Tax Planning and Why You Should Think Ahead

EOFY-Tax-Planning

What do you need to consider?

Below are three key areas that pay attention to during the tax planning process:

1. Business Income

Reviewing your business records will assist in highlighting any opportunities or areas of concern. Examples of what may be identified during the tax planning process include:

  • You may be missing out deductions such as super if not paid on time
  • You may be holding onto obsolete or devalued stock or assets that can be expensed
  • You may have the opportunity to bring forward or prepay expenses
  • You may have the opportunity to defer income to the next financial year
  • You may have bad debts that can be expensed
  • You may have the opportunity to make use of the small business concessions
  • You may have the opportunity to apply the small business capital gains provisions
  • You may have carried forward tax or capital losses that can be applied

Without accurate and up to date information, it will be difficult to derive a clear picture of your business performance and tax position. With the abundance of easy to use, cloud based bookkeeping packages available, there’s no excuse to be behind with your record keeping!

2. Other income

Your non-business income must also be considered during the tax planning process. Sources may include:

  • Salary, wages, allowances, fees and ETPs
  • Government payments and allowances
  • Superannuation income streams
  • Interest, dividends and other investment income
  • Rental property income inc Airbnb
  • Capital gains or losses including crypto currency gains and losses
  • Foreign income

We will ensure that all deductions and opportunities relating to the above income sources are taken into consideration when reviewing your overall position.

The ATO’s data matching capabilities are increasing, so please ensure all sources of income are declared and that appropriate records are kept.

3. Group Structure

If you have a company or discretionary trust in your group structure, there are unique opportunities to minimise your taxes. There are also unique compliance requirements that need consideration prior to 30 June each year.

Companies

Operating through a company provides opportunities but without tax planning, it can create obstacles due to the strict compliance requirements.

With a company being a separate legal entity to you as the owner or director, it must be remembered that the company’s assets are not your assets. The three main ways to legally extract money from a private company as a director or shareholder are as follows:

  • Directors Salary, wages, allowances, fees
  • Subject to superannuation guarantee, PAYG withholding and ATO reporting
  • Dividends
  • The declaration and payment of dividends must be recorded appropriately
  • Loans
  • May be deemed to be unfranked dividends unless subject to commercial term

During the tax planning process, we review optimising the level of director’s fees and dividends within commercial and legal boundaries to keep tax at a minimum.

Discretionary Trusts

Discretionary trusts are an excellent vehicle for tax planning due to the flexibility afforded in respect of the who, what and how much to distribute each year.

If the trust deed allows, the trustee can:

  • Distribute income in in any proportion to the nominated beneficiaries
  • Stream income by segregating the different income classes & distribute in the most tax efficient manner
  • During the tax planning process, we will assist with optimising the distributions to minimise tax.

We also ensure that every trust has an annual trust distribution resolution prepared by 30 June each year. Not having a complying resolution prepared on time will subject the trust income to the highest marginal rate and the ATO has openly stated that they are focusing on compliance in this area.

What are you waiting for?

Please reach out to get the process started. There are opportunities to exploit, money to be saved and the time to get started is now!

1 Comment

  1. Hi! Thanks for this info ! Useful article!

Leave a Reply

Your email address will not be published. Required fields are marked *