebate.  The rebate is currently 20% of expenditure over $2,060 per annum.  The changes are that, for singles with an income of $84,000 or more and families with $168,000 or more, the claim threshold will increase from $2,060 to $5,000 with the reimbursement reducing from 20% to 10%.  This all relates to expenditure incurred after 1st July 2012.  If you're in these categories and you have major medical expenses to be incurred, perhaps you be having the treatment prior to 30th June 2012. 

• If you're operating your business as a "small business" with turnover under $2M, payments of capital expenditure costing under $6,500, will be eligible to a 100% deduction in 2012/13.  This could be a good reason to defer capital expenditure until after the 1st July 2012.  The government has also announced an accelerated write-off of $5,000 for the purchase of cars and utilities used in a business, operational from the 1st July 2012.  Whilst the cashflow benefit from this initiative and the write-off of assets up to $6,500 will not accrue to taxpayers until 2013/14, there are sound reasons for deferring the purchase of a new motor vehicle or utility until after 1st July 2012.

• If you're likely to receive a "golden handshake" in the near future and your total income exceeds $180,000, there are benefits for receiving the "golden handshake" prior to the 30th June 2012, when the "golden handshake" payment will be taxed at 15%, because after the 30th June 2012, a "golden handshake" payment to a person who's taxable income exceeds $180,000, will increase to 30%.

• Medicare Surcharge - the government has announced changes to Private Health Insurance Rebate and Medicare Levy Surcharge which will be income tested against three income tier thresholds.  The income thresholds that apply to the 2012/13 financial year are:

End Of Year Tax Planning Checklist 2012

Small Business Entity Rules

• Small Business Entities - the small business entity rules apply to a sole trader, partnership, company or trust which has a group turnover of less than $2M in the previous year, or likely to be less than $2M in the current year.
• Depreciation Rules - if the asset costs less than $1,000 it may be written off in full in the year in which it was acquired.  Most other depreciating assets, with an effective life of less than 25 years, can be pooled and depreciated at 30% (15% in the first year).
• Prepaid Expenses - a small business entity taxpayer can claim an immediate deduction for certain prepaid business expenses that satisfy the 12-month rule.

Deductions

• Interest On Investment Loans - taxpayers who have borrowed money for a non-business investment (e.g. rental property) can check with their lenders to see if they can prepay interest prior to 30th June 2012.
• Staff Bonuses - ensure a cheque has been written prior to 30th June and PAYG withholding tax deducted. Otherwise contact our office to discuss how accrued bonuses can be claimed.
• Superannuation - for the year ended 30th June 2012, superannuation contributions can be paid for a person under 50, up to $25,000 and for a person 50 and over up to $50,000.  In 2012/13 the superannuation contribution for all taxpayers is $25,000.
• Self-Employed Persons - self-employed persons can obtain a superannuation deduction on the same basis as that adopted for employees if your salary and wage income is less than 10% of your assessable income.
• Salary Sacrifice Arrangements - salary sacrifice arrangements may be utilised to maximise superannuation contributions subject to the overall deduction limits. Contact our office to discuss your circumstances if this is of interest.
• Superannuation Co-contribution - the government will give lower income earners $1 for each $1 they contribute to superannuation from their after-tax salary up to a maximum of $1,000.
• Repairs and Maintenance - ensure that the work has been completed prior to 30th June.
• Directors' Fees - ensure cheques are drawn prior to 30th June and that PAYG Withholding Tax is deducted.
• Travel Deductions - prepare a full itinerary and diary if travel is for travel of six nights or more and maintain records to support all expenses. 
• Depreciation - review capital expenditure and ensure you claim depreciation at the highest legally allowable amount.
• Donations - any promised tax deductible donations should be made prior to 30th June to deductible gift recipients.

Stock

• Conduct a stocktake as at 30th June 2012.  If you are conducting regular "rolling" stocktakes throughout the year, it may not be necessary to conduct a stocktake as at 30th June 2012.  Stocktaking may not be necessary if you are a small business entity.
• Value Of Stock - stock can be valued at different individual methods for each item of stock:
  •   Cost;
  •   Sales Value; or
  •   Lower of Market Value or Replacement Cost.
• Obsolete Stock - identify any obsolete stock and decide whether to clear or dump that stock prior to stocktake.

Assets

• Fixed Assets - determine if there are any benefits in scrapping any fixed assets prior to 30 June to obtain the tax write off prior to 30 June 2012.

Capital Gains Tax Items

• Matching Capital Losses and Capital Gains - capital losses are not directly deductible.  Capital losses have to be offset against any capital gains generated during that financial year hence consider realising any losses in advance of gains.
• 50% Capital Gains Tax Discount - you should check your eligibility for the general 50% capital gains tax discount for individuals.  If you are a small business operator and are able to meet the $6M net value asset or have turnover of less than $2M, you might be entitled to further capital gains tax concessions. Consider delaying contracts until at least 12 months after the purchase contract.

Personal Planning

• Utilising Tax Free Threshold - every adult taxpayer has a tax-free threshold of $6,000.  If a taxpayer is verging on losses, consideration should be given to the decision being made in relation to the  valuation of stock, bringing forward or delay of sales etc., to utilise the tax-free threshold otherwise it will be lost forever.
• Superannuation Contributions - special concessions are available to low income or non-working spouses relative to superannuation contributions.

End Of Financial Year Review

The comments in this newsletter are general in nature and should not be relied upon as a substitute for professional advice. Anyone intending to apply the information contained in this newsletter should seek their own professional advice to independently verify their interpretation and the information's applicability to their particular circumstances. This newsletter is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.