With June 30 only a few months away it’s time to take a moment to check that all your financial affairs are in order, and all tax minimisation strategies are in place not to mention wealth protection & investment growth strategies.
To ensure you’re ready we are going to cover the main areas:
1. Personal and Business.
2. Superannuation & Primary Producers.
3. Dividends and Trust Resolutions.
This is a one for all list that covers people in business, employees, investors, retirees and so on. It is a list of general prompts and is provided to alert you to the opportunity so you can seek professional advice prior to implementing a given strategy.
Please feel free to circulate the list to others you feel might get benefit from it, and if you have any questions just ask. Remember only spend money if you need to, not just to gain a tax deduction.
Click here to book now for a one hour planning meeting or if you have a family group and complicated structure in place call to discuss a detailed year end plan being prepared.
Business and Personal
Rules for Small Business with an aggregated turnover of Less than $2m and assets less than $6m.
Equipment purchased with a value less than $20,000 (ex GST) attracts an immediate deduction in 2017 as opposed to being depreciated. Note that this now reverts back to $1000 1st of July 2017 so if business equipment is needed, it might be worth bringing forward purchases pre June 30 due to the tax savings.
Purchasing a new piece of equipment (i.e motor vehicle) ? Buy before 30 June 2017 and get 15% depreciation on the entire value with 30% in fiscal 2018.
If you run your business from your dedicated home office, you may be able to claim interest and depreciation on your home without any Capital Gains Tax (CGT) consequences.
Ensure if selling your business that you have planned how you intend to take advantage of the small business CGT concessions before 30 June. Note that your aggregated asset value must be below $6m to access the concessions.
The following ideas may be suitable depending on your circumstances, each strategy having a different impact.
Prepay Interest on a deductible loan.
Write off Bad Debts.
Bring forward maintenance & repairs.
Prepay expenses covering no more than 12 months in advance:
Rent on business premise or equipment
Lease payments on office equipment
Business trips even if taken after 1 July 2017
Training courses even if taken after July 2017
Remember to instigate a stock take if applicable. Ask if unsure.
If you are registered for GST, equipment purchases made before 30 June can claim a GST refund in your June BAS return. This is a great way to front load a cash injection.
Manage timing of a CGT event, tax on capital gains is applied to contract date not settlement. If possible manage the contract date to 1 July 2017 if this improves your tax position.
Ensure that any loans to shareholders for companies are covered by a valid Div 7a compliant loan agreements and is being repaid in the appropriate manner. If not sure please ask.
Review your asset register and claim any items no longer in use and not yet fully depreciated.
Ensure your super contributions are paid before 30 June (They must be received by the fund to be tax deductable).
Meet bonus and commission obligations by passing a resolution to approve the payment (payment not required for immediate deduction), applies to companies & trusts only.
Individuals (Employees/Sole Traders)
Selling an investment property or shares with a capital gain ? Ensure you have held the investment for more than 12 months to receive the 50% CGT discount.
Use your car for work and travel in excess of 5000 kms per annum ? Start a log book prior to 30 June to be able to use this method.
If you use your spouses motor vehicle (registered in there name) for work related travel and the motor vehicle was purchased from a joint bank account, make sure you instigate a declaration of joint ownership before 30 June. Ask us how.
Have an investment property but no depreciation schedule ! Call to discuss your options and if this is relevant to your circumstances.
Trades people – Making big materials payments in July ? Maybe it’s worth bringing these forward and deferring customer payments received. Spend time reviewing your business forecasts and timing of purchases. We have seen benefits in excess of $50k of tax savings from utilising such an approach. Need help forecasting ? Let us help you.
Consider your circumstances around the Medicare levy surcharge and having or not having health insurance. See our overview of the benefits in our bloq area.
If your employer has made it mandatory for you to work from home and maintain a dedicated home office, you may be able to claim a portion of your home rent. Contact us to discuss the necessary requirements.
If you work overtime as part of your employment, you may be able to access tax deductions for meals purchased, without receipts, if provided for on your payslip as an allowance or employment contract and under $28.80 per meal.
With regard to your investment performance and structure, is re balancing required and realising capital gains prior to June 30 a sensible strategy. ? Discuss with your financial planner.
If you have an investment property you can prepay interest for the next 12 months and associated running costs of the property, and receive a full tax deduction this year. Consider your circumstances and if this is a useful strategy.
