Question #6: What Can I do to Reduce my Tax?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business.

The sixth most popular question I get asked in the lead up to 30 June is “What can I do to reduce my tax?” Well, the short answer is there are numerous options. A more detailed answer is tax planning.

Tax planning is a very beneficial tool for business owners and is a very proactive way of minimizing your tax liability. There are many options available, although not every option is going to be available t you in your particular situation. So examples of some of the things you can do are:

  • The first sales income to post 30 June
  • Pay all non-business expenses before 30 June.
  • Bring forward any expenses that would otherwise be payable post 30 June.
  • Prepay interests on all business and investment loans
  • Write-off any bad debts then you’re not likely to collect
  • Purchase business assets where required and receive accelerated depreciation.
  • Contribute to your superannuation up to the concessional contributions limits.

Now there are many many more and you probably should speak to your trusted tax advisor to make sure that every possible option is covered for you and you’re minimizing your tax to the maximum you possibly can.

So I hope you found this useful. Remember, tax planning is very very important not just in the lead up to 30 June but all year round.

So thank you for joining me. Look forward to speaking with you soon bye for now.

Question #5: I’ve taken out $200,000 from my company. Will that affect my tax?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient
lifestyle business.

The fifth most popular question I get asked in the lead up to 30 June is “I’ve taken out $200,000 from my company. Will that affect my tax?”

Well, the short answer is yes. The more detailed answer is there any money that you take out of your business must be accounted for if you’ve personally taken that money, it will then need to be triggered in one of two ways:

As a personal income to you
As a directors loan which will be repaid back to the company

So where option two is not possible or in fact intended, then it will count as personal
income. Now, this can be derived in one of a few ways. It can be in terms of salary wages. It can be directors fees or it can be a shareholder dividend.

The first two will attract income tax at individual rights i.e. tax of $200,000 at current rates is over $67,000 assuming no other income or deductions. Now if you treat it as a dividend, it will depend on whether you can issue frank dividends or unfranked dividends.

So franked dividends are when your company has already paid tax on those prior
earnings and therefore, you can get a credit in your individual personal income tax for that company tax already paid on the $200,000. So the net tax payable by you personally in this example would be nearly 24,000 on current rates.

So you can see taking out the money if it’s not going to be repaid will affect your tax most definitely. But there are ways in which that can be reduced in terms of the timing and how we account for it

So I’d be found this useful thank you for joining me look forward to speaking with you soon bye for now.

Question #4: Will I reduce my tax if I pay out my business/investment loan?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business.

The fourth, most popular question I get asked in the lead up to 30 June is, “Will I reduce my tax if I pay out my business or investment loan?” Well, the short answer is no. But the more detailed answer is that any business or investment line will attract interest and ATO also expects that the loans provided at non-arm’s length i.e. by directors shareholders and/or their family, who also attract the interest at the ATO benchmark interest rate.

Now given this, it’s the interest on the loan that is 100% tax deductible if it relates to your business or investment. Therefore paying the loan i.e. the principal will not reduce your tax.

The tax-effective strategy would be to pre-pay interest on the loan and you can arrange this with your bank. It brings forward the interest and therefore increases your tax reduction, thereby reducing your tax. So paying the loan completely will not reduce your tax. Paying out interest or pre-paying interests will increase your tax deduction and therefore reduce your tax. So thank you for joining me. I hope you found this useful look forward to speaking with you soon. Bye for now.

Question #3: Should I pay some money into my superannuation?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business.

The third most popular question I get asked up to 30 June is “Should I pay some money into my superannuation?” Well, the short answer is yes. A more detailed answer is that you can contribute money to your superannuation by either concessional contributions, which are tax deductible or non-concessional contributions which are after-tax contributions.

So concessional contributions are made from your business and are 100% tax deductible up to the contributions cap which was from the 1st of July 2017 and $25,000 so if you utilize this cap and contribute the full 25 thousand, you’ll reduce your tax based on your relevant tax rate. So in other words, if you’re a small business and you’re running your operation under a company structure, you will pay 27 and a half percent on company tax.

