As we approach the end of the 2024 financial year, several available tax deductions could significantly reduce your tax liability. Talk with your tax consultant without delay to discuss the following potential avenues for restaurant tax savings, and push them hard! Are they working for your best interests or just doing what they’ve always done?
#1 Tip: Pay your Superannuation before 30 June. Only super that is paid on time is deductible, so paying your June Qtr Super before 30 June (must be received by the fund before 30 June) is a great way to decrease your taxable income
Charitable Donations: If you’ve made any charitable donations, ensure you have a receipt from a registered charity to validate your contributions. Donations to sporting organisations and schools typically qualify as marketing or advertising expenses, given their non-charitable status. However, winning a holiday trip to Cairns at a charity auction is unlikely to be deductible.
Self-Education and Coaching: Training related directly to your professional activities can be claimed as a personal expense. For instance, a pastry chef attending a chocolate course or a manager undertaking a leadership programme.
Business Vehicles: Remember depreciation and running costs for your business vehicles. Different methods exist to claim motor vehicle deductions if the vehicle is used for both personal and business purposes. Maintaining a logbook can help determine these proportions. Identify which method would provide the most tax savings.
Accelerate Purchases: Consider bringing forward any purchases planned for the coming months to claim the deduction this financial year. If you use ‘accrual’ accounting, the invoice must be dated before June 30th. For ‘cash-based’ accounting, payment must be made before this date.
Instant Asset Write-Off and Depreciation: The upfront deduction is (now) a maximum of $20,000 since 1 July 2023. If you use the simplified depreciation rules, any depreciating assets for which you cannot claim an immediate deduction under instant asset write-off or temporary full expensing are allocated to a small business depreciation ‘pool’.
This includes assets that cost the same as, or more than, the instant asset write-off threshold amount as well as assets you held before you used the simplified depreciation rules (other than excluded assets). For these, you can claim a 15% deduction for the assets in the year they are allocated to the pool (regardless of when the asset was purchased during the year), plus a higher rate after the first year.
For example, if you purchase a new Pizza Oven for $40k, you can claim a $6k deduction in the first year of depreciation regardless of whether it was purchased on July 1, 2023, or June 30, 2024. Note that the second year of depreciation will be $10,200.
Depreciation of Fit Out and Fittings: Are you maximising your depreciation claims for items such as lighting, seating, benches, stoves, and shelving? Engaging a quantity surveyor could be worthwhile in evaluating your assets, particularly if you have recently acquired a business or lack comprehensive records. The surveyor might establish a higher depreciation value than initially anticipated.
Obsolete Equipment: You might be able to write off the depreciated value of unused equipment, like a defunct microwave, mixer, or blender. Clear out unused items and claim the deduction. Make sure you review your deprecation schedule and check that old items no longer in use are fully written off.
Outdated Liquor: For any liquor that will no longer be used, even for cooking, there may be a case to write down the value to zero. Be prepared to justify your decision, but it’s certainly worth investigating.
Bad Debts: If you’ve not received payment for a service rendered, you may be able to write off the debt and claim it as a deduction. You need to demonstrate that you’ve made every attempt to recover the money before writing off the full value.
Bookkeeping System Upgrade: If you’re considering updating your bookkeeping system to track expenses better, remember that this cost is also tax-deductible.
Be Wary for Tax Liabilities from Restructuring, Sale or Transfer of a Business: If you’re a sole trader, partnership, or even a trust moving a business or selling it into a company or trust, are you sure your accountant is maximising the benefits and minimising tax liabilities? Is your accountant helping you get the highest sale price possible (note that if not, they generally should be, even if it is an internal sale)? What about capital gains rollovers if a business is sold – can your accountant help minimise this?
Is your accountant working with the business sales broker (and may have compiled an official valuation) on the best allocation of the sale price between capital items and goodwill? Are they really thinking outside the box?
Final check for restaurant tax savings…
Pay your Super before 30 June. Only super that is paid is deductible, so paying your June Qtr Super before 30 June (must be received by the fund before 30 June) is a great way to decrease your taxable income.
Have you loaned money from the business that needs to be put back before 30 June to avoid Division 7A issues?
