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Business – Preparing for Bookkeeping Year End Accounts
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Published on Monday, 19 May 2014 11:46
Here are some important considerations for bookkeeping services tasks that should at least be looked at BEFORE 30 June and addressed in the books for Year End accounts–
Bad debts (unpaid customer invoices)
If you have any bad debts during the year, ensure you write them off in your bookkeeping prior to 30 June and prepare minutes approving the write-off. This will also enable an adjustment for any GST charged on the original invoice. If not sure, ask us how 0407 361 596.
PAYG payment summaries
PAYG payment summaries must be provided to employees by 14 July 2014 and the Payment Summary Statement lodged with the ATO Office by 14 August 2014, unless the ATO have granted your business an extension of time.
Personal services income
Be aware there are special rules about the tax treatment of Personal Services Income (PSI) and work by restricting deductions and applying the entity income to the individual. An individual or entity is subject to the PSI rules, unless it can show that the “results test” is satisfied; or it does not derive 80% or more of its income from one client and passes one of three additional tests. See ATO site
Personal use of assets
Where assets owned by a company are used outside of a business by a shareholder or “associate” – this may result in a breach of Division 7A. This can give rise to an unfranked dividend to you for tax purposes. If your company owns any assets that are available to be used for non-business purposes, please contact your tax advisor to discuss this issue.
Prepayments of some expenses
Only certain prepayments required to be made by law (eg. worker’s compensation insurance) and amounts of less than $1,000 are deductible as incurred. Interest on some loans is another deductable claim if you have a profit.
Shareholder loans
If you or your “associates” borrowed money, received a benefit, or had a debt forgiven from a private company during the year, the Division 7A rules may apply.
Small business entities
In general terms, you are classed as a Small Business Entity (SBE) if you carry on business and your aggregated turnover is less than $2 million or is likely to be less than $2 million as at the commencement of the financial year. SBE’s can choose to access certain concessions including: CGT concessions; immediate deductions for certain prepaid expenditure; and simplified depreciation and trading stock rules.
Small business Capital Gains Tax (CGT) concessions
There are 4 specific small business concessions may apply to reduce capital gains as a result of the sale of your business (or active business assets). These are:
1. 15 year exemption;
2. 50% reduction for active assets;
3. $500,000 retirement concession; and
4. Replacement asset roll-over relief
If the 15 year exemption does not apply, you may apply one, two or all three of the remaining concessions, and If you sell your business or the entity that carries on the business, or are considering selling your business in the future, but please talk to your tax advisor BEFORE entering into any agreement to discuss eligibility and planning to access these concessions.
Superannuation
Contributions for the quarter ending 30 June 2014 must be made before 30 June for a deduction to be available in the 2014 year. Concessional contributions (include SG and salary sacrifice) are limited to $25,000 pa. for all individuals, unless you are 59 years of age on the 30 June 2013, your concessional contribution limit is increased to $35,000 p.a for 2013-2014. But be careful - contributions above these caps are generally subject to tax at the top marginal tax rate.
Timing of income
Consider issues associated with the timing of income close to 30 June, such as:
1. The time of billing work in progress;
2. Timing of sales income; and
3. The date of entering into a contract for the sale of CGT assets.
Trading stock
Stock can be valued under different methods for each item of stock.
1. Cost;
2. Sales value; and
3. Lower of market value or replacement cost.
Remember to conduct a stocktake before year end and also identify damaged lost or obsolete items.
Maximise the allowable deductions in your bookkeeping
Expenses that are incurred before year end can reduce taxable income. Consider upcoming liabilities and the value in incurring them before year end. Allowable deductions may include:
● Paying directors’ fees and bonuses;
● Minor repairs on property and machinery;
● Pooling depreciating assets; and
● Scrapping of depreciating assets.
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