So therefore if you contribute the full twenty-five thousand in superannuation, you will save yourself six thousand eight hundred and seventy-five dollars in tax. Now note that 25 thousand going into your superannuation will be taxed but it’ll only be taxed at 15 percent so it’ll be taxed at three thousand seven hundred and fifty dollars. Therefore, an overall saving in a tax of three thousand one hundred and twenty-five dollars.

The added benefit here is though you will have twenty-one thousand two hundred and fifty dollars that are being invested wisely and generating more income for you being taxed at the low concessional rate. So should you put money to super? Yes absolutely should. In terms of your future earnings and future tax, it is the most concessional tax investment vehicle.

So hope you found this useful, thanks for joining me. If you have any questions, don’t hesitate to get in touch.

Question #2: If I buy a vehicle, will that reduce my tax?

Hi, my name is Tony Dimitriadis, I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business.

The second most popular question I get asked up to June 30 is “If I buy a vehicle, will that reduce my tax?” Well, the short answer is yes.

But a more detailed answer is that the cost of the vehicle used for business acquired by an entity which operates your business will be able to claim a tax deduction for depreciation of that vehicle if the cost is greater than thirty thousand than the normal depreciation rules apply. So you can’t get the complete 100% right off.

So in other words, from a standard depreciation rate for a vehicle that’s greater than thirty thousand, will be twenty-five percent on a diminishing value basis. For example, if you purchase a vehicle and receive delivery of it, let’s call it a Ford Ranger (fifty thousand dollars), you’ll be able to claim the depreciation for their fifty thousand at a 25 percent, pro rate for the number of

days you’ve used it in the year. So if you have bought it on 15th of June, you’ve got fifteen days of that 25 percent of the 50 thousand which is 12 and a half thousand. 

So you need your pro rate of that, so it’s going to equate to about five hundred dollars worth of depreciation. So if you’re running a company and your tax rate is 27.5% percent, then that tax benefit is going to be a hundred and forty dollars. Doesn’t sound like a lot does it? Well, it’s not, but the reality is it’s not year one but year two and three where you’re gonna get the benefit. So you’ll get the benefit complete if you’re buying an asset and the thirty thousand dollars but not for any assets over thirty thousand.

So you need to understand that yes you will get the tax benefit from buying a vehicle or any other asset for that matter. But any assets over thirty thousand, the benefit will come in years two and three and so on. So hope you found this useful. Thanks for joining me. Look forward to speaking with you soon. 

Question #1: Will I get a $20,000 refund if I buy an asset from my business?

 

Hi, my name is Tony Dimitriadis. I run an accounting & advisory firm and I specialize in helping ambitious builders and property developers build a financially rewarding tax-efficient lifestyle business. The number one question I get
asked in the lead up to 30 June is, “Will I get a $20,000 refund if I buy an asset from my business?”

Well, the short answer is no. The more detailed answer is that the HR allows small businesses to claim an immediate depreciation deduction for assets which cost no more than 20,000. That 20,000 has actually recently been extended to 30,000 from April 2019. So firstly, you need to qualify as a small business. The small business annual turnover threshold has now also been pushed out to 50 million. So that’s gonna capture quite a number of small businesses out there. So chances are, you will qualify on that basis.

But do you get the 20 and now $30,000 tax refund? No, you get the deduction so you claim that cost against the income you make, therefore reducing your taxable income by that amount — let’s stick with the 20,000 from now. So at a company tax rate of twenty-seven and a half percent, you’ll claim the twenty thousand as a tax deduction and then you’ll get a tax refund of five and a half thousand in that example. Now, of course, you need to have made a net profit to be paying tax in the first instance, but obviously, you’d save five and a half thousand in tax for a twenty thousand dollar purchase.

Now, don’t go running out and buying an asset just because you get a five and a half thousand dollar tax refund. Buy the asset because you need it for your business and it’s gonna help your business grow. Don’t spend money for the sake of spending money or for the sake of a tax refund. Spend it wisely on the things you need to help your
business.

Hope you found this useful, thanks for joining me. Looking forward to speaking with you soon. Bye for now.