Several accountants have hit out at their biggest “bugbear” that crops up every tax time, and warned taxpayers against falling victim to it again this year.
Speaking about the $30,000 instant asset write-off for SMEs with turnover up to $50 million, Prime Partners direct George Morice urged against spending money unless the item is genuinely needed here and now.
“It’s fantastic to be able to spend money on things you need and get the refund or the [tax] benefit of spending that money instantly,” he said, noting that for some of his clients, the benefit relates strictly to cash flow and receiving the deduction faster.
However, he urged businesses not to make unnecessary purchases and to spend their money wisely in the final days of the financial year.
“Some [businesses] are like ‘I don’t need to spend that money’ so there’s no real benefit for them [from the instant asset write-off],” Mr Morice said on the My Business/Accountants Daily special end of financial year webcast.
His advice to businesses is to only “buy it if you need it”.
“It’s a real bugbear of mine: a lot of people come to me and say, ‘I need to spend some money, it’s coming up to 30 June’. You don’t need to spend some money; pay some more tax and make more profit. I want you paying $100 million in tax, if possible,” Mr Morice said.
“I quite often say to them, ‘If you really want to spend money and get a tax deduction, we can definitely lift our fees this year’... It doesn’t work, I’ve tried,” he joked.
Fellow tax specialist Peter Bembrick, of HLB Mann Judd, agreed.
“That’s one of my bugbears [including] when people talk about negative gearing,” Mr Bembrick said.
“Do you realise when you negatively gear something, it means you’re losing money... Yes, if you make a capital gain in the future, it may be worthwhile, but what if you don’t? Then, in the meantime, you’re losing money, so do you really want to lose money to make a tax deduction?”
The pair’s comments echo those of Pete Pennicott of financial advisory firm Pekada who earlier this month warned against “spending dollars to get cents back”.
“Too many people suffer from a rush of blood and go on a spending spree to take advantage of last-minute deductible purchases, [but] there is no point spending money just for a deduction,” Mr Pennicott said.
The full EOFY webcast can be viewed by registering here. Also, don’t miss the My Business webcast on Single Touch Payroll, for businesses with 19 or less employees.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.