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.

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.

Trust Resolutions – Why Timing and Evidence Matter

By Clarke McEwan • October 10, 2025
As the trustee believed the income was classified as interest (this was challenged successfully by the ATO), the trustee assumed that the income would be subject to a final Australian tax at 10%, under the non-resident withholding rules. This was clearly more favourable than having the income taxed in the hands of Australian resident beneficiaries at higher marginal rates. However, the ATO argued that the distribution resolutions were invalid and the Tribunal agreed. Why? The main reason was a lack of evidence to prove that the distribution decisions were made before the end of the relevant financial years. While there were some documents that were purportedly dated and signed “30 June”, the Tribunal wasn’t convinced that the decisions were actually made before year-end and it was more likely that these documents were prepared on a retrospective basis. The evidence suggested the decisions were probably made many months after year-end, once the accountant had finalised the financial statements. The outcome was that default beneficiaries (all Australian residents) were taxed on the income at higher rates. Timing of trust resolution decisions is critical For a trust distribution to be effective for tax purposes, trustees must reach a decision on how income will be allocated by 30 June each year (or sometimes earlier, depending on the trust deed). It might be OK to prepare the formal paperwork later, but those documents must reflect a genuine decision made before year-end. For example, let’s say a trust has a corporate trustee with multiple directors. The directors meet at a particular location on 29 June and make formal decisions about how the income of the trust will be appointed to beneficiaries for that year. Someone keeps handwritten notes of the meeting and the decisions that are made. On 5 July the minutes are typed up and signed. The ATO indicates that this will normally be acceptable, but subject to any specific requirements in the trust deed. If the ATO believes the decision was made after 30 June (or documents were backdated), the resolution can be declared invalid. In that case, you might find that one or more default beneficiaries are taxed on the taxable income of the trust or the trustee is taxed at penalty rates. This could be an unexpected and costly tax outcome and could also lead to other problems in terms of who is really entitled to the cash. Broader lessons – it’s not just about trust distributions The timing issue is not confined just to trust distribution situations. Other areas of the tax system also turn on when a decision or agreement is actually made, not just when it is eventually recorded. For example, if a private company makes a loan to a shareholder in a given year, that loan must be repaid in full or placed under a complying Division 7A loan agreement by the earlier of the due date or lodgement date of the company’s tax return for the year of the loan. If not, a deemed unfranked dividend can be triggered for tax purposes. If a complying loan agreement is put in place then minimum annual repayments normally need to be made to avoid deemed dividends being recognised for tax purposes. A common way to deal with loan repayments is by using a set-off arrangement involving dividends that have been declared by the company. However, in order for the set-off arrangement to be valid there are a number of steps that need to be followed before the relevant deadline. The ATO will typically want to see evidence which proves: · When the dividend was declared; and · When the parties agreed to set-off the dividend against the loan balance. If there isn’t sufficient evidence to prove that these steps were taken by the relevant deadline then you might find that there is a taxable unfranked deemed dividend that needs to be recognised by the borrower in their tax return. Documenting decisions before year-end The key lesson from cases like Goldenville is that documentation shouldn’t be an afterthought — lack of contemporaneous documentation can fundamentally change the tax outcome. What normally matters most is when the relevant decision is actually made, not when the paperwork is drafted. In practice, this often means: · Check relevant deadlines and what needs to occur before that deadline. · If a decision needs to be made before the deadline, ensure that a formal process is followed to do this. For example, determine whether certain individuals need to hold a meeting or whether a circular resolution could be used. · Produce contemporaneous evidence of the fact that the decision has been made. You might consider sending a brief email to your accountant or lawyer explaining the decision that has been made before the relevant deadline , basically providing a time-stamped record of the decision. · Finalise paperwork: formal minutes of meetings can sometimes be prepared after year-end, but they must accurately reflect the earlier decision. Thinking carefully about timing — and building a habit of producing clear evidence of decisions as they are made — is often the difference between a tax planning strategy working as intended and an expensive dispute with the ATO.

