Reducing or deferring assessable income is a widely used and effective strategy for minimising taxation liability.
Some key areas to consider include:
Cash vs Accruals Accounting
Determine whether your business should be assessed on a cash or accruals basis, as this may significantly impact the timing of income recognition.Timing of Invoicing
If your business is assessed on an accruals basis, consider delaying the issuing of invoices until after 30 June—provided your business can accommodate the temporary reduction in cash flow.Capital Gains
If you are planning to sell an asset that will generate a capital gain, deferring the sale until after 30 June will shift the taxable gain into the next financial year.Trading Stock Revaluation
Consider the revaluation of trading stock, which may reduce assessable income where appropriate and permissible under legislation.Review of Trade Debtors
Review outstanding debtors and identify amounts that are unlikely to be collected. These debts, previously treated as income, should be written off where they are genuinely unrecoverable.Confirming When Income Is Derived
Assess whether certain cash receipts should be treated as income using principles such as the Arthur Murray precedent. For service-based contracts, income may be derived only as services are performed.Deferring Interest Income
Where appropriate, consider deferring the receipt of interest income into the next financial year.Deferring Dividend Income
Similarly, consider delaying the receipt of dividends, if possible, to shift income into the next year.
If you would like to discuss further please contact us:
McNamara & Company - Chartered Accountants, located minutes from the Melbourne CBD
www.mcnamaraandco.au/contact-us
Phone +61 3 9428 1062
Email admin@mcnamaraandco.au
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