2021 Pre-Year End Review

Article by Robyn Tyler

With the financial year end quickly approaching, it’s a great time to consider any actions that your business may need to take before 30 June to reduce tax.  Tax planning (also known as a pre-year end review) helps you minimise the tax liability for your business group.  Paying tax is not necessarily a bad thing – if you don’t make a profit, you don’t pay tax – most people want to reduce tax payable where possible and have their business working to its full potential.

For the 2021 financial year, consideration may need to be given to the following areas:

  1. Maximising superannuation contributions without exceeding relevant caps;
  2. Capital acquisitions – instant asset write off;
  3. Bad debt management;
  4. Bring forward of deductible expenses;
  5. Review of trading stock for obsolescence;
  6. Managing capital gains income tax; and
  7. Review of business structures.

Let’s consider the first three areas closer…

Superannuation

Individuals have a cap of $25,000 that can be contributed to superannuation in 2021.  However, this cap could be higher where members use the “carry forward” rule.

If looking to make superannuation contributions, you should discuss this with your financial planner.

Instant Asset Write Off

Small and medium businesses can continue to fully expense the cost of new depreciable eligible assets in the first year of use.  To claim a deduction in 2021, the asset must be installed and ready for use by 30 June 2021.  Deductions in relation to cars are limited by the luxury car limit.  The instant write off also includes second hand assets for businesses with group turnover of less than $50M. The instant write off has been extended to 30 June 2023.

Bad Debts

Business has been tough over the past 12 months. Now is the time to review your aged debtor listing and consider if older debts are recoverable. If a debt is not recoverable, a deduction may be claimed where the debt has been written off in the company records (Xero, MYOB, etc).

In regards to the above areas, there are other matters that should also be considered:

  • Ensure that superannuation guarantee is being paid on time each quarter. The superannuation amnesty has closed and ATO reviews could lead to significant penalties where superannuation has not been paid on time; and
  • Now is also a good time to consider your strategic plan and budgets for the coming financial year.

If you would like to know more about what your business should consider before 30 June, get in touch with our team at SRJ Walker Wayland Pty Ltd today.