30 June is once again almost upon us however it is not yet too late to undertake meaningful tax planning. This year, in addition to the usual planning opportunities available to taxpayers, there are an unusually large number of changes to be aware of. This includes new tax incentives and opportunities for businesses and individuals.
As 30 June approaches, now is a great time to look at your tax affairs and ensure you are achieving the best tax results possible for your business and family group.
There can be many ways to optimise your tax outcomes, though many opportunities require steps to be taken prior to 30 June each year to secure a particular outcome for that year of income.
The pace of change in the world of tax continues unabated this year and there are a high number of changes which apply for the first time from the 2018 year, or will come into effect from 1 July 2018, that may affect you.
This article contains 8 cherry-picked planning opportunities for businesses and individuals which can potentially help improve tax outcomes. If you would like us to undertake a more thorough review of your affairs prior to 30 June 2018, please don’t hesitate to get in touch.
Planning Opportunity #1 - Ensure your business and investments are structured correctly.
There can be a world of difference in the tax outcomes provided by trusts, companies, partnerships, SMSFs and various combinations thereof. It is critical to optimising your tax position, and protecting your wealth, that you choose the right legal tools for the job. Structures that were once appropriate may no longer suit and, with the introduction of the Small Business Restructure Rollover in the 2017 income year, there are more opportunities available to restructure small businesses without tax consequences.
Planning Opportunity #2 – Take advantage of targeted tax incentives where possible.
Small businesses (generally turnover under $10 million) can take advantage of an immediate tax deduction for depreciable assets such as equipment and furniture of up to $20,000 per item if purchased prior to 30 June 2018. The government has also announced this concession will be extended to 30 June 2019 and we believe it is likely to be successful implementing this change.
Small businesses and most individuals can also take advantage of the prepayment concession to bring forward a tax deduction on certain costs that are prepaid up to 12 months in advance of 30 June 2018. For individuals, examples could include rental property interest or deductible insurance premiums.
Planning Opportunity #3 – Consider tax outcomes when deciding discretionary trust distributions.
Many family groups contain one or more family trusts, which typically give the trustee the discretion to distribute income amongst a range of possible beneficiaries each year. Careful consideration needs to be given to how distributions are made given beneficiaries will be taxable on this income at their applicable personal tax rates.
Planning Opportunity #4 – Consider topping up concessional superannuation contributions.
Since 1 July 2017, most individuals in Australia can claim a tax deduction for personal superannuation contributions however care is needed to ensure concessional contributions caps ($25,000 for all individuals in 2018) are not exceeded. It is also important that legal notice requirements are met, and acknowledgement of the deduction is obtained from your superannuation fund.
Planning Opportunity #5 – Businesses should consider paying all superannuation obligations by 30 June.
Unlike most expenses, which are tax deductible when “incurred”, superannuation payments are only tax deductible to employers when paid. Many employers pay their quarterly or monthly superannuation guarantee obligations after month or quarter end. To bring forward the deduction one year, consider paying June quarterly or monthly superannuation contributions for employees before 30 June.
Planning Opportunity #6 – SMSF members who draw pensions should ensure their minimum is taken by 30 June.
SMSFs that pay pensions to members are generally exempt from income tax on earnings derived from assets held to meet these obligations. To secure the tax exemption, it is critical that the SMSF has paid the member’s minimum pension amount by no later than 30 June. The ATO will generally consider the member not to have been receiving a qualifying pension if the minimum payments have not been made in a given income year.
Planning Opportunity #7 – If aged 65 or over, consider the downsizer super contributions rules from 1 July 2018.
From 1 July 2018, where certain conditions are met, individuals aged 65 or over can contribute up to $300,000 from the sale proceeds of their home into superannuation regardless of age, amounts already held in superannuation, or the availability of contribution caps. For a couple this can mean up to an additional $600,000 can be contributed into superannuation on sale of the family home.
Planning Opportunity #8 – Considering disposing of investments before 30 June which have reduced in value.
Under Australian capital gains tax rules, a capital gain or loss in respect of an asset does not crystallise until the happening of certain events, for example the disposal of the asset. If you hold an asset which has reduced in value and would realise a loss when disposed, consider whether it would be advantageous to dispose of the asset prior to 30 June to bring the loss into the current income year.
For more information
To find out more about how Baumgartners can assist in optimising your tax outcomes, both business and personal, please contact Aaron Fitchett on 03 9851 9000 or by email firstname.lastname@example.org
Aaron is the tax partner at Baumgartners. He is a Chartered Tax Adviser with 18 years’ experience advising private and corporate clients on a wide range of tax and commercial matters. Aaron also represents clients in disputes with the Australian Tax Office and state revenue authorities. Aaron holds a Master of Taxation from UNSW and is an active member of the Taxation Institute of Australia.