Accessing superannuation funds for medical treatment or financial hardship

By Clarke McEwan • October 10, 2025
Superannuation is one of the largest assets for many Australians and offers significant tax advantages, however, strict rules apply to when it can be accessed. While super is most commonly accessed at retirement, death or disability, there are limited situations where earlier access may be possible. Early access is generally available in two situations: · Financial hardship – where you are receiving a qualifying Centrelink/DVA payment for a minimum period and cannot meet immediate living expenses. · Compassionate grounds – Funding for certain specific scenarios which include preventing a mortgage foreclosure or meeting medical expenses for a life-threatening injury or illness or to alleviate severe chronic pain. Compassionate grounds access requires an application to be made to the ATO which needs to be accompanied by relevant medical certificates or mortgage information. If approved the ATO will provide instructions to the individual’s superannuation fund to release an amount to cover the expense. We have included some ATO links with more detailed information on compassionate grounds and financial hardship below. When accessing superannuation under compassionate grounds you would usually collect the relevant supporting documentation and personally make the application for approval using your MyGov account. It has come to the ATO’s attention that there may be medical and dental providers exploiting this access and assisting super fund members to access amounts for cosmetic reasons (you may have even seen advertisements pop up on your social media showing people with a new sparkling smile – and a lower super balance). The ATO’s concerns are discussed in Separating fact from fiction on accessing your super early. Superannuation fund members and SMSF trustees should be aware that there can be substantial penalties applied when super is accessed outside of the legislated conditions of release. You should never provide another party with access to your MyGov login or allow a third party to make applications on your behalf. Penalties may also apply for making false declarations. Should you have any questions or concerns relating to proposed access to your superannuation please reach out to us. Related links Accessing superannuation under compassionate grounds Accessing superannuation due to financial hardship

Government Review of Supermarket Unit Pricing: What It Could Mean for Your Business

By Clarke McEwan • October 10, 2025
Submissions closed just a few weeks later on 19 September 2025, marking the end of a very short opportunity for stakeholders to have their say. A Quick Recap Unit pricing is what allows shoppers to compare costs per standard measure (e.g. $/100g or $/litre) across different pack sizes and brands. Since 2009, large supermarkets have been required to display this information to help customers spot value. While compliance has been relatively low-cost and penalties limited, the Government’s review signals that much tighter rules could be on the way. Why Now? The ACCC’s recent supermarket inquiry highlighted that while unit pricing helps, there are still gaps. The big concern is shrinkflation—when pack sizes quietly reduce while prices remain the same or higher. With cost-of-living pressures dominating headlines, the Government is looking at clearer, fairer pricing to rebuild consumer trust. What Might Change? Proposals considered in the consultation paper include: · Shrinkflation alerts – supermarkets may need to flag when a product becomes smaller without a matching price cut. · Clearer displays – larger, more prominent unit prices both in-store and online. · Wider coverage – expanding the rules beyond major supermarkets to smaller retailers and online sellers. · Standardised measures – eliminating confusing “per roll” vs “per sheet” comparisons. · Civil penalties – introducing fines for non-compliance. The Commercial Impact For suppliers, packaging decisions could come under closer scrutiny. For retailers, costs might arise from updating shelf labels, software, or e-commerce systems. But there are also opportunities: businesses that embrace transparency could build loyalty and stand out in a competitive market. What You Should Do Now that the consultation period has closed, Treasury will consider submissions and the Government is expected to announce its response later this year. Businesses in food, grocery, and household goods should stay alert—the final shape of the rules could affect pricing, packaging, and compliance obligations across the sector. At Clarke McEwan, we can help you model potential compliance costs, assess financial impacts, and prepare for upcoming regulatory change. Reach out to discuss how this review might affect your business.

