• New Wave Accountants

What You Need to Consider for Year-End Tax Planning

Year-end tax planning can be a pain. This is doubly true if you have little to no experience and knowledge on this matter. To make matters worse, making mistakes can end up being costly. To avoid this, you need to do all you can to prepare for this tricky endeavour. This is why we thought it would be useful to put together a brief article about this subject. If this is something that you’re interested in learning more about, read on as we discuss everything you need to consider for year-end tax planning.


Depreciation for Non-SBE Taxpayers


Non-SBE taxpayers' depreciation schedules need to be examined before the end of the year. This is so that an increase in balancing adjustment deductions is possible. The taxpayer must be involved in this process so that they can provide input on whether assets have been scrapped or will eventually be scrapped within the year.


Bad Debts


You’ll also want to ensure that any debts are written off before the end of the year. Failing to do this will prevent you from receiving a deduction. Remember, no deductions will be allowed in a year if the debt is cleared by the time the fiscal year comes to an end.


Deferring Income


Taxpayers may sometimes receive payments in advance of goods or services being delivered. If the taxpayer is on an accruals basis, they may be able to defer the inclusion of this revenue in their tax return to a later income year. It all comes down to when the income was earned by the taxpayer. Whenever an invoice is produced and a recoverable debt is created, a business that recognizes income on an accrual basis would ordinarily derive income at that time. There are exceptions to this rule, particularly when some of the money has not yet been earned.


Director’s Fees and Employee Bonuses


If an employee or director is due a fee or bonus after June 30, 2022, the employer may be able to deduct the amount in the 2022 tax year if the employer is contractually obligated to pay the employee or director by that date. The employer should pass a resolution authorizing the payment by the end of the year and notify the employee of their right to payment before the end of the year. After each year, the employer should pay the collected fees and bonuses to the employee or director in a reasonable amount of time. The ATO has issued a warning about bonus and director fee schemes that may be structured solely or primarily to get a tax benefit.


Conclusion


We hope this article proves to be useful when it comes to helping you gain a better understanding of how to best approach year-end tax planning. While it may seem difficult at first, the information that we’ve laid out here should help make things infinitely more manageable. Feel free to reread this article whenever you like if you feel like you need a little more help with year-end tax planning.


At New Wave Accounting, we take care of all your accounting and bookkeeping needs from start to finish. We have worked with over 600 small businesses across various industries. Our Gold Coast accountants have been able to get a thorough understanding of each sector and provide customised solutions for our customers as a result. If you're searching for a business accountant, we're here to help! Get in touch with us today and let us assist you in scaling and growing your company!



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