Morris says that while most businesses use depreciation rates given by the tax office, there is scope to use your own depreciation guides.
“Most people value depreciation by estimating the effect of losses on a generic basis. They may estimate the life of a car as ‘X’ years, therefore depreciation is ‘Y’. What you can do in some circumstances is do your own estimate of effective loss, providing you have strong grounds.”
If you are an entrepreneur with aggregated annual turnover under $50,000, you may be eligible for the entrepreneurs’ tax offset, which is equal to 25% of the income tax payable on business income.
But be aware – the government has introduced means testing for this offset and only singles with personal income below $75,000 or households with incomes below $120,000 are eligible.
The offset phases out after that initial $50,000 and ends once your income reaches $75,000. The ATO warns the offset can only be used to reduce the amount of tax payable and is non-refundable.
Most entrepreneurs would no doubt be aware of the Government’s changes to superannuation from 1 July, which reduce the cap on heavily tax-concessioned voluntary contributions to just $25,000 for those under 50, and $50,000 for those over 50.
Now is the last time to take advantage of the higher, existing caps, but be careful – Matthew Field reminds entrepreneurs not to exceed contribution caps for super funds. “Otherwise, the entity could be up for tax liabilities sometimes up to 93%.”
Peter Bembrick, tax consulting partner at HLB Mann Judd, says that the ATO will be carefully looking at individuals and senior management teams in regards to super, particularly if salary sacrificing is involved.
“They pick up on it because they might receive income from another source and they have superannuation they’ve forgotten about, so that’s something people will think about. Be aware of the laws going forward.”
Frank Brass reminds entrepreneurs that contributions on behalf of a spouse are subject to the spouse’s income limit being $13,800, but a rebate of $540 is available for those who qualify.
“A full rebate will apply if the taxable income of the spouse is below $10,801 and it is reduced and cuts out at a taxable income of $13,800.”
The Government’s co-contribution scheme will still match payments up to $1500 for those earning under $30,343, graduating out at $60,343. The co-contribution amount will change to $1000 from 1 July, so now is the time to take advantage of the Government’s offer.
Chris Hope from Pitcher Partners says ensure contributions are paid by 30 June for the current financial year in order to claim the deduction from the ATO.
The ATO will allow contributions to be paid after that date, but if contributions are paid after 28 July, businesses will be subject to the superannuation guarantee charge. The charge is made up of three parts: the shortfall amount of any super not paid, interest on that amount, (10% per annum) and an administration fee of $20 per employee per quarter.
The self-employed can claim a deduction on super paid into their own accounts if they pass a test, which requires all income from salary wages, together with any reportable fringe benefits, to be less than 10% of all assessable income and RFG.
The Government recently introduced tax changes to non-commercial business losses. From 1 July, taxpayers with income over $250,000 will no longer be able to claim some deductions relating to side businesses such as a holiday home or a hobby farm.
“Where an individual is incurring losses of a different nature in a non-commercial enterprise, those losses are now quarantined and can’t be offset against any other income,” Matthew Field says.
“Someone who’s running two businesses, one is successful and one is running at a loss, from 1 July [ATO] won’t allow those losses to offset against other income.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
