Tax Planning Ideas & Suggestions

30 June 2016 Approaches – Year End Planning Tips

It is nearly 30 June and spending time on preparing and planning before year end may provide tax savings and avoid any surprises post year end. Planning should be undertaken by both individuals and businesses to maximise all possible opportunities and ensure a smooth end of year process.

Individuals

Defer earning taxable income until the next tax year:

  • Planning on selling an asset at a gain? Can the contracts be signed after 30 June to defer the tax a whole year?
  • Already sold an asset at a gain? Are there any assets you were considering selling that may incur a capital loss to offset or reduce the gain already made?
  • Term deposits maturing? Roll maturing term deposits now to a date after June 30 so that tax payable on that interest is deferred for another year.

Bring forward deductible expenses:

  • Salary sacrifice work related items for an effective tax deduction in the current year (even if the item is above $300)
  • buy work related items < $300 for an immediate deduction;
  • prepay interest on investment loans;
  • bring forward repairs to your investment property;
  • make tax deductible donations.

Review salary sacrifice arrangements to ensure they are still beneficial and appropriate to your circumstances.

Review your log book for currency.

  • A log book will ensure you get the maximum claim for your work related travel and needs to be kept for a consecutive period of 12 weeks every 5 years.
  • This is especially important for the current tax year as the following changes have occurred:
    • the cents per kilometre rate has now been reduced to a flat 66c per kilometre for all vehicles, reduced from a maximum of 77c per kilometre in previous years
    • the 12% x car cost and 1/3 expenses method have been removed.

Businesses

  • Prepay expenses if you are a small business entity for an immediate deduction in the current year.
  • Do you need new plant, vehicles or equipment? If you are a small business and purchase and install business equipment for < $20,000 prior to 30 June you could be entitled to an immediate tax deduction for the full purchase price in the current financial year. If you need to finance your purchase please click here for loan quotes and applications
  • Bring forward deductible expenses, such as repairs.
  • Review your receivables/debtors ledger and write off any bad debts prior to 30 June so you don’