Tax Strategy 6: Save tax on expenses (even if unpaid by June 30th)

Did you know that you’re entitled to an immediate deduction for certain expenses that have been ‘incurred’ even if they haven’t been paid by 30 June?

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These include:

  • Salary and Wages – a tax deduction can be claimed for the number of days your employees have worked up to 30 June 2017, but have not yet been paid for.
  • Directors Fees – your company can claim a tax deduction for directors fees ‘definitely committed’ as of 30 June 2017. An appropriate resolution to approve the payment must have been passed. The director is not required to include these fees in their tax return until the following year (2018), when the amount will be received. Your company can claim the tax deduction in 2017 but the director will include the income amount one year later in 2018.
  • Staff Bonuses and Commissions – a business can claim a tax deduction for staff bonuses and commissions that are owed and unpaid as at 30 June 2017, where it is ‘definitely committed’ to the expense.

Sasi’s Tip: Have a meeting with your Proactive accountant before 30 June 2017 and go through your financials.

Get a good idea of how much profit you’re expecting to make and how much tax is payable. You may consider passing an appropriate resolution to approve a directors fee and/or bonus payable for year ending 30 June 2017. Actual payment happens after 30 June 2017 and the director is not required to include these amounts in their tax return until 2018.

For example, if you document a resolution to pay a directors bonus of $80,000 for year ending 30 June 2017, at the company tax rate of 27.5% you will save $22,000 of tax for 12 months!

The information provided above is general in nature and does not constitute financial advice. Find out more on this topic and get financial strategy advice that’s right for you.

Call (03) 9021 6662 and book your strategy session today.

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