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.

Reviewing your fund’s investment strategy

By Clarke McEwan • October 21, 2026
Superannuation law requires trustees of SMSFs to formulate, regularly review and give effect to an investment strategy that has regard to the whole of the circumstances of the fund. Although there is nothing in the law stating a timeframe that may define ‘review regularly’, it is commonly accepted that this would be at least annually. This aligns with comments on the ATO’s website where they expect reviews to occur at least annually. Some trustees will undertake an annual review leading up to, or at the beginning of a new financial year, while others will undertake the review as part of reviewing the completed financial accounts from the previous financial year. Neither is the right or wrong option, and you must consider what is best for your situation. Either way, you will need to be able to show your fund’s auditor that you have reviewed the investment strategy and documented any decisions made, whether it be recording changes deemed necessary or determined the existing strategy remains appropriate. There may be other times that it is appropriate to review the investment strategy. These may include when: There is a market correction; A member joins or leaves the fund; A member starts a pension in the fund. An investment policy will generally be comprised of two parts: 1. Investment objective – this part outlines the fund’s objectives and expected outcomes. For example, an objective may be to achieve a certain level of return over a certain period. This would generally take into account the age of the members, their retirement needs and investment risk profile. 2. Investment strategy – this part outlines how the fund will achieve the stated objectives. For example, it may include investment asset ranges or specific assets that will be held. When reviewing your fund’s investment strategy, consideration must be given to: The risk of holding particular investments and their returns, with regards to the fund’s objectives and expected cashflow requirements; Composition of investments and the risk of inadequate diversification; Liquidity of investments, with regards to expected cashflow requirements; Ability to discharge existing and prospective liabilities; and Whether insurance cover for one or more members should be held by the fund. Although these points need to be considered, it is up to the trustees to determine how they are applied, based on the circumstances of the fund. As an example, you must consider the diversification of the fund’s assets, but that does not mean you are required to have a diversified investment strategy. Many funds hold just a property and a bank account, and this may be appropriate for those funds. However, the trustees should document what consideration they gave to diversification, why the lack of diversification is appropriate and why they have chosen these particular assets. Likewise, there is no legal requirement to hold insurance cover for the members, but you do need to document that it has been considered. As noted above, a member starting a pension may be reason to review the fund’s investment strategy. This is due to the fact that this is likely to change the liquidity considerations and investment profile of the fund. When members are all in the pre-retirement growth phase, expenses are usually more predictable and there isn’t a need for many funds to hold large cash reserves. Once members reach the point they are accessing their benefits, as either pension or lump sum payments (or both), cashflow, liquidity and a potential cash buffer become a more important consideration. It is not uncommon that leading up to the end of any given financial year we will field enquiries and concerns from trustees that do not have the cash to satisfy even the minimum pension requirements for the year. While there may be several reasons for this, it should raise questions about the appropriateness of the fund’s current investment strategy and considerations as to whether a review of the asset holdings is warranted. If we revisit the one property and one bank account funds mentioned early, this may have been a reasonable strategy during the growth phase, but does it remain so during the drawdown phase? Although many people are comfortable with property and Australian investors in general have an affinity for the old bricks and mortar, this does not mean it is an appropriate investment in all circumstances. If the rental income from the property cannot support your retirement needs and minimum pension withdrawal requirements, something needs to change. This will hold true for any other investment that may not be easily sold, such as holdings in unlisted companies and trusts. Reviewing your fund’s investment strategy and giving consideration to the needs of the members and the asset holdings of the fund should not be seen as just a tick-a-box legal requirement. You’ve worked hard to build you retirement wealth and when the time comes, you want to be able to enjoy it. Having an appropriate investment strategy that will allow this is an important element of running an SMSF. Have you reviewed your strategy lately?

