Down to the Crunch

Clarke McEwan Accountants

With the end of the financial year fast approaching we're getting down to the crunch for tax planning. McCullough Robertson Lawyers offer some practical strategies that SME's should implement by 30 June!!

Uncertain of how to apply these suggestions? Contact us for advice now.

SMALL BUSINESSES

There are additional tax planning strategies if your business is considered to be a small business under the Tax Act.

From 1 July 2017, in order to be a small business, the turnover of the business, including connected entities and affiliates, has to be less than $10 million GST exclusive per annum. The turnover for either the current financial year or the previous financial year can be used.

The small business turnover for accessing the 27.5% tax rate has increased to $25 million for the 2017/2018 year.

The following 3 strategies apply only to small businesses.

1. Instant asset write-off of $20,000

A small business with a turnover of less than $10 million (GST exclusive) can claim an immediate tax deduction for "individual" assets (including motor vehicles) costing less than $20,000 (GST exclusive), including individual assets that form part of a set.

This immediate write-off applies equally to the purchase of new and second hand assets which are used in the business.

Note that to be entitled to the deduction this financial year the asset needs to be acquired at or after 7:30pm on 12 May 2015, and ordered, used, or installed ready for use by 30 June 2018. The Government have also proposed that, as part of this year's budget, this will be extended to 30 June 2019. For assets acquired before 12 May 2015 or from 1 July 2019, the immediate deduction can only be claimed if the asset's value is below $1,000.

The increase in the turnover threshold to $10 million, which applies from 1 July 2016, provides an additional tax planning opportunity for many businesses that did not previously meet the definition of small business. Significantly, the immediate deduction available for depreciating assets valued under $20,000 acquired between 12 May 2015 and 1 July 2018 (and potentially up to 30 June 2019) can be accessed by these new small businesses (rather than having the item depreciated over a number of years).

2. Deduction for pre-paid expenses

A small business can claim an immediate deduction for certain prepaid business expenses where the payment covers a period of 12 months or less and that period ends before the end of the next income year. The most common expenses that you should consider prepaying by 30 June 2018 include lease payments, interest, rent, business travel, insurances and business subscriptions.

Note that your business must be able to make the prepayment under the relevant contractual agreement to get the immediate tax deduction this financial year - you cannot simply choose to prepay the expense.

3. Other tax concessions

A small business is also entitled to the following additional tax concessions:

Simplified trading stock rules, giving small businesses the option to avoid an end of year stocktake if the value of their stock has changed by less than $5,000 from the previous year; and
The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Make super contributions by 30 June 2018

From 1 July 2017, the maximum concessional superannuation contribution limits is $25,000 for all individuals regardless of their age.

Note that employer super guarantee contributions and salary sacrifice contributions are included in the cap. Where a concessional contribution is made which exceeds these amounts, the excess is taxed at your marginal rate, less a 15% tax offset for the tax already paid by the super fund on the excess contribution.

If you are self-employed and making a personal superannuation contribution, ensure you obtain the correct documentation from your superannuation fund to substantiate claiming the deduction before lodging your tax return.

In order to obtain a deduction in the 2018 financial year, the contribution must to be received by your superannuation fund by 30 June 2018 (see below).

Super contributions made by cheque or electronic funds transfer (EFT)

Care needs to be taken where last minute contributions are made by cheque or electronic fund transfer to ensure that the deduction can be claimed in the current financial year.

Where the super contribution is made by cheque and the fund receives it by 30 June 2018, the deduction is allowed in the current financial year so long as the trustee banks the cheque within 3 business days and the cheque is not subsequently dishonoured.

Where the contribution is by EFT, it is taken to be made when the amount is "credited" to the bank account of the fund and not when the transfer is made.

Unless the contribution is made between linked accounts of the contributor and the fund (held at the same bank), the deduction may be deferred to the next financial year where the funds are not credited to the super fund account by 30 June 2018.

