6 things you can do to take advantage of tax deductions on your personal tax return.
Tax Tips for Tradies
- Pay super on time! Super paid after the due date (28th of the following month of each quarter) is generally not deductible to the employer.
- If your company uses franked dividends as part of your business drawings/wages strategy, consider distributing dividends via family trusts. This can be an effective way to minimise tax across multiple periods.
- Try to avoid owing the company money for greater than 12 months. These loans generally result in the company paying tax on a calculated interest charge. You may know these as Div 7A loans, which are sometimes used to smooth out tax on distributions over many years.
- Review your structure. Operating under an ineffective structure can cost you thousands and there is no one ideal structure for all businesses.
- For businesses with a turnover of $2m or less, you can obtain an immediate deduction for assets costing less the $1,000. Acquire small assets before 30 June. You may recall that this limit was $6,500, however it was repealed (via draft legislation yet to be passed.) As of 1 January, the law reduced back to $1,000. Be careful as the $6,500 immediate write off is still being advertised by some retailers as an incentive to buy before 30 June.
- Take out personal insurances in the right entity. It makes most sense to take out income protection insurance in your own name or in the company/trust; you operate your business in order to benefit from the tax-deductible premiums. However, life insurance is best paid by your super fund, as the premiums are not deductible if paid outside of the fund. Trauma insurance is best not paid by your super fund as you may have difficulty accessing the payouts.
Tax planning call to action before 30 June
- Write off bad debts
- Write off obsolete stock
- Distribute from your trusts to family members. Parents and children over 18 with little of no other income and not on the government support such as the pension are ideal.
- Salary sacrifice super contributions to bring your total contributions up to $25,000.
- Take out income protection insurance and pay for 12 months before 30 June.
- If you earn less than 48,516 contribute $1,000 into your super and the government will tip in up to $500. There are other requirements.
Bio: Matt Dryden is a Chartered Accountant with over 18-year experience in corporate tax and business services specialising in business structures and corporate taxation. Having started in PwC in Brisbane, he now heads the team at Dryden Associates servicing small to medium businesses from Melbourne to Cairns including multinational groups.