The financial year has flown by and now it’s time to prepare for your 2015-16 income tax return. So how can you maximise your return to make sure that you are getting something back from every dollar you have spent and invested during the financial year?Whether lodging by the October 31st due date or through an accountant (check ATO for lodge due dates for businesses), here a four key tips to consider to get the most out of your 2015-16 tax return.
1. Employee share schemes
There have been some changes to the tax treatment of employee share schemes that apply to any employee share interests issued from 1 July 2015.
The changes include deferring when options are taxed. The new rules defer the taxing point depending on what type of restrictions are on your employee share scheme interests. The new deferred taxing points include:
- For employee share scheme interests where there is no risk of forfeiting, the interests may be taxed when any restrictions on their sale are lifted.
- In the case of rights, where there is no risk of forfeiting the resulting share and no restriction on sale, the interests may be taxed when you exercise them.
- When you cease employment.
- 15 years after the employee share scheme interests were acquired.
2. Top up super funds for you and your spouse
You can voluntarily top up your superannuation and your spouse’s superannuation subject to certain limits.
Contributions out of your pre-tax income are known as concessional contributions. Once in your fund, these contributions are taxed at 15 per cent.
For the 2015-16 financial year, the general concessional contributions cap for those younger than 50 years old in that financial year is $30,000. However, if you turned 50 years old in 2015-16, you can contribute up to $35,000. If you exceed these caps, you might have to pay extra tax, so make sure that the contributions paid into the superannuation fund before year end do not exceed these caps.
If you make contributions to your spouse’s complying superannuation fund or retirement savings account (a special account offered by certain banks, credit unions or life insurance companies and is used in a similar way to a superannuation fund for cash savings for retirement), you may be entitled to a tax offset of up to $540 per year.
3. Prepay tax-deductible expenses before EOFY – especially if you run a small business
You can claim a tax deduction even when the expenses relate to a good or service that you might only receive in the next financial year – such as a prepayment. Examples include gifts and donations, self-education expenses, subscriptions relevant to your trade or profession, income protection insurance, union fees and subscriptions to associations.
As in prior financial years, you could only claim a tax deduction for a prepayment that was either required by law or under $1000. For the 2015-16 financial year, a new small business prepayments concession is available.
To qualify as a small business, your annual turnover must be less than $2 million. The small business prepayments concession effectively allows you to claim all prepayments, even if they are over $1000, provided the goods or services are all received within the next 12 months.
If you won't receive the goods or services in full within 12 months, the small business prepayments concession doesn’t apply. However, the standard prepayment rules apply and you can still claim a deduction for prepayments that are under $1000. This is also the case if your business is not a small business (your turnover is greater than $2 million).
4. Other small business benefits
If you are a small business, you may be eligible for the following small business concessions.
a. Instant asset write-off
For any assets acquired during the 2015-16 financial year, you can claim an immediate deduction if the assets are for business use and cost less than $20,000. The instant asset write-off concession is available regardless of whether the asset is new or second-hand. You can claim the deduction in the 2015-16 financial year if it was installed and ready to be used before 30 June 2016.
If you have chosen to maintain a small business pool for your assets, if an asset pool balance is less than $20,000, you can also claim a deduction for the balance of that pool in the 2015-16 financial year.
If you aren’t able to squeeze in that business asset purchase by 30 June 2016, make sure you plan ahead for the 2016-17 financial year as the instant asset write-off concession is only available until 30 June 2017.
b. Startup costs
Typically, startup costs are not deductible immediately but are deductible over time (commonly, a period of five years). For the 2015-16 financial year, the law has been amended to allow an immediate deduction for certain costs incurred by startups and small businesses, including costs associated with raising capital, professional, legal and accounting advice, and government fees and charges.
c. Small business income tax offset
A new income tax offset of up to $1000 may be available for an individual for the tax on income made up of:
- Net small business income from sole trading activities.
- Share of net small business income from a partnership or trust.
- Other small business entity amounts (such as farm management repayments).
The offset is calculated by the ATO based on what you disclose as total net small business income in your income tax return.
Disclaimer: This blog provides general information only and does not take into account your financial situation, objectives or individual circumstances. These tips are of a general nature and based on present taxation laws and may be subject to change. Before making any decision based on this information, you should seek independent professional tax advice.