Defer income & capital gains tax

Businesses that return income on a cash basis are assessed on income as it is received. A simple end of year tax planning strategy is to delay "receipt" of the income until after 30 June 2018.
Businesses that return income on a non-cash basis are generally assessed on income as it is derived or invoiced. Income may be deferred in some circumstances by delaying the "issuing of invoices" until after 30 June 2018.
Realising a capital gain after 30 June 2018 will defer tax on the gain by 12 months and can also be an effective strategy to access the 50% general discount which requires the asset to be held for at least 12 months. The date of the contract is the realisation date for capital gains tax purposes. In some cases, the capital gain can be further reduced to Nil under the small business capital gains tax concessions.

Family trust distributions

For the 2017/18 year, minors (i.e. children under the age of 18 at 30 June) can receive investment income (including trust distributions) of up to $416 without paying tax. Any income earned above this amount is taxed at penalty rates.

Income received by a family trust should be allocated amongst the various beneficiaries by 30 June each year and documented by way of resolution. It is preferable that the resolution is made by 30 June 2018 to avoid any later dispute with the ATO as to whether the income was properly allocated by this date.

The exact requirements for allocating trust income are set out in the trust deed, and as each trust deed is different, it is vital that trustees are aware of the terms applying to that particular trust.

Failure to follow the terms of the trust deed and to allocate the relevant income by 30 June may result in the trustee paying tax on income of the trust at the top marginal tax rate of 49% (including 2% medicare levy).

Note also that special rules apply to the "streaming" of capital gains and franked dividends received by family trusts to particular beneficiaries, and if you wish to stream it is critical that there are sufficient "streaming" provisions in the family trust deed which allow the trustee to do so.

Write-off slow moving or obsolete stock

All businesses have the option of valuing trading stock on 30 June 2018 at the lower of actual cost, replacement cost, or market selling value. A different valuation method may be applied for each item of trading stock.

For example, where the market selling price of stock items at year-end is below the actual cost price, your business can generate a tax deduction by simply valuing the stock at market selling value for tax purposes.

Also, in situations where stock has become obsolete at year-end (e.g. fashion clothing), your business may elect to adopt a lower value than actual cost, replacement cost, or market selling value, provided the value adopted is reasonable.

Maximise depreciation claims for non-small businesses (i.e. turnover >$10M)

An immediate deduction can be claimed for assets costing less than $100 GST inclusive (e.g. minor tools).
A tax deduction can be claimed for depreciable assets that are scrapped or sold for less than their written down value.
Assets costing less than $1,000 GST exclusive can be allocated to a "low value pool" and depreciation claimed of 18.75% for 2018 (37.5% thereafter) regardless of when the assets were acquired during the income year.

Claim deductions for expenses not paid at year end

All businesses are entitled to an immediate deduction for certain expenses that have been "incurred" but not paid by 30 June 2018 including:

Salary and Wages: A tax deduction can be claimed for the number of days that employees have worked up to 30 June 2018, but have not been paid until the new financial year.

Directors Fees: A company can claim a tax deduction for directors fees it is "definitely committed" to at 30 June 2018 and has passed an appropriate resolution to approve the payment. The director is not required to include the fees in their taxation return until the 2018/19 year when the amount is actually received.

Staff Bonuses and Commissions: A business can claim a tax deduction for staff bonuses and commissions that are owed and unpaid at 30 June 2018 where it is "definitely committed" to the expense.

Repairs and Maintenance: A deduction can be claimed for repairs undertaken and billed by 30 June 2018 but not paid until the next income year.

Write-off bad debts

If your business accounts for income on a non-cash basis and has previously included the amount in assessable income, a deduction for a bad debt can be claimed in 2017/18 so long as the debt is declared bad by 30 June 2018.

Your business will need to show that it has made a genuine attempt to recover the debt by 30 June to prove that the debt is bad. It's preferable that this decision is made in writing (e.g. a company directors minute).

Your business can also claim back the GST paid on debts that have been written off as bad, or where not written off as bad, the debt has been outstanding for 12 months or more.

Personal services income rules

If you conduct a business through a trust or company structure that relies on your personal effort and skill to generate the income, there are different rules that apply to the diversion of some or all of that personal services income.

For example, if your company earns personal services income, the ATO can treat the income as having been earned by the individual rather than the entity that earns the income, unless certain tests can be satisfied. The personal service income regime also denies particular types of deductions which would otherwise be available to a business.

