The end of financial year (EOFY) will be here before we know it. If you've been putting off tax planning, now is the time to act.
Generally there are 2 ways to minimise tax liability at this time:
- Consider the timing of trading income and capital gains transactions close to the end of year.
- Bring forward expenditure. For small businesses, some examples are:
- Write off bad debts before 30 June;
- Ensure all superannuation contributions are paid up to date (including personal contributions if self-employed);
- Purchase necessary plant and equipment (which can be immediately written off if under $20,000);
- Prepay expenses for services 12 months in advance e.g. insurance (there are limitations to this so please check with us first);
- Review valuations of trading stock as at 30 June.
Some significant concessions will end at 30 June 2017, most notably:
Small business accelerated depreciation – small businesses buying plant and equipment items with a value less than $20,000 can still claim a full write-off of the purchase in the 2016-17 financial year. This concession is on a per asset basis, so several assets each costing less than $20,000 would qualify. After 1 July, the threshold will revert to $1000. Some assets are excluded – for more details check with Lionel or Tony.
- consider salary sacrifice strategies
- ensure any deductible donations are made before 30 June and in the name of the higher income earner in the household
- consider ownership structure for income producing assets to ensure positive cash flows to the lower income earner and negative cash flows to the higher income earner
- maximise motor vehicle deduction claims if you use your own vehicle for work purposes - generally this requires keeping a logbook for 12 continuous weeks - now is the ideal time to start. There are complex rules surrounding this - please contact us for advice.
Tax Planning for primary producers include:
- if you expect a long term reduction in income, consider withdrawing from the income averaging system. From the 2016-17 tax years primary producers will be eligible to access income averaging ten years after choosing to opt-out, instead of that choice being permanent.
- consider the use of farm management deposits before the 30 June. Primary producers experiencing severe drought conditions are allowed to withdraw an amount held in an FMD within 12 months of making the deposit without effecting the income tax treatment of the FMD in the earlier year. The limit on FMD's has been raised to $800,000 per individual and an FMD can now be sued to offset debt.
- consider capital expenditure items with immediate or accelerated depreciation allowance, such as fodder storage, fencing for land care and water facilities.
If your operating entity structure is a trust, then it is essential that you adopt a trust distribution resolution before 30 June 2017. Tax planning for trusts should be completed as soon as possible to ensure the resolution can be documented prior to 30 June.
The above tax planning strategies must take into consideration your individual circumstances as many technical conditions can apply. Please contact us for advice.
The Government superannuation changes have been subject to ongoing negotiation for over a year – often quoted as the most significant reforms to superannuation in a decade. The reforms have now been passed which means many changes to the super system will take place from 1 July 2017. Most commonly talked about are:
- Reduction in the annual non concessional contributions cap from the current level of $180,000 to $100,000.
- The new annual concessional contributions cap is $25,000 for all individuals regardless of age.
- All individuals will be able to claim tax deductions for personal super contributions (voluntary concessional contributions), not just those predominantly self-employed.
- Introduction of $1.6M transfer balance cap for super pensions.
- Low income super contribution to be replaced by Low Income Superannuation tax offset.
- Removal of tax exemption for earnings on transition to retirement pensions.
There are many other changes, and a lot of technical questions around the above – please refer to Tony's blog. Some clients will need to make super decisions before 30 June, particularly in relation to contributions to be made this year. If you need more information on the changes, we can advise you. Find out more...
Before the 2017-18 financial year starts, you may wish to consider whether it is appropriate to establish a SMSF in conjunction with other tax planning opportunities, or to make structural changes within your SMSF. Tony Walsh is licenced to provide SMSF advice and would be happy to discuss this with you further.
The ATO has introduced a simpler BAS reporting system to take effect from 1 July 2017. Businesses will only need to report the following GST information on their BAS:
- GST on sales (1A)
- GST on purchases (1B)
- Total sales (G1)
The requirement to report Export sales (G2), other GST free sales (G3), Capital purchases (G10) and Non-capital purchases (G11) will be removed.
This will be welcome news for many small businesses. If you currently use an electronic accounting system, we expect software developers will be issuing advice to small business on changes to their programs, particularly GST options and codes, well before 1 July. Walsh Accounting can also provide advice as the system is rolled out.
Find out more.....
In addition, our web practice offers you interactive services.
You can keep up to date with important accounting and business dates and deadlines. More...
The Tax Facts section where you can learn more about tax requirements within Australia. More...
Try out our new online calculators. More...
If you have any questions, comments, suggestions, please don't hesitate to contact us at any time. We look forward to hearing from you.