Tax Planning –

The financial year is going to end soon and as your accountant, it is our responsibility to help you arrange your financial affairs in a manner so as to minimize your tax liability within the framework of the Australian taxation system.

Here, we have put together some strategies for year-end tax planning. You need to act fast, and should you want to discuss your circumstances and how you can take advantage of these strategies, you can organise a meeting with us.

1. To increase the benefits for the current year, we advise you to prepare a preliminary estimate of your taxable income to know the size of any potential tax ‘problem’ relating to the year ending 30th June 2016.

2. A review of your current financials (if current figures are unavailable then previous year’s figures will be sufficient) to determine the need for actions like expense pre-payments or income deferral.

3. Tax planning not only requires consideration of income and deductions for the year, you also have to satisfy compliance requirements like making appropriate elections within certain deadlines and the preparation and maintenance of adequate records (such as trust minutes).

Small Business Entities –

1. You should review all outstanding debts before year-end to know any debtors who may not pay their dues. Once you have done everything in your power to seek recovery of the debt, you may consider writing the balance as bad-debt.

2. Corporate tax entities are entitled to deductions for prior year losses subject to certain conditions. An entity needs to satisfy the “continuity of ownership” test before deducting losses of the prior year. If the entity fails in the continuity of ownership test, It can still deduct the loss if the same business test is satisfied.

3. A deduction may be available to you at the disposal of a depreciating asset if you stop using it and have no intention to use it again. Therefore, asset registers may need to be reviewed for any assets that fit this category.

4. Small businesses can claim an immediate deduction for assets started to use- or have installed ready for use during the current year– provided each depreciable asset costs less than $20,000.

5. The rate of tax applicable to small business entities is now 28.5% (instead of standard rate i.e. 30%). Other types of small business entities can enjoy tax discount in the form of a tax offset.

6. Business entities who are eligible, can access a range of concessions for capital gain made on CGT assets which are used in business, subject to meeting certain conditions.

Individuals-

1. Individual taxpayers get an immediate deduction for assets that are used predominantly to earn assessable income and that cost $300 or less, subject to certain conditions.

2. Self-employed and other eligible people are entitled to a deduction for personal superannuation contributions, subject to meeting conditions such as the “10% rule”.

3. For the 2015–2016 income year, the general tax-free threshold available to Australian resident taxpayers is $18,200.

4. Australians who have student help debts and are travelling or living overseas will soon have the same repayment obligations as people who are still living in Australia.

Companies-

1. Companies should ensure that dividends which are paid to shareholders for the relevant franking period are franked to the same extent to avoid breaching the “Benchmarking Rule”.

2. Loans, payments and debts forgiven by private companies to their shareholders and associates may give rise to unfranked dividends that are assessable to the shareholders and their associates. Shareholders and entities should consider repaying loans and making payments on time, or have appropriate loan agreements in place.

Superannuation-

1. Individuals should keep track of their contributions if they wish to take advantage of the concessionally taxed superannuation environment.

2. Individuals may wish to have early discussions with their employer if they have salary sacrifice to help ensure contributions are allocated to the correct financial year.

3. Individuals are subject to an additional 15% tax on concessional contributions if they are earning above $300,000. However, despite such extra 15% tax, there is still an effective tax concession of 15% (i.e. top marginal rate less 30%) on their contributions up to the relevant cap.

4. Self-managed super funds (SMSFs) should bear in mind that if they have investments in collectables or personal-use assets that were acquired before 1 July 2011, time is running out to ensure they meet the requirements of the superannuation law for these assets.

Trusts-

1. To determine how trust income is defined, taxpayers should review trust deeds. This may have an effect on the trustee’s tax planning.

2. To ensure that bad debt and losses incurred by the trust will be deductible and beneficiaries will be entitled to franking credits, trustees should consider the requirement of family trust election (an FTE).

3. Taxpayers should avoid retaining income in a trust because it may be taxed in the hands of the trustee at the top marginal tax rate.

If you have any questions, feel free to ask them in the comments section. We will be happy to answer all your queries