Questions to ask your accountant before 30 June. What are they?
Hopefully you’ve already met with your accountant and done some planning before the end of the financial year. After all, this year we had a number of businesses receive JobKeeper but now that it’s tax time many business owners may get a shock when they realise that all the income from JobKeeper is taxable income.
Maybe you accessed a Government Supported Loan, maybe you sold a car or asset in the 2021 financial year that you wrote off completely in the 2020 year taking advantage of the instant asset write off and pooling depreciation. Now you need to declare that as income and worse still, pay back some of that tax benefit. So, at the last minute it’s not all over – there might be something you can do to help reduce your tax. Our good friends at Sage Business Group have put together a quick hit list. This isn’t every question you should ask your accountant but these are the ones you can ask now and see if some last minute savings are available.
The Technical Ones You Don’t Even Know You Should Ask (but they are really important and can save you tax)
- For each trust, have the annual trust distribution minutes & resolutions been completed? The ATO require that trust distribution minutes and resolutions are completed BEFORE the end of the financial year in which the distribution is to be made.
- For each company, have the dividend notices (if any dividends are to be paid during the financial year) been completed?
- Are there any Division 7A Loans in any entities and if so, have the necessary actions been taken prior to June 30 to ensure that these loans are ATO compliant? This is a really complex topic and you want your accountant to be all over this as non compliance can be really expensive!
- Are there any superannuation pension accounts and have we met our minimum superannuation pension payment obligations?
The Fun Ones (where you can actually save tax by being proactive)
- Is it appropriate to make any additional contribution to your superannuation fund to get an extra tax deduction before 30th June? A few key points on this:
- To receive a tax deduction the superfund must receive the contribution prior to 30 June. Note the subtle but critical difference – it’s not when you pay the contribution, it’s when the fund receives the contribution – so don’t leave it to the last couple of days!
- If your super balance is under $500,000 you may be able to go over and above the $25,000 concessional contribution limit to get a bigger deduction!
- Your super guarantee contributions count towards the concessional contribution limit so make sure you allow for them.
- Are there any expenses I can prepay to bring forward a tax deduction to this financial year? For some businesses prepayments can be tax deductible but not for all businesses so this could be an option. Some of the more common expenses that are prepaid will be rent, insurances and subscriptions.
- Is there any tax benefit from investing in capital equipment and assets before 30 June. At the moment we have a number of incentives to do this for an accelerated tax deduction but before spending remember these golden rules:
- The asset must be “installed and ready for use” before it can be claimed as a deduction.
- Don’t buy because of the tax benefit – buy because it is a wise investment and either improves your business or your lifestyle and there is value in the transaction.
- The asset is NOT FREE – you still have to pay for it and the tax benefit is only a percentage of the actual amount paid.
- Motor vehicles have a depreciation cost limit – just because you paid for it doesn’t mean you can claim the full cost. Advice on cars is critical!
Questions to ask your accountant after 30 June?
OK, so that was the last minute saver but it was last minute and rushed. And frankly, not much fun at all given the stress it caused, so here’s some questions you should ask your accountant after 30 June each year. You see, everyone waits until the last minute and then feels anxious, rushed and disappointed. Our suggestion, get in early and avoid the rush.
- Can we please book our three critical meetings in for the next 12 months? Let’s book the following meetings:
- In xxxx month to review our overall financial position and do our annual health check
- In xxxx month to review our accounts & tax position from last financial year
- In xxxx month to do our tax planning for the current financial year
- Then, use the Annual Health Check Meeting to ask some really powerful questions that can deepen your relationship and find out if you have the right accountant for you who aligns with your values and sees you as more than just a set of numbers:
- What did we miss last year that we should prioritise to do better this year? (Because nobody is perfect and learning is an opportunity.)
- When you look at my numbers what do you see are the top three opportunities for me to improve my business performance?
- If you were running my business what are the top three projects you’d take on over the next 12 months to improve the business performance?
- If you were in my financial position what would be the number one priority issue that you would address now?
- Can you please take me through my business structure and explain to me why I have this structure and where the benefits are for me from the current structure over the alternative options?
You can ask a number of technical questions around asset protection, depreciation schedules and the like but these questions will give you the insight and base to know you can work together successfully beyond just number crunching and bean counting.
Source: This article has been written by our very good friends at Sage Business Group. To get in touch with Tim and the team, click this link.
Happy New Financial Year!
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