ATO Interest Charges Are No Longer Deductible – What You Can Do

By Clarke McEwan • October 10, 2025
Leaving debts outstanding with the ATO is now more expensive for many taxpayers. As we explained in the July edition of our newsletter, general interest charge (GIC) and shortfall interest charge (SIC) imposed by the ATO is no longer tax-deductible from 1 July 2025. This applies regardless of whether the underlying tax debt relates to past or future income years. With GIC currently at 11.17%, this is now one of the most expensive forms of finance in the market — and unlike in the past, you won’t get a deduction to offset the cost. For many taxpayers, this makes relying on an ATO payment plan a costly strategy. Refinancing ATO debt Businesses can sometimes refinance tax debts with a bank or other lender. Unlike GIC and SIC amounts, interest on these loans might be deductible for tax purposes, provided the borrowing is connected to business activities. While tax debts will sometimes relate to income tax or CGT liabilities, remember that interest could also be deductible where money is borrowed to pay other tax debts relating to a business, such as: · GST · PAYG instalments · PAYG withholding for employees · FBT However, before taking any action to refinance ATO debt it is important to carefully consider whether you will be able to deduct the interest expenses or not. Individuals If you are an individual with a tax debt, the treatment of interest expenses incurred on a loan used to pay that tax debt really depends on the extent to which the tax debt arose from a business activity: · Sole traders: If you are genuinely carrying on a business, interest on borrowings used to pay tax debts from that business is generally deductible. · Employees or investors: If your tax debt relates to salary, wages, rental income, dividends, or other investment income, the interest is not deductible. Refinancing may still reduce overall interest costs depending on the interest rate on the new loan, but it won’t generate a tax deduction. Example: Sam is a sole trader who runs a café. He borrows $30,000 to pay his tax debt, which arose entirely from his café profits. The interest should be fully deductible. However, if Sam also earns salary or wages from a part-time job and some of his tax debt relates to the employment income, only a portion of the interest on the loan used to pay the tax debt would be deductible. If $20,000 of the tax debt relates to his business and $10,000 relates to employment activities, then only 2/3rds of the interest expenses would be deductible. Companies and trusts If a company or trust borrows to pay its own tax debts (income tax, GST, PAYG withholding, FBT), the interest will usually be deductible if it can be traced back to a debt that arose from carrying on a business. However, if a director or beneficiary borrows money personally to cover those debts, the interest would not normally be deductible to them. Partnerships The position is more complex when it comes to partnership arrangements. If the borrowing is at the partnership level and it relates to a tax debt that arose from a business carried on by the partnership then the interest should normally be deductible. For example, this could include interest on money borrowed to pay business tax obligations such as GST or PAYG withholding amounts. However, the ATO takes the view that if an individual who is a partner in a partnership borrows money personally to pay a tax debt relating to their share of the profits of the partnership, the interest isn’t deductible. The ATO treats this as a personal expense, even if the partnership is carrying on a business activity. Practical takeaway Leaving debts outstanding with the ATO is now more expensive than ever because GIC and SIC are no longer deductible. Refinancing the tax debt with an external lender might provide you with a tax deduction and might also enable you to access lower interest rates. The key is to distinguish between tax debts that relate to a business activity and other tax debts. For mixed situations, you may need to apportion the deduction. If you’re unsure how this applies to you, talk to us before arranging finance. With the right strategy, you can manage tax debts more effectively and avoid costly surprises.

Measuring the health of your business with ratio measures

By Clarke McEwan • October 3, 2025
Business ratios
Cash is King. To work out how fast you can grow your business, you need to look at your cashflow.

Cash is not profit and vice versa

By John Clarke • September 30, 2025
The purpose of a business is to make money, and that means you need to know the difference between profit and cash flow. Net profit is what you have left after you deduct all your business expenses from all your revenue. You can improve net profit only by changing the things that affect revenue and expenses. For example, if: You renegotiate with your suppliers, you may get stock cheaper, or carry less inventory Your staff engage with customers better, you can learn more about what they do and don’t like – and get more business You can roster staff differently, you may be able to run your business more efficiently.  Cash flow comes from various sources. However, it also covers operating expenses, taxes, equipment purchases, repayments, distribution, and so on. Note that a profitable business does not always have good cash flow. And a business with good cash flow is not always profitable. For example, you can have good cash flow, and loss-making expenses. To work out how fast you can grow your business, look at your projected cash flow. We can advise you on this. Keeping cash crowned as King Your business can’t survive without cash. The following six takeaways are essential for business success: Protect your cash position, by knowing what it is. Build a cash flow statement and always keep it up-to-date. If you foresee a shortfall, start at once to fix it. Create a cash buffer as an insurance against unexpected difficulties. Protect your cash position against revenue shocks, by maintaining a balance equivalent to at least two months of operating expenses. Be realistic with revenue expectations. Take action now if it looks like sales are not going to get you to breakeven. Credit checking up front will reduce the risk of customer non-payment. Make sure you follow up with clear payment terms agreed in writing. Communicate regularly with customers and automate where possible. Every dollar you spend reduces cash reserves. The best way to protect your cash is to create a budget for the spend you know you need, and stick to it. Looking to improve cash flow? Make a time to talk to us. We're here to help.
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