Year End Planning Issues

Intro suggested...........


General planning techniques

Step  The variables  Planning opportunities 
 1  Add up all assessable income  Defer derivation of assessable income
 2  Add up all allowable deductions  Bring forward incurring of allowable deductions

Derivation of assessable income

Deferring income - Consider whether scope for deferring derivation of income:
  • services under an agreement that provides for payment on completion of the job possibly can defer derivation by deferring the rendering of a bill
  • review accounts to determine whether amounts taken up as income are in fact assessable income
  • an item brought into internal accounts for tax purposes may not be part of the net income of the partnership
Income for services yet to be provided - May not be assessable until
service has been provided

Insurance proceeds — may be assessable as ordinary or statutory income. Check the nature of the insurance recovery:
  •  apply relevant timing rules or
  •  exclude from taxable income if exempt
Trading stock
  •  Where commenced to be held on capital account - deemed disposal  for cost
  •  Consider valuation:
  •  Investment starts to be held as trading stock - Deemed sale and re-  acquisition - elect to use either:
     - cost or
     - market value
  •  CGT event K4 happens if market value is used
Deductions — general

Bad debts
  •  written off before 30 June
  •  must be bad
  •  must be a physical writing off
  •  must have been included in assessable income, unless money lending
  •  business
  •  Liability must have actually been incurred before year end
  • Unless payable pursuant to employment agreement, discretionary bonuses
  • should be paid before year end
  •  a mere accrual will not be deductible
Deductions — general

Superannuation contributions — other than personal contributions
  • Requirements for deduction are:
    1. the employer must be entity making contribution
    2. contribution must be made to a complying fund
    3. purpose of contribution must be to provide superannuation benefits       for another person
    4. other person must be an employee when contribution is made
    5. deduction allowable only in income year which contribution made
Medical expenses offset

ATI in the 2012-13 income year

 Rate of NMETO   Where NME for 2012-13 exceed:
Single taxpayer

Couple or family  
< $84,000

< $168,000 (plus $1,500 for each dependent child after the first)


Single taxpayer

Couple or family 


> $168,000 (plus $1,500 for each dependent child after the first)

Prepayment rules 

  • Generally deduction apportioned over the eligible service period
  • Immediate deduction available for expenditure relating to individual nonbusiness expenditure where:
1. expenditure is deductible under general deduction provisions
2. eligible service period does not exceed 12 months and
3. eligible service period ends in the next income year

Capital allowance deduction
  • Individuals entitled to immediate deduction where asset:
1. costs no more than $300
2. used predominantly for the purpose of producing assessable
    non-business income
3. is not part of a set of assets costing more than $300 and
4. is not identical or substantially identical to assets started to be held
    during income year

Article from: Tax Banter


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