Monday, 30 May 2016

Tax Planning

When it comes time to pay your tax bill, you don’t want to feel like the ATO has gone all Stewie Griffin on you.

Instead, a pre-30 June tax planning meeting with your accountant at the corner of

could be very helpful.  Aside from wanting to catch up with your accountant for their good looks and funny jokes, there are several reasons as to why you should meet up prior to the end of the financial year.  

It is an opportunity to review and analyse your results in real time, rather than waiting until after the end of financial year when it can be too late to have any impact.  Modern accounting software can be very helpful, but it is a great idea to sit down with a professional and analyse things like:
o   Results vs budget
o   Spending patterns such as staff costs vs revenue
o   Profitability of various cost centres
o   Revenue issues
o   Cash flow issues
o   Required expansion and capital expenditure
o   Debtors
Next, it is time to do what Liam Neeson would do and use your (or your accountant’s) very particular set of skills to take any action required to ensure compliance and legally minimise your tax.  This might include:
o   Completing required trust resolutions.
o   Completing annual stock-take at 30 June.
o   Ensuring deductible expenses are paid prior to 30 June (e.g. income protection insurance premiums).
o   Ensuring vehicle log books are completed, if required.
o   Ensuring your staff superannuation is paid prior to 30 June to allow the tax deduction in this financial year.
o   Acquiring any required new assets especially if you are eligible for the small business write-off of up to $20,000.
o   It is also an opportune time to consider your business structure, especially considering the changes to the company tax rate and the small business restructure rollover.  This rollover can allow small businesses to restructure into another entity from 1 July 2016 without incurring a capital gains tax liability.
If your interest in all things super piqued when Dean Cain wore his undies on the outside then listen up because this is also the ideal time to review your personal superannuation.
o   The proposed changes in the 2016 budget mean that the concessional contribution cap is scheduled to be reduced to $25,000 for everyone from 1 July 2017.  With the cap currently $30,000 (or $35,000 for those aged over 50), the next two years might be the last opportunity to utilise the higher contribution caps.
o   Any additional contributions you choose to make should always be made in consideration of your overall financial position and any other upcoming liabilities.  You should also be mindful of not breaching your contribution cap limit.  Be sure you consider contributions from all sources, including salary sacrifice amounts and contributions for insurance policies held in a superannuation environment.
o   Depending on your adjusted taxable income, there may also be additional tax on your contributions including Superannuation Guarantee Contributions made by your employer.  Division 293 Tax results in additional 15% tax on all contributions if your adjusted taxable income is in excess of $300,000.  This cap is proposed to be reduced to $250,000 from 1 July 2017.
Being aware of all of these considerations allows you to accurately plan for upcoming tax liabilities.
Although in many cases your tax liability for 2016 may not be due until May 2017, it is much better to identify any liability sooner rather than later so that you can put aside cash as required.
It is also a good time to map out all of your tax liabilities for the next 12 months, including calculating future PAYG instalments.  These are calculated by the ATO based on your last lodged return and where taxable income varies there can be sudden and dramatic changes in your quarterly instalment.  Setting the
expected liabilities out in a calendar format can be very helpful.

Understanding your results and likely tax position also allows you the opportunity to vary your PAYG instalments.  After all, if you haven’t made as much money as last year you’re much better off varying your instalment down to avoid paying any more than necessary to the ATO.

If you’d like to discuss any of these issues please contact any of the friendly team at Vivid Chartered Accountants.

1 comment:

  1. Good to know how Vivid chartered accountants are making tax plans. Actually I was looking for a tax firm that have experts tax planning making agents. Looking forward to get in touch with Vivid.