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Important Tax-Time Tips for Small Business and Investors – Part Two

06.27.2014 By Elliott Insurance Insurance News

Tax-time is still drawing near and here we bring you our next instalment of tips to help you through what can sometimes a very busy time for small businesses or investors. So let’s get down to the nitty-gritty and discuss some things which can help make your tax deadline not so frightening.

What other factors should you consider this financial year?

Small business entities

If your business turns over less than $2 million, then you will likely be classed in the small business category. In this case you may be able to apply for concessions on capital gains tax, immediate deductions on pre-paid items, and simplified trading stock rules and depreciation. If you are transitioning from a SBE and are not sure about your concessions, contact your tax account for advice.

Capital Gains Tax for small business

Small businesses can reduce the CGT on the sale of their business by applying for four different concessions

  1. A 15 year exemption – if this does not apply to you, you can apply for any or all of the remaining three, which are;
  2. A 50% reduction on active assets
  3. A $500,000 retirement concession
  4. Replacement asset roll-over relief

Crowe Horwath is considering this CGT for small business an area of high risk with the ATO at the moment due to agreements, eligibility, and planning for these concessions.

Bad debts

Crowe Horwath also recommends writing off any bad debts you have and documenting this thoroughly, allowing for adjustment of GST charged on the original invoice.

Share holders

Crowe Horwath recommends that “shares must generally be held ‘at risk’ for 45 days for entitlement to franking credits. Individuals and superannuation funds can receive a refund of excess imputation credits. Un-utilised excess franking credits in a company may be carried forward as a revenue loss”.

Allowable deductions

You can maximise your allowable tax deductions and reduce your taxable income by considering the expenses you have incurred before the years end or pushing them out before 30 June. For example you can pay directors fees and bonuses, make minor repairs on property or machinery, pool your depreciating assets or scrap them altogether.

Non- commercial losses

If you carried out a non-commercial business activity you are restricted by non-commercial loss provisions which prevent you from offsetting the losses against other income earned that financial year. There are certain tests which must be passed and special exceptions which can be made if you fit the criteria.

If you have incurred losses from non-commercial assets and your income exceeds $250,000 you will generally not be eligible to claim the loss unless you apply for the Commissioners discretion.

Personal services income

If you provide a personal service such as contracting or are a contracting entity, you will have a personal services income. There are special rules, such as limited deductions, which apply to this type of income unless you can provide proof that you do not obtain more than 80% of your income from one client, or pass one of three other tests by the ATO.

Personal use assets

If business – owned assets are used outside of business by shareholders or associates you may be risking your tax dividends. It is important to seek professional advice in this case, such as that of Crowe Horwath.


There is a requirement by the law to pre-pay tax on some items. For example workers compensation insurance and some items under $1000 can be deductible as they arise. Where possible, prepay your tax to make things more simple come 30 June.


Contributions for the tax year must be made prior to 30 June for the deduction to be available to you. For family businesses Crowe Horwath recommends maximising concessional contributions to key persons. These however, are limited to $25,000 p/a unless they are over 59 years old. Persons over this age are limited to a $35,000 p/a concessional contribution. Any amount over these rates will generally incur a higher rate of tax.

If you have any queries regarding tax for yourself, your business, or your investments please contact a professional tax accountant to discuss your situation before making any decisions.

Advice Warning Elliott Insurance Services are not tax advisors or accountants. The advice given above is of a general nature and if you are seeking specific professional tax advice please seek a licensed accountant who can tailor advice to your individual tax needs.

You can also find more information on the ATO website. We thank Crowe Horwath for the information they have provided.