“Widow tax” fixed

By Clarke McEwan • October 21, 2026
Federal Parliament has closed an unintended loophole in the recent negative gearing and capital gains tax reforms that became widely known as the “widow tax”. At the same time, the Government also fixed a technical issue that could have affected people who first use a main residence to generate rental income after Budget night on 12 May 2026. What the problem was As you might be aware, the tax rules have recently been changed to ensure that losses generated from residential rental properties from 1 July 2027 can be ‘quarantined’. This means that they can only be offset against income or capital gains generated from other residential rental properties. However, the changes won’t generally apply to properties that were purchased by the relevant taxpayer before 12 May 2026. However, a problem could arise when an ownership interest in a property passes to someone as a result of the death of the original owner or because of a relationship breakdown and this occurs after 12 May 2026. Under the original version of the new rules, that transfer could be treated as a new acquisition. This could have meant that a surviving spouse or former partner risked losing the protected negative gearing treatment that had applied to the property in the hands of the previous owner. How it was fixed The Government moved quickly once the issue was identified. Some new rules now specifically protect people who acquire a residential property interest from a spouse because of death or relationship breakdown. The rules can also potentially protect someone who inherits an additional ownership interest in a rental property from a co-owner who isn’t their spouse. Case study 1 – the widow tax fix Sarah and David bought a rental unit in 2019 as equal joint owners. The property has always been negatively geared, with annual rental losses of around $8,000 offset against their other income each year. Under the original May 2026 reforms, the property was protected because it was acquired well before Budget night. However, if David had died and the property transferred fully into Sarah’s name, the additional 50% interest that Sarah inherited from David’s estate risked being treated as a new acquisition. Sarah could have lost the ability to claim the losses generated from this interest in the property against her other income. With the updated rules now in place, that outcome is avoided. Because the transfer occurs due to the death of a spouse, Sarah keeps the original protected treatment and can continue offsetting the rental losses in the same way as before. Former main residences A related technical issue also needed fixing. Under the original rules there was a risk that an existing main residence purchased before 12 May 2026 could lose its protected status if it was later first used to generate taxable rental income after that date. This was because of the interaction with a long-standing tax rule that can treat someone as if they had reacquired a former main residence when it is first used to produce income. The Government has now passed legislation to correct this. The new rules specifically disregard that “first use to produce income” rule when determining the acquisition date for negative gearing purposes. Case study 2 – renting out a former home James bought his home in 2018 and has lived in it as his main residence ever since. In 2027 he decides to move in with his partner and rent the property out for the first time. Under the original drafting of the 2026 reforms, first renting the property after 12 May 2026 risked resetting its acquisition date. That could have caused the property to be treated as a post-Budget night acquisition and subjected to the tighter negative gearing limits. With the new rules now in place, that reset is disregarded for negative gearing purposes. Because James originally acquired the property before 7:30 pm on 12 May 2026, it keeps its original acquisition date. He can continue to offset any rental losses in the same way as if the property had always been an investment property acquired before Budget night. Why these fixes matter Both changes remove sources of unexpected cash-flow disruption. The “widow tax” fix protects people at a difficult personal time. The main residence clarification gives homeowners greater flexibility if their circumstances change and they later decide to rent out a property they already own. What you should do now If you own a jointly held investment property acquired before 12 May 2026, the “widow tax” fix provides reassurance that a future transfer on death or separation should not remove negative gearing rights, but the rules are still complex and it is always best to have the position checked. If you own a main residence bought before 12 May 2026 and are considering renting it out in future, the new rule means the property should keep its original acquisition date for negative gearing purposes, but there could still be some complex CGT implications. Keep clear records of the original purchase date and ownership history. If either situation applies to you and you would like confirmation of how the amended rules work in your circumstances, contact us.

