There are a number of small business tax breaks that it pays to be aware of as the end of financial year approaches.

We have compiled this brief overview to give you an idea about whether any of these will be beneficial to your business:

Trading stock

Small businesses can opt out of doing an end of year stocktake (which can be expensive) if the value of their trading stock has not gone up or down by more than $5000 in the past financial year.

Simplified depreciation

Small businesses can immediately write off the value of business assets that were less than $1000. The depreciation on assets valued at over $1000 can be calculated as a single pool that depreciates at 15% in the first year and 30% every year after that.

However, there are some assets that are excluded from the simplified depreciation rules. Businesses that are using the simplified depreciation should seek advice on any assets that may require a different method of calculating depreciation.

CGT concessions

There are four CGT tax concessions available to small businesses that can be extremely effective in minimising, or even eliminating, CGT liability. These concessions are:

• The retirement exemption: Available to small business owners over the age of 55, or when the capital gain is contributed to a superannuation account

• The 15 year exemption: Available to retiring small business owners who have held the asset for over 15 years

• The 50% active asset reduction: Where an asset is considered to be ‘active’ the CGT liability may be reduced by 50% (the requirements here are complex and it is advisable to seek professional advice)

• The CGT rollover: If a business asset is disposed of and the business plans to purchase a similar replacement asset, then the CGT bill may be deferred for at least two years

There are specific rules about the order that these CGT concessions should be applied. It is advisable to seek professional advice before disposing of an asset.

Every year, the ATO announces a number of compliance areas that will be subject to additional scrutiny.

It always pays to be aware of these focuses, as non-compliance is, more often than not, the result of an honest mistake as opposed to wilful deception. Unfortunately, an honest mistake can still cost you dearly in penalties and/or interest on late payments to the ATO. In the 2014/15 financial year, the ATO will be focusing on:

Personal technology

Deductions claimed for personal technology items such as smartphones, tablets and laptops. Taxpayers who are claiming deductions on such items should ensure that they have adequate documentation to prove the breakdown of personal/work use (for example diary entries). You are only able to claim a tax deduction equivalent to the portion of the use that is work related.

Cash economy

The ATO will be aiming to identify businesses that operate off the books by failing to accurately record their cash transactions. This may involve paying employees in cash (and therefore avoiding minimum wage requirements and the super guarantee) and/or underreporting the business’s profits, thereby reducing the overall tax liability.

GST compliance

The GST compliance program involves ensuring that all businesses that are required to register for GST have done so (that is all businesses with an annual turnover in excess of $75 000). The accuracy of BAS reporting is also under scrutiny.

Travel costs

Taxpayers claiming large deductions in the form of work-related travel costs will be subject to additional examination from the ATO this year. In particular, the tax office has warned that it will be focusing on the validity of deductions claimed for the transportation of bulky tools and equipment. 

Savvy Australian property investors can save a large amount on their tax bill by deducting associated expenses.

Negative gearing allows property investors to claim any shortfall between their income and expenditure on an investment property as a deduction against their total taxable income.

Most property investors are aware of the usual expenditure deductions that they can use to offset any income earned by an investment property. Regular costs such as maintenance, repairs, interest on loans and management fees can all be used to offset rental income.

However, there are a few lesser known tax strategies that property investors may care to look at as June 30 approaches:

Refinancing your mortgage

Refinancing your mortgage usually incurs a couple of one-off costs and fees. Investors who are planning on refinancing their mortgage may care to consider doing so before June 30 in order to claim these costs as a deduction in the 2015-16 financial year.

Pre-pay interest

Property investors who have sufficient funds to pre-pay interest on a loan can do so and claim the deduction in the current financial year. It is also possible to pre-pay (and claim a deduction for) your upcoming property insurance premiums.

Bring forward maintenance expenditure

If there are maintenance tasks that you know will need to be completed on an investment property, then you may wish to complete them before June 30 in order to minimise your tax bill in the current financial year.

Stay on top of your paperwork

Make sure that you are aware of the depreciations on any fittings or repairs, as well as any other costs you have incurred, for example, strata fees, management fees or rental losses.

Property investors are highly advised to discuss their tax situation with an accountant to ensure that their activities are compliant and that tax savings are maximised. 

If your negatively geared property is beginning to create some serious cash flow problems, there is a way you can access the large tax breaks it provides before the end of the financial year.

Specifically structuring an investment property to take advantage of negative gearing is a popular strategy for investors wanting to achieve significant taxation benefits. However, since investors are subject to normal withholding tax from their weekly pay, these benefits often remain with the ATO until investors lodge their annual tax return.

While that may work for most tax deductions, it can sometimes create cash flow problems for property investors with large tax breaks who cannot afford to wait until the end of the financial year.

Applying for a Tax Withholding Variation

Lodging an Income Tax Withholding Variation (ITWV) application with the ATO is a viable means of allowing investors to access these tax benefits every week (when they are most needed) to help relieve pressures such as cash flow restrictions.

An ITWV, previously known as a Section 221YD variation, is an annual application investors can send to the tax office, requesting to vary the amount of tax withheld from their salary each pay period by their employer.

The ITWV is valid for a whole financial year i.e. 1 July 2015 to 30 June 2016. If lodged part way through the financial year, it takes into account the tax amount withheld from an investor’s salary to date of the application. ITWV applications need to be renewed on an annual basis if investors wish to continue varying the tax withheld from their salary each financial year. Once approved, investors will have their weekly PAYG reduced for each pay period.

There are a number of circumstances where an ITWV may be appropriate, and sometimes necessary for those who want to reduce their pay as you go (PAYG) withholding rate for the year ending 30 June.

The tax office usually processes ITWV applications within ten working days, but it is worthwhile lodging applications at least 14 days prior to an existing variation from expiring.

Once the ATO has processed an ITWV, they will notify the investor’s employer of the “varied” amount of tax to be withheld from their pay each pay period. Those who change jobs during the year will need to submit a new application to the tax office.