We are now mid-May with less than six weeks left until the end of another tax year. Have you consulted with your tax accountant to discuss what your estimated taxable income would be and what options you have to minimise this?
It is good business practice to do this each year so that you can plan the best outcome. Not only for years in which you have higher income but also if your income is down or you have had additional tax claims this year. You may be holding off sending cattle to market as you think you're deferring the tax by selling in July, but it may be beneficial to have that income in this year.
As part of the COVID-19 stimulus plan the government introduced an immediate depreciation write off for the purchase of items of plant and equipment up to $150,000 per item. Even if you have not bought any new equipment during the year, the change to legislation may give you an extra tax deduction this year. If your small business depreciation pool balance is under $150,000 as at the beginning of the year the total pool balance can be written off. This may have an adverse result on other deductions. If the extra write-off reduces your income so much that you end up in a loss position you are unable to claim superannuation and farm management deposit deductions. In this situation it may pay to sell those extra cattle you are holding back.
If you estimate that your income is higher this year, your accountant can advise on ways to reduce your tax liability. Some suggestions are spending additional amounts on consumables like fencing wire, fuel etc. Purchasing some needed capital equipment to take advantage of the immediate write-off. If you wish to retain the cash you could make a farm management deposit
If you are considering superannuation contributions we are in the first year of a new rule allowing the carry forward of unused contribution caps for up to 5 years. You may be able to claim more than the cap of $25,000 this year. Conditions apply so please check with your accountant first.
- Helen Warnock is a partner at Kennas Chartered Accountants Rockhampton. This article offers general information only. You should consult your personal adviser to seek advice relevant to your personal circumstances before taking action.