#2018taxplanning #smallbusinesstips #endoffinancialyearplanning

Our thanks to McCullough Robertson Lawyers for this insightful content.

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Cash is Making a Comeback – Is Your Business Ready to Take It?

By Clarke McEwan • December 3, 2025

The Government has released draft regulations that would require certain retailers to accept cash payments, ensuring Australians can still buy essential goods like groceries and fuel – even when technology fails. The change aims to stop people from being excluded when power, internet, or card systems go down, or when they simply prefer to pay in cash. Who Will Need to Accept Cash – and Who Won’t The new rules are targeted and, importantly, practical. They’ll apply to fuel stations and grocery retailers, including both major supermarket chains and independent operators, but only for in-person transactions under $500. That means you won’t have to accept someone paying for a $700 tyre replacement or bulk farm supplies in cash – it’s about the everyday essentials. If your business (or franchise group) has an annual turnover of less than $10 million, you’ll be exempt. That’s good news for most small businesses such as family-run grocers, local cafés, and corner stores already managing tight margins and staffing challenges. The regulations are expected to take effect from 1 January 2026, with a review after three years to see how the system is working in practice. Why It’s Happening The move comes as part of a broader push to maintain access and fairness in Australia’s payment system. The Government and industry groups have recognised that while most Australians are happy to tap their card or phone, around 10–15% still prefer to use cash – particularly older Australians and those in regional or remote areas. There’s also a resilience angle: during bushfires, floods, or power outages, card networks can go offline. In those moments, cash becomes essential. What This Means for Your Business For larger retailers, this change will mean dusting off cash-handling policies and reintroducing processes that many have phased out. That may include: Re-establishing cash floats and tills Staff training to handle and verify cash More frequent bank deposits and reconciliation procedures For small businesses that fall under the $10 million exemption, the key step will be to document your turnover clearly so you can demonstrate that the exemption applies. We can help ensure your records and structures support that. There may also be commercial upside. Accepting cash could attract a segment of customers who’ve drifted away as stores went digital – especially in regional areas where cash use remains strong. A small business that promotes “cash welcome” could even gain new loyal customers who value convenience and personal service. Preparing for the Change With final regulations expected soon, it’s worth starting to plan now. Review your payment policies, assess whether you’re likely to be caught by the new rules, and budget for any setup or compliance costs. If you’re exempt, ensure your records are watertight. If not, look for ways to streamline cash handling – for example, by using digital cash counters or smart safes to reduce errors and time spent on reconciliations. Looking Ahead Cash isn’t going away just yet. This reform is about maintaining choice, resilience, and fairness in how Australians pay – and ensuring businesses are ready when customers want to use it. If you’d like help assessing how these rules could affect your operations or what the exemption means for your business, get in touch with our team.

