News & Tax Insights

Are you receiving a share of profit from a partnership? The Court has confirmed that an interest in a partnership can be assigned directly to another person, such as a spouse, or a discretionary trust. Thus, the income from the partnership can be distributed in a tax effective manner. (FCT v Everett 80 ATC 4076). The assignment must be formally documented. Either the while or a stated percentage of the partnership interest can be assigned. It is essential that the documentation is correctly prepared by a solicitor. Not only future income, but also earnings of the partnership for the current year,…

If you have trading stock you must include it's value at the end of the financial year as assessable income. There are three methods for valuing trading stock. These are; Cost, or market selling value, or; replacement price The valuation method may be changed from year to year. The closing value of each item at the end of one year must be the same as the opening value at the beginning of the next year. You can reduce or defer income by changing the stock valuation method to ensure each item is always included at its lowest value. Alternatively, you…

You can claim a deduction for loss of money through theft, stealing embezzlement, etc if the loss is an incident of your business operations such as the theft of your day's bankings whilst it is on the way to the bank. Trading stock losses are automatically deductible as they reduce the value of stock on hand at the end of the year. The law has been amended to allow deductions for misappropriations arising from the disposal of a depreciating asset or a CGT asset.

Children under 18 are taxed at a penal rate if unearned income exceeds $416. There are some circumstances where the child will be taxed at normal marginal tax rates, including earned income from: Employment Social Security services (incl. Centrelink) Compensation, superannuation or pension funds A deceased person's estate Profit of business and partnerships that your child conducts. Capital gains from property or investments The low income tax offset will reduce tax payable on the portion of income from these above sources. Other passive sources of income, for example family trust distributions, will be taxed at penal rates.

You can claim a deduction for the cost of tea, coffee and light lunches provided to employees on the work premises during working hours. These are exempt from FBT.

Has a family member with business or investment income died? Don't rush to finalise the estate. You have up to three years to administer the estate as if were a separate taxpayer maintaining the tax free threshold and lower rates of tax. When the estate is fully administered the income flows through to the beneficiaries who may be on higher marginal rates.

Are you running a profitable business and suffering high personal marginal tax rates? Incorporate your business and leave profits in the company taxed at the moderate company rate of 30%.

To maximise your deduction for bad debts you must ensure they are written off during the year - not later than 30 June. Go through your debtors carefully and put through the necessary accounting entries to write them off by 30 June. You can partially write off a debt if you consider that you cannot collect the entire amount.

Interest on monies borrowed to purchase an asset mused for both business and private purposes must be apportioned on a reasonable basis, eg. kilometres driven, floor space, etc. Keep adequate records to explain your method of apportionment.

If you travel overseas on business but also with your spouse you must apportion the travel costs. The cost of transport to the airport by car or taxi is the same for one or two, so that expense is deductible in full. Air fares are deductible as to 50% whilst hotel accommodation should be apportioned at the cost differential between a double and a single room in the hotel.

Have you incurred expenses which are not of a revenue nature or related to an asset? In the past these could not be claimed and fell into a 'black hole'. If incurred in relation to the operation of a business they can be claimed in equal instalments over five years. Expenses such as costs of establishing or winding up a company, partnership or trusts, restructuring, equity raising, defending or attempting a takeover and any other capital expense which is not otherwise deductible or part of the cost base of an asset comes under this category.