Utilising salary sacrificing to Superannuation as a tax minimisation strategy ? The Concessional super contributions cap applies to payments received by the fund in the 2017 tax year. Make sure you don’t exceed the cap and check you fund statements and adjust contributions before 30 June if required. If unsure what amounts you can contribute please as.
Utilising a Transition to Retirement Pension (TRIP) at the moment ? This will be the last year this approach can be used as a zero tax planning opportunity, ensure you maximise your concessional cap payments into Super this tax year before 30 June. Not sure contact us to discuss further. Not sure what to do for fiscal 2018, please ask.
Superannuation & pending 1 July 2017 tax changes
Superannuation is not only a great wealth creation tool for the longer term, it’s also a great tax minimisation tool. I am a big advocate in maximising tax deductable super contributions each year. If you are under 50 yrs old this financial year the cap is $30k or over 50 is $35k.
Make sure you meet the work test if over 65, ask if not sure. Note that all Australians will be capped at $25k Super contributions each fiscal year pre tax from 1st July 2017, so it might be worth maximising your salary sacrifice this tax year. Ask if unsure.
If under a Transition To Retirement Plan (TRIP) as part of your tax minimisation strategy, changes as of the 1st of July may no longer mean this strategy is tax effective. Ensure you contact your accountant or financial planner to review your TRIP strategy if applicable.
Effective from 1 July 2017, “a $1.6 million superannuation transfer balance cap on the total amount of superannuation that an individual can transfer into retirement phase accounts.” Will be applied. If you have more than $1.6m at this date make sure you have reviewed your options around the CGT transitional relief being offered by the Government. All actions must be completed before June 30 2017.
Contribution splitting. Have an older partner who is over 55 but under 65 ? might be worth diverting or splitting concessional super contributions to your spouse so you can claim the immediate tax deduction and also provide for earlier access to the super funds.
Spouse superannuation tax offset. Although not a great benefit it does provide something. The spouse superannuation tax offset allows a contributing spouse to claim an 18% offset worth up to $540 for contributions made to an eligible spouse’s superannuation account. from 1 July 2017, the income threshold for the eligible spouse will lift to $37,000 and phase out at $40,000 so if this fits the income distribution of a couple and you want to make additional Non concessional contributions to super from say an inheritance why not use it. For this tax year the spouse cap is $10,800.
Non Concessional contributions cap changes from July 1 2017 are dropping back to $100,000 from $180,000 in fiscal 2017. You can still use the 3 year bring forward non concessional contribution in fiscal 2017 of $540,000. Although not a tax minimisation strategy it is certainly an important wealth creation strategy. There are manly conditions to this and you need to seek professional advice before making a non concessional contribution this year.
Discretionary Family Trusts
Have or intend on making a family trust election in fiscal 2017 and intend distributing dividends to family members. ? Ensure that resolutions are made by 30 June on who will receive what percentage of the trust distributions. We are providing resolution services in June so book in now if you require assistance.
Start contacting family members to determine who is in a position to receive distributions and have them agree on the amount, need help preparing a consent to receive a distribution ? Please ask.
Don’t forget fencing/water facilities for this fiscal year can be 100% claimed as a tax deduction if paid for before 30 June. Storage assets can be claimed over 3 years.
Taxable income below $100,000 ? Consider using the Farm Management Deposits (FMD) scheme. Great for income shifting between years to lower taxable income
Although tax laws are complex and constantly changing, there are always opportunities to legitimately minimise your tax liability.
As with all Federal Budget announcements, the proposed measures are contingent on legislation being passed by both houses of parliament after the Federal election.
We should also point out that the tax legislation contains specific anti-avoidance provisions which target schemes entered into with the dominant purpose of tax avoidance. Accordingly, it is essential that you consider your specific circumstances before proceeding with any tax planning ideas to ensure these rules do not apply. The ideas and concepts provided here are general in nature and should form part of any planning discussions with a licensed financial planner and/or registered tax agent to ensure they are being applied correctly.
To discuss your individual circumstances or concerns, and to have a tailored plan designed to your personal circumstances, please contact myself.
Brad Cowley B.Bus | CPA | ASIC Agent | TA | Lic Mbroker | Dip FP
IGnite Accounting & Financial Services