Know the Rules Before You Break Them: Why SMSF Education Matters More Than Ever

By Clarke McEwan • December 3, 2025

Why understanding SISA matters You can’t comply with what you don’t know: Many common breaches arise from misunderstanding basic SISA duties (for example, sole purpose, arm’s length dealings, or in-house asset limits). Awareness of the rules is the first step to spotting a problem early. Early identification reduces harm: Knowing what to look for, incorrect benefit payments, related party transactions that aren’t on commercial terms, or records that are incomplete, lets you seek advice before small errors become reportable contraventions. Education protects members: The consequences of a breach can include loss of tax concessions, penalties and remediation costs that reduce retirement savings for members. The ATO’s Focus on Education — What Trustees Need to Know The ATO has recently published a draft Practice Statement (PS LA 2025/D2) explaining when it might issue an education direction under section 160 of SISA. These directions give the ATO power to require trustees (or directors of corporate trustees) to complete specified education, where trustees’ knowledge or behaviour poses a risk to compliance. The draft statement sets out the ATO’s approach and the kinds of circumstances that may lead to an education direction. However, trustees should not wait for an ATO directive before getting educated – such a directive means the trustees have already breached the rules. The draft Practice Statement is intended to support compliance and public confidence, but it is not a substitute for proactive trustee learning. Acting early and voluntarily is both safer for trustees and viewed more favourably by regulators. Practical Steps Trustees Can Consider Use ATO’s official SMSF guidance Start with the ATO’s SMSF courses on the lifecycle of an SMSF, setting up, running and winding up. These courses are written for trustees and prospective trustees: Setting up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/setting-up-a-self-managed-super-fund-smsf Running an SMSF: https://smallbusiness.taxsuperandyou.gov.au/running-a-self-managed-super-fund-smsf Winding up an SMSF: https://smallbusiness.taxsuperandyou.gov.au/winding-self-managed-super-fund-smsf Complete the ATO’s ‘knowledge check’ The ATO provides an online “knowledge check” for each course designed to test trustee understanding. It’s a useful starting point, but note a pass mark of 50% should not be taken as a guarantee of safety. Trustees should consider whether aiming for a much higher standard, even 100% comprehension of core duties, is a more appropriate target to reduce risk. Seek timely professional advice If a knowledge check or your reading flags uncertainty, contact us early to discuss your concerns. Timely, qualified advice often transforms a potential contravention into a routine fix and may mitigate potential penalties or ATO enforcement action. Document your learning and decisions Keep records of training completed, who provided advice, and why investment or payment decisions were made. Good records are persuasive evidence of a trustee’s intent to comply. Final Word SMSF trustees hold both opportunity and responsibility. Learning the SISA rules and the ATO’s expectations is the most practical way to prevent costly mistakes. The ATO’s draft Practice Statement shows the regulator is prepared to use education directions where trustees’ knowledge gaps pose risks, but you shouldn’t wait to be told. Build your knowledge, use the ATO’s resources, complete the knowledge check, document what you learn, and seek professional help confidently and early. That approach better protects your fund and retirement outcomes.

Unlocking Tax Savings: Can Your MBA (or Other Studies) Pay Off at Tax Time?

By Clarke McEwan • December 3, 2025

The ATO’s rules on self-education expenses are strict, and the line between “deductible” and “non-deductible” can be thin. Getting it right could mean thousands back in your pocket; getting it wrong could mean an ATO adjustment, plus interest and penalties. Let’s unpack how it works with a real-world example and some practical takeaways. The Scenario: Sarah’s MBA Sarah works in the Department of Defence and recently completed an MBA through a private provider. Her employer supported her studies with a $40,000 study allowance, and the course fees totalled $18,000. She deferred payment using the FEE-HELP loan system and declared the allowance as taxable income in her return. Now she’s asking: Can I claim a deduction for my MBA fees? Does it matter that I used FEE-HELP? Does the employer allowance change things? The Type of Loan Matters First, not all funding for education courses is treated equally. HECS-HELP - no deduction: If your course is a Commonwealth supported place (most undergraduate and some postgraduate university programs), you can’t claim a deduction. There is specific legislation in the tax system which denies deductions for fees covered by HECS-HELP — even if you pay them upfront and even if the course is closely related to your work. FEE-HELP - potential deduction: If you’re in a full-fee course, your tuition fees might be deductible if the study directly relates to your current employment or business activities. The ATO doesn’t allow a deduction for loan repayments later on — just the course fees themselves. Practical tip: Check your course statement or loan confirmation to see if you’re under HECS-HELP or FEE-HELP. Only FEE-HELP (or private payment) gives you potential deductibility. The “Nexus” Test — Linking Study to Your Current Work Even if the funding passes the first test, the purpose of the study is key. The ATO will only allow deductions if the course maintains or improves the skills you already use in your job, or is likely to increase your income in that same role. It won’t apply if you’re studying to move into a new field or start a different career. The ATO issued a detailed ruling on this topic in 2024 which provides some clear examples: Allowed: A store manager doing an MBA to strengthen leadership and business operations skills. Denied: A sales rep doing an MBA to change careers into consulting — the link to the current role was too weak. For Sarah, the deduction depends on whether her MBA subjects (like strategy, policy or management) build directly on her current Defence role. The fact that her employer funded the course helps demonstrate relevance, but it’s not proof on its own. In some cases you might find that specific subjects or modules are sufficiently linked with current income earning activities, while other subjects are too general in nature for the fees to be deductible. Employer Allowances and HELP Repayments The $40,000 allowance Sarah received is assessable income — it’s taxed just like salary. But that doesn’t stop her from claiming eligible self-education deductions for the course fees. HELP loan repayments later on are not deductible — they’re simply a repayment of debt. The timing of the deduction is based on when the course expense was incurred (not when the loan is repaid). Making It Practical If you’re planning further study or reviewing a recent course, here’s how to make sure you get it right: Check your loan type – FEE-HELP or private fees can be deductible; HECS-HELP cannot. Gather evidence – Keep course outlines, job descriptions, and any correspondence showing the study supports your current work. Claim what’s relevant – You can only claim expenses directly connected to your current job (fees, books, and possibly travel). Be ready for review – Large claims often attract ATO attention. A private ruling can provide peace of mind if the amount is significant. Key Takeaways For many professionals, postgraduate studies like an MBA can deliver both career and tax benefits — but only if they relate directly to your current role. Handled correctly, self-education deductions can return thousands in tax savings. For Sarah, that could mean a refund of over $5,000 on an $18,000 course. If you’re considering further study, talk to us before you enrol or claim. A quick chat could ensure your next qualification delivers the best return — professionally and financially.

