Australian accounting firm BDO says automotive dealers commonly make mistakes or miss things in their end of financial year planning.
BDO, the firm which built the DealerNomics economic data tool for the Australian Automotive Dealer Association (AADA), is offering dealers some top suggestions to guarantee their tax obligations are covered for the 2017-18 financial year.
Mark Ward, national lead partner for BDO’s automotive division, recommends dealers consider three typical planning matters; trading stock valuations, superannuation contributions, and deferring revenue while bringing expenditure forward.
“These are the three most common items we suggest dealers put their focus into for this financial year, because they relate to some of the core operations of the dealership and need to be done properly,” he says.
“While trading stock does not include spare parts used in repair and maintenance, for example, dealers routinely must do a stocktake. For small businesses, if your estimated value hasn’t changed by over $5000 you can choose not to do a formal stocktake,” Ward reminds small dealerships with low turnover or fluctuating vehicle stocks.
More complex issues such as ‘division 7A loans and unpaid present entitlements’ Ward says should be attended to or at least considered by the dealership.
“These are a reasonably complex compliance matter, however your accountant should be aware of your compliance requirements which can involve repayments of interest and/or principal and documentation,” Ward explains.
“Falling foul of the ATO’s compliance requirements is not an option,” he says.
“When it comes to the company tax rate reduction to 27.50% for entities with aggregated annual turnover of less than $25 million for FY18, and less than $50m (for FY19),” Ward continues, “this may present some planning opportunities with respect to managing franking credits through the timing of dividends.”
BDO’s automotive team, which Ward leads in managing over 35 dealerships in its portfolio, suggests dealers keep taking advantage of the government’s instant asset write-off for small businesses.
“Small business entities which have an aggregated turnover of less than $10 million can take an immediate deduction for assets that cost less than $22,000 (including GST),” Ward says.
“In a marketing sense, take advantage of the federal government’s extension of the higher instant asset write-off before 30 June 2019. While the $22,000 threshold is low in terms of the cost of say a new or used car, it should not be dismissed entirely from a marketing perspective. Customers of agricultural dealers are more likely to be able to access this instant write off.”
Ward also points to the importance of fringe benefit tax compliance (FBT), especially with exemptions on dual-cab utes.
“The ATO’s recently released Practical Compliance Guidelines bring into focus the FBT exemptions in respect to exempt vehicles – for example dual cab utes – and their work-related use,” he says.
“To qualify for FBT exempt treatment, the relevant item (such as mobile phone, laptop, tools, industry magazine subscriptions, protective clothing) must be used by the employee primarily for work related purposes and only one of each item may be provided to each employee in a given FBT year,” Ward says.
“A full tax deduction is available for these benefits provided to employees. The FBT rate for the year ending 31 March 2019 remains at 47%.”
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