Lets Save Some Tax

As we head towards to the end of the financial year, it is a good time to consider your tax position. This applies both to the business owner and the individual salary earner. Below are a number of “tax tips” that you should consider.

Small business owners (turnover less than $2m)
•    Immediate deduction for depreciable assets costing less than $1,000 (GST-exclusive)
•    15% (30% thereafter) deduction for depreciable assets costing $1,000 (GST-exclusive) or more
•    Immediate deduction for prepaid expenses
Other business owners
•    Consider the accruing of any employee bonuses pre-30 June 2011

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Capital Gains Tax - Real Estate - Part 8 (cont'd)

If you start using part or all of your main residence to produce income for the first time after 20 August 1996, a special rule affects the way you calculate your capital gain or capital loss.  In this case, you are taken to have acquired the dwelling at its market value at the time you used it to first produce income if all of the following apply:
•    You acquired the dwelling on or after 20 September 1985;
•    You first used the dwelling to produce income after 20 August 1996;
•    When the property is sold you would only get a partial exemption because you used the dwelling to produce assessable income during the period you owned it; and
•    You would have been entitled to full exemption if the sale happened to the dwelling immediately before you first used it to produce income.

If all of the above apply, you must work out your capital gain or capital loss using the market value of the dwelling at the time you first used it produce income.  You do not have a choice.  A similar rule applies if you inherit a dwelling that was the deceased’s main residence and you use it to produce income.

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Tax Planning

The April to June period each year is seen by most accountants as the most significant time of the year. Why? Once midnight 30 June rolls around, not much more can be done to minimise your tax position.

At Ellingsen Partners, we offer our clients an additional service of preparing what we term "tax planning figures".

For those that are new to this concept, the process works like this:

Step 1. We prepare a set of financial statements for the period 1 July 2010 to either 31 March 2011 or 30 April 2011 using your accounting records.

Step 2. We then ask you for your estimate of the income and expenses for the remaining part of the 2010-2011 income year.

Step 3. We combining the actual figures and your estimated figures and calculate your likely tax position.

Step 4. From there, we discuss and offer our advice with regard to various tax planning initiatives that will minimise your tax liability for the 2010/11 income year.

Once we have processed your figures from 1 July 2010 to either 31 March or 30 April, those figures are then finalised. When it comes to the end of the year, we only have two (2) or three (3) months left. In other words, we don't process the same set of figures twice!

We believe that tax planning is an extremely important service to offer to our clients. Therefore, we will be contacting our business clients over the next week or two to discuss this service.

In the meantime, if you have any questions about the tax planning process, or you know you would like us to prepare tax planning figures for you, please contact Ellingsen Partners.

Busy But not Productive

In last month’s edition, we looked at a case study of a business that had major cash flow management issues.

In particular, we looked how much it cost to produce the product being sold. The end result was the development of a Microsoft Excel spreadsheet that helped calculate the total cost of production.

As was mentioned in the beginning of that article, the business had two (2) fundamental aspects that had not been addressed. 

We will deal with the second issue in this article.

Have you ever sat down at the end of a day or week and thought how busy you were but then became depressed at our little you had actually achieved? Well that was the problem facing this business. Everyone was working extremely hard, but very little was being achieved.