Maximise depreciation deductions

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. The eligible new assets must be first held, and first used or installed ready for use for a taxable purpose, between 7.30pm AEDT on 6 October 2020 and 30 June 2023.
For businesses with an aggregated turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
Businesses can also immediately deduct the business portion of the cost of improvements to eligible depreciating asset
For assets first used or installed ready for use from 12 March 2020 until 30 June 2021, and purchased by 31 December 2020, the instant asset write-off:
• threshold is $150,000 (up from $30,000)

Make sure you pay the correct company tax rate

Company Tax Rates

The standard company tax rate is 30%.

companies that are base rate entities must apply the lower company tax rates (see below table).

A base rate entity is a company that both:
- has an aggregated turnover less than the aggregated turnover threshold - which is $50 million from the 2018-19 year onwards
- 80% or less of assessable income is base rate entity passive income (e.g. interest, dividends, rent, and net capital gains).

Make trust resolutions by 30 June

As always, trustees of discretionary trusts are required to make and document resolutions on how trust income should be distributed to beneficiaries for the 2017-18 financial year by 30 June.
If a valid resolution is not executed by 30 June, any default beneficiaries under the deed will become presently entitled to trust income and subject to tax (even where they do not receive any cash distribution), or the trustee will be assessed at the highest marginal tax rate on any taxable income derived but not distributed by the trust.
A trustee must be able to show how an effective resolution was made through minutes, file notes or an exchange of correspondence documented before year end. However, the trust's accounts do not need to be prepared by 30 June.
As a corporate trustee may need time to notify its directors that a meeting must be convened to pass and record a resolution, such a notice should be sent out well before the 30 June deadline.

Seek professional advice when starting a business

Professional expenses associated with starting a new business, such as legal and accounting fees, are deductible in the financial year those expenses are incurred rather than deductible over a five-year period as was the case previously.

Consider whether your legal structure is right for your business

Small businesses are able to change their legal structure without incurring any income tax liability when active assets are transferred by one entity to another.
This rollover applies to active assets that are CGT assets, trading stock, revenue assets and depreciating assets used, or held ready for use, in the course of carrying on a business.

Document the streaming of trust capital gains and franked dividends to beneficiaries

Broadly, trustees of discretionary trusts can stream capital gains and franked dividends to different beneficiaries if the trust deed allows the trustee to make a beneficiary "specifically entitled" to those amounts. The trustee must document this resolution before 30 June and the beneficiary receives or is entitled to receive an amount equal to the net financial benefit of that gain or dividend.

Review your private company loans

Division 7A is an anti-avoidance measure targeted toward ensuring that private companies are not able to make tax-free distributions of profits to shareholders or associates in the form of payments, loans or forgiven debts. Loans for this purpose include a provision of credit or any other form of financial accommodation.

The effect of Division 7A is to deem a private company beneficiary to have paid an unfranked dividend in an income year if it makes a loan to a shareholder or their associate during an income year and that loan is not repaid by the private company’s lodgement day. The deemed unfranked dividend is taken to be equal to the amount of the loan remaining unpaid at the lodgement day and is treated as paid to the recipient of the loan (in most cases, the trust for UPEs and sub-trusts).

The income tax laws can potentially treat the following as an unfranked deemed dividend for a taxpayer unless an exemption applies:

A payment or a loan by a private company to a shareholder or an associate (like a family member)
The forgiveness of a shareholder's or associate's debt
The use of a company asset by a shareholder or their associate, or
The transfer of a company asset to a shareholder or their associate.

The most common exemption is to enter into a written loan agreement requiring minimum interest and principal repayments over a specified loan term, which may be seven or 25 years depending on whether or not the loan is secured.
There are various things a private company can do before its 2017-18 income tax return needs to be lodged to minimise the risk of a shareholder or an associate deriving a deemed dividend.
Depending on the circumstances, these strategies may include repaying a loan, declaring a dividend or entering a complying loan agreement.

Prevent deemed dividends in respect of unpaid trust distributions

An unpaid distribution owed by a trust to a related private company beneficiary that arises on or after 1 July 2016 will be treated as a loan by the company, if the trustee and the company are controlled by the same family group. In these circumstances, the associated trust may be taken to have derived a deemed dividend for the amount of the unpaid trust distribution in 2017-18.
However, a deemed dividend may be prevented if the unpaid distribution is paid out, or a complying loan agreement is entered into before the company's 2017-18 income tax return needs to be lodged.
Alternatively, a deemed dividend will not arise if the amount is held in an eligible sub-trust arrangement for the sole benefit of the private company, and other conditions are satisfied.

Write-off bad debts

Businesses can only obtain income tax deductions for bad debts when various conditions are met.

A deduction will only be available if the debt still exists at the time it is written off. Thus, if the debt is forgiven or compromised before it is written off as bad in the accounts, no deduction will be available. The debt must also be effectively unrecoverable and written off in the accounts as bad in the year the deduction is claimed.

The bad debt must have been previously brought to account as assessable income or lent in the ordinary course of carrying on a money-lending business. Certain additional requirements must be met where the creditor is either a company or trust.

Paying employee bonuses

If you pay staff bonuses and you want to bring expenses into the 2017-18 year, ensure they are quantified and documented in a properly authorised resolution (e.g. Board minute) prior to year-end to enable a deduction to be incurred for employee bonuses where such amounts are not paid or credited until the subsequent year.

Pay any outstanding superannuation entitlements

The Australian Government has announced a 12-month amnesty from 24 May 2018 for employers to pay any outstanding Superannuation Guarantee (SG) contributions for periods prior to 1 April 2018.

Employers who voluntarily disclose and pay previously undeclared SG shortfalls during the Amnesty and before an SG audit will not be liable for the administration penalties and will be able to claim a tax deduction for payments made during the 12-month period. The announcement is subject to approval by the Parliament.

Cryptocurrecy Tax

In Australia, individuals transacting with cryptocurrency may incur tax liabilities in the form of Capital Gains Tax (CGT) or Income Tax. The type of tax payable (as well as the quantity of how much) will depend on the type of transaction and entity in question.

There are many different types of cryptocurrencies – Bitcoin, Tether, Ether and many others. They are created from code using an encrypted string of data blocks, known as a blockchain.

If you buy, sell or invest in cryptocurrency, you need to be aware of your tax responsibilities.

Your tax responsibilities vary depending on your circumstances, but you need to keep records for all cryptocurrency transactions.

You must report a disposal of cryptocurrency for capital gains tax purposes. Disposing occurs when you either:
• exchange one cryptocurrency for another cryptocurrency
• trade, sell or gift cryptocurrency
• convert cryptocurrency to a fiat currency (a currency established by government regulation or law), for example to Australian dollars (A$)

Work out any CGT

If you exchange cryptocurrency for goods, cash or other cryptocurrencies, it is normally considered a disposal for the purposes of capital gains tax (CGT) and you may need to include a capital gain or loss in your tax return.

To work out your capital gain or loss, you need to determine the value of your cryptocurrency purchases and sales in Australian dollars. A capital gain or loss is the difference between the:
• cost base (cost of ownership, including the purchase price plus certain other costs associated with acquiring, holding and disposing of it)
• capital proceeds (what you receive or the market value of what you receive) when you dispose of your cryptocurrency.