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I always get asked for a tip or two, particularly around tax time each year.  So over the next 2 weeks I will provide my top 20 tax tips for 2009.  Please note that not all of the tips will be applicable to you or your business and you should consult your own adviser/s to assess your own particular needs before implementing any of them. Remember that effective tax planning should be over 365 days per year, not merely the few weeks before 30 June.

20. Private health care – if you are single & earn over $70,000 (or a couple earning over $140,000) then you should know by now that for 99.7 percent of us it is probably cheaper to get basic hospital cover to avoid the 1 percent Medicare levy surcharge. Note that you do not need to get ancillary cover (ie dental, physio, acupuncture, chiro, etc) although I reckon that this is where all the value is with private cover these days.

19. Travel diaries – if you travel more than 5 days interstate or do any overseas travel for business then you need maintain a travel diary to substantiate your claim. The diary must be quite detailed and record dates, places, times and duration of activities and travel. Keep business cards of who you see & if possible, make a presentation/report to your work.

18. Get a great accountant – great accountants are like quantity surveyors … they know where the boundaries are.  By not using an accountant, you could be paying too much in tax or you could be leaving yourself open to a visit from the ATO auditors. And their fees are tax deductible! If you are looking for one then drop me a line.

17. Medical expenses – there is a rebate for out of pocket medical expenses (ie the gap) over $1,500 – they must be provided by a registered medical practitioner (ie a doctor & not physio or chiro unless referred by them) & also includes prescriptions. In tough times, people generally get sick so if you are close to the $1,500 threshold you may want to bring forward some costs (such as new glasses, visit to the dentist) before 30 June & get an effective 20 percent discount from the taxman.  It may even be worthwhile to register for the Medicare Safety Net.

16. Depreciation schedule – if you have bought a rental property this tax year, and it was built after 1985, then it is definitely worthwhile organizing a depreciation schedule from a quantity surveyor now. It takes about 3-4 weeks to organize & costs around $500-600 but you get the benefits back tenfold with tax savings via increased depreciation claims.

15. Scrap obsolete stock & plant – got some old plant or stock that your business simply can’t sell?  Then physically write it off before 30 June & get a tax deduction for it this year.

14. Income splitting – it amazes me how many smart business people are really dumb when it comes to reducing tax. Too often I see rich businessman with high income taxed at 46.5 percent also paying 46.5 percent tax on interest or dividend income which could be in put in their lower taxed spouse (0 percent or 16.5 percent) or company (30 percent).

13. Write-off bad debts – like obsolete stock, for a business to get a tax deduction on its bad debts it must physically write off the debt prior to 30 June.  Note that the debt must have been originally shown as income in order for the write off to be allowed.

12. Defer income & bring forward expenses – it is always a good idea to try & defer your taxable income to next financial year.  If you have expenses such as professional membership subscriptions due on 1 July, pay them before 30 June to reduce this year’s tax.  For those in business you may want to defer your invoicing til next tax year.

11. Don’t spend purely for a tax deduction – there are so people that get caught out at this time of the year in spending money purely to get a tax deduction. Remember that it is a play on marginal tax rates.  If you are running a business via a company then you are only getting 30 percent back.  If you want a $100,000 tax deduction before 30 June my accounting practice will gladly invoice you & accept payment.  But you will only get $30,000 tax benefit & the transaction has cost the business $70,000.  So don’t get caught out by the fancy marketing of retailers in coming weeks.  Always think of my A-B-C motto … Absolute Bloomin’ Cash.

Tune in next week for my top 10 tips!
Does your business do any tax planning?

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Adrian Raftery

Adrian Raftery

Adrian Raftery has over 20 years experience with small businesses and individuals as an award winning Chartered Accountant & Certified Financial Planner. He is managing director of ARW Chartered Accountants and CEO of accountantsRus and is fast becoming one of Australia’s leading commentators on all matters relating to finance, tax and superannuation. This blog is designed to provide helpful advice to business owners about how to manage their finances and get their tax right.

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