Super on Payday: Fundamental Changes for Employers

By Clarke McEwan • December 3, 2025

It’s called Payday Super, and it became law on 4 November 2025. The new rules are designed to close Australia’s $6.25 billion unpaid super gap and make sure employees — especially casual and part-time workers — get their retirement savings when they get paid. What’s Changing? From 1 July 2026, you’ll need to pay superannuation guarantee (SG) contributions at the same time as wages, rather than weeks or months later. Employers will have seven business days from payday to ensure contributions hit employees’ super funds. If payments are late, the Superannuation Guarantee Charge (SGC) will apply — that means paying the missed super plus an interest and administration penalty. Once SGC has been assessed, additional interest and penalties may apply if the SGC liability isn’t paid in full. Unlike the existing system, SGC amounts will normally be deductible to employers, although penalties for late payment of SGC won’t be deductible. On top of this, the ATO will retire the Small Business Superannuation Clearing House (SBSCH) platform from 1 July 2026 for all users and alternative options should be sought. The change isn’t just about compliance — it’s about impact. The Government estimates the earlier payments could boost an average worker’s retirement balance by around $7,700. Why It’s Good for Business This reform might sound like extra admin, and it might take a bit of getting used to, but it can actually simplify your payroll process and strengthen your reputation as an employer. Less admin – Paying super when you run payroll means no more quarterly payment crunches. Fewer compliance risks – ATO data-matching will pick up issues faster, helping you avoid penalties before they snowball. Stronger employee trust – Staff can see their super growing in real time, which might help with engagement and retention. Smoother cash flow management – Paying smaller, regular amounts of super is often easier to manage than large quarterly sums. The ATO will take a “risk-based” approach for the first year, focusing on education and helping businesses transition smoothly. If you pay on time, you’ll likely be flagged as low risk, meaning fewer compliance checks. How to Get Ready — Practical Steps to Take Now You’ve got time before the rules kick in, but the smart move is to prepare early. Here’s how: Check your payroll software. Most modern systems (like Xero, MYOB, or QuickBooks) already support payday-aligned super. Confirm your setup and check if any updates or integrations are needed. Map your pay cycles. Note how often you pay staff (weekly, fortnightly, monthly) and calculate the seven-day payment window for each. Brief your team. Make sure whoever manages payroll understands the changes. The ATO has free online resources and webinars to help. Plan your cash flow. Consider shifting from quarterly to more regular payments now to get used to the timing. Smaller, frequent super payments can reduce cash flow shocks. Monitor and review. Set up a monthly check to ensure super contributions have cleared correctly. Keep an eye on ATO updates as final guidance is released. If you outsource payroll, contact your provider soon — many are already updating systems for Payday Super and can help you make a seamless switch. The Bottom Line Payday Super isn’t just a compliance change — it’s an opportunity to make your payroll more efficient, your staff happier, and your business more compliant with less effort. With the laws now passed and just over 6 months to prepare, it’s time to get ahead of the curve. If you’d like help reviewing your payroll setup or planning the transition, get in touch with our team — we can help you make sure your business is ready to go when Payday Super commences.