Have you completed tax planning for the year with your accountant to ensure your structure is set up in the safest way possible whilst also being the most tax effective? They should also be giving you a plan for how you are getting $$ out of the business for you to use personally.
Build a positive relationship with your accountant – they’re always up for a cup of coffee at your venue. Engaging in regular conversations throughout the year can yield a wealth of money-saving advice.
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As we approach the end of the 2024 financial year, several available tax deductions could significantly reduce your tax liability. Talk with your tax consultant without delay to discuss the following potential avenues for restaurant tax savings, and push them hard! Are they working for your best interests or just doing what they’ve always done?
#1 Tip: Pay your Superannuation before 30 June. Only super that is paid on time is deductible, so paying your June Qtr Super before 30 June (must be received by the fund before 30 June) is a great way to decrease your taxable income
Charitable Donations: If you’ve made any charitable donations, ensure you have a receipt from a registered charity to validate your contributions. Donations to sporting organisations and schools typically qualify as marketing or advertising expenses, given their non-charitable status. However, winning a holiday trip to Cairns at a charity auction is unlikely to be deductible.
Self-Education and Coaching: Training related directly to your professional activities can be claimed as a personal expense. For instance, a pastry chef attending a chocolate course or a manager undertaking a leadership programme.
Business Vehicles: Remember depreciation and running costs for your business vehicles. Different methods exist to claim motor vehicle deductions if the vehicle is used for both personal and business purposes. Maintaining a logbook can help determine these proportions. Identify which method would provide the most tax savings.
Accelerate Purchases: Consider bringing forward any purchases planned for the coming months to claim the deduction this financial year. If you use ‘accrual’ accounting, the invoice must be dated before June 30th. For ‘cash-based’ accounting, payment must be made before this date.
Instant Asset Write-Off and Depreciation: The upfront deduction is (now) a maximum of $20,000 since 1 July 2023. If you use the simplified depreciation rules, any depreciating assets for which you cannot claim an immediate deduction under instant asset write-off or temporary full expensing are allocated to a small business depreciation ‘pool’.
This includes assets that cost the same as, or more than, the instant asset write-off threshold amount as well as assets you held before you used the simplified depreciation rules (other than excluded assets). For these, you can claim a 15% deduction for the assets in the year they are allocated to the pool (regardless of when the asset was purchased during the year), plus a higher rate after the first year.
For example, if you purchase a new Pizza Oven for $40k, you can claim a $6k deduction in the first year of depreciation regardless of whether it was purchased on July 1, 2023, or June 30, 2024. Note that the second year of depreciation will be $10,200.
Depreciation of Fit Out and Fittings: Are you maximising your depreciation claims for items such as lighting, seating, benches, stoves, and shelving? Engaging a quantity surveyor could be worthwhile in evaluating your assets, particularly if you have recently acquired a business or lack comprehensive records. The surveyor might establish a higher depreciation value than initially anticipated.
Obsolete Equipment: You might be able to write off the depreciated value of unused equipment, like a defunct microwave, mixer, or blender. Clear out unused items and claim the deduction. Make sure you review your deprecation schedule and check that old items no longer in use are fully written off.
Outdated Liquor: For any liquor that will no longer be used, even for cooking, there may be a case to write down the value to zero. Be prepared to justify your decision, but it’s certainly worth investigating.
Bad Debts: If you’ve not received payment for a service rendered, you may be able to write off the debt and claim it as a deduction. You need to demonstrate that you’ve made every attempt to recover the money before writing off the full value.
Bookkeeping System Upgrade: If you’re considering updating your bookkeeping system to track expenses better, remember that this cost is also tax-deductible.
Be Wary for Tax Liabilities from Restructuring, Sale or Transfer of a Business: If you’re a sole trader, partnership, or even a trust moving a business or selling it into a company or trust, are you sure your accountant is maximising the benefits and minimising tax liabilities? Is your accountant helping you get the highest sale price possible (note that if not, they generally should be, even if it is an internal sale)? What about capital gains rollovers if a business is sold – can your accountant help minimise this?
Is your accountant working with the business sales broker (and may have compiled an official valuation) on the best allocation of the sale price between capital items and goodwill? Are they really thinking outside the box?
Final check for restaurant tax savings…
From the team at FC Accounting Co.
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