30 June remains the deadline for end-of-financial-year preparations.
Taxable income in a tax year is usually the net of assessable income less allowable deductions for the year. Deferring income to a later year or accelerating planned expenditure so that it is claimed in this tax year, will improve your taxable position.
It’s worthwhile to review your pre-tax position so that informed decisions can be made, and strategies are implemented to ensure you have an informed better post tax position.
Some initial strategies begin by looking at your billings and deferring income …
- Cash or Accruals – Determine whether you should use “Cash” or “Accruals” tax accounting. On the cash basis, taxable income is the net of amounts that are actually received less amounts actually paid at year-end. The proceeds of pre – 30 June sales which have not yet been received, are excluded from income for the current year.
- Unearned income – Make sure that you exclude any income that you may have received but not yet earned. Defer the income until the next year.
- Defer Billing – If your cashflow can stand it, think about deferring your invoicing until after 30 June. A one-month delay in billing will mean you pay tax on the income a whole year later. Mind you, your customers might want you to bill pre-June so that they can claim the deduction. And a few days delay in billing will usually mean that you get paid a whole month later.
- Interest – For most taxpayer’s interest is only assessable when actually received. If you are lucky enough to have a few term deposits, arrange to have them mature after 30 June rather than just before.
Download this checklist here.