Maximising deductions for non-SBE taxpayers
Non-SBE business taxpayers should endeavour to maximise deductions by adopting one or more of the following strategies:
- Prepayment strategies;
- Accelerating expenditure; and
- Accrued expenditure.
Prepayment strategies – non-SBE
Any part of an expense prepayment relating to the period up to 30 June is generally deductible.
In addition, non-SBE taxpayers may generally claim the following prepayments in full:
- expenditure under $1,000;
- expenditure made under a ‘contract of service’ (e.g., salary and wages); or
- expenditure required to be incurred under law.
Note: Prepayments can be a little confusing, so before you commit to making a payment please feel free to call us with any queries or assistance if required.
Accelerating expenditure – non-SBE
This is where a business taxpayer brings forward expenditure on regular, on-going deductible items. Business taxpayers are generally entitled to deductions on an ‘incurred basis’. Therefore, there is generally no requirement for the expense to be paid by 30 June 2018 (as long as the expense has genuinely been ‘incurred’, it will generally be deductible).
The following may act as a checklist of possible accelerated expenditure:
- Depreciating assets costing $100 or less can be written off in the year of purchase. Depreciating assets costing less than $1,000 can be allocated to a low value pool and depreciated at 18.75% (which is half of the full rate of 37.5%) in their first year regardless of the date of purchase.
- Repairs to office premises, equipment, cars or other business items.
- Consumables/spare parts.
- Client gifts.
- Fringe benefits – any benefits to be provided, such as property benefits , could be purchased and provided prior to 1 July 2018.
- Superannuation – contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).
Accrued expenditure – non-SBE
Non-SBE taxpayers (and some SBE taxpayers) are entitled to a deduction for expenses incurred as at 30 June 2018, even if they have not yet been paid.
The following expenses may be accrued:
- Salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2018.
- Interest – any accrued interest outstanding on a business loan that has not been paid as at 30 June 2018.
- Commercial bills – the discount applicable to the period up to 30 June 2018, where the term of the bill extends past 30 June.
- Commissions – where employees or other external parties are owed commission payments.
- Fringe benefits tax (FBT) – if an FBT instalment is due for the June 2018 quarter, for example, but not payable until July, it can be accrued and claimed as a tax deduction in the 2018 income year.
- Directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2018, it can be claimed as a tax deduction.