$21 billion in lost super is waiting

By Clarke McEwan • October 21, 2026
More than $21 billion in lost and unclaimed superannuation is currently sitting idle across Australia, according to the latest ATO figures. The average lost account holds around $41,000. Last year alone the ATO reunited more than $1.1 billion with members. That is real money that could be working harder for your retirement. Tax time is the natural moment to check whether any of it belongs to you. How super becomes “lost” Super generally becomes lost when an account becomes inactive and the fund can no longer contact the member. Common triggers include: Changing jobs and leaving an old account behind Moving house or updating your phone number without telling the fund Changing your name When the fund cannot reach you, the account may be classified as lost. In some cases, the balance is eventually transferred to the ATO to hold until the rightful owner claims it. The money does not disappear; it simply sits waiting to be reunited with its owner. A five-minute health check Finding lost super is straightforward and free. The quickest way is through ATO online services via myGov: 1. Log in to myGov and open the ATO section. 2. Select Super, then Fund details. 3. You will see any active accounts plus any lost or ATO-held super linked to your tax file number. You can also use the ATO app or call the automated lost super search line on 13 28 65. A paper form is available if you prefer. Many people are surprised by what turns up from old accounts from early jobs, small balances that have grown over time, or larger amounts they had completely forgotten about.  Especially valuable if you are approaching retirement For clients still decades from retirement, finding lost super is useful. For those at or approaching retirement age it can be particularly meaningful. An extra $20,000 or $40,000 (or more) can make a noticeable difference to the size of the nest egg available to draw on. Even smaller amounts compound further once consolidated into a single active account that continues to earn returns and attract any future contributions. One important practical warning before you consolidate If you decide to roll multiple accounts into one preferred fund, check the insurance cover attached to each account first. Death, total and permanent disability, or income-protection cover that comes with a super account can sometimes end when the balance is rolled over. Losing that cover without realising it can leave a gap in your protection at the exact time you may need it most. Speak with your fund or adviser before consolidating so you understand exactly what will transfer and what will not. The commercial upside is simple Every dollar sitting in a lost or low-balance account is potentially earning less than it could, or incurring unnecessary fees. Bringing the money into one active account usually reduces fees, improves investment choice, and makes it easier to keep track of your overall position. The ATO’s reunification figures show that when people do the search, meaningful amounts are regularly returned. The process takes only a few minutes and costs nothing. Given that more than $21 billion is currently waiting to be claimed, the odds that some of it belongs to you are higher than many people expect. You can start the free search here: https://www.ato.gov.au/forms-and-instructions/superannuation-searching-for-lost-superannuation If you would like help interpreting what you find, or advice on whether consolidation makes sense in your circumstances (including the insurance check), just get in touch. A short conversation now can put money back into your retirement savings that might otherwise stay forgotten.

Travel records under the microscope

By Clarke McEwan • October 21, 2026
Travel records under the ATO microscope

Should You Buy or Lease Your Business Premises?

By Clarke McEwan • October 7, 2026
Owning your business premises can build long-term wealth and eliminate rent increases. Leasing can offer greater flexibility and preserve cash flow. Every business is different. Let us help you analyse the costs and benefits so you can make the right decision. 📞 Get in touch today.

Should you buy or lease your business assets?

By Clarke McEwan • September 18, 2026
There are certain items of equipment, machinery and hardware that are essential to the operation of your business – whether it’s the delivery van you use to run your client deliveries, diagnostic equipment in your medical practice or the high-end digital printer to run your print business. But when a critical business asset is required, should you buy this item outright, or should you lease the item and pay for it in handy monthly instalments? To buy or to lease? That is the question Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it’s important to weigh up the pros and cons of buying, or opting for a leasing option. First of all, let’s look at why you might decide to buy the item… Buying: the pros and cons: - Pro: It’s a tangible asset – when you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes. - Pro: It’s yours for the life of the asset – once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn’t reliant on you being able to keep up regular lease payments, and if your financial circumstances change then you can sell the asset to free up the capital. - Con: It’s an expensive outlay – paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment. - Con: You may require extra funding – if you don’t have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing your worth on the balance sheet. Leasing: the pros and cons: - Pro: Leasing has a cheaper entry point – if the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For start-ups and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business. - Pro: You can spread the cost – there is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow and bring in more customers and revenue. - Con: You don’t own the asset – there are different types of leasing agreement. Under a capital lease, you do own the asset (once you’ve paid if off). But if you opt for an operating lease, this is a more short-term lease and you won’t own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required) so it’s important to consider what kind of leasing agreement you’re entering into and what the advantages/disadvantages may be. - Con: You may pay more in the long run – most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value. - Con: You may lose the use of the asset – if you can’t keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is a more risky prospect, but also an easier option for businesses with less cash to splash.Talk to us about whether buying or leasing is the best way forward. Whether you opt to buy or lease your equipment isn’t always a straightforward decision to make – so it’s a good idea to consult with your accountant early on in the decision-making process. We’ll help you review your current financial position, assess your available cashflow and look at your regular cost base to decide whether buying or leasing is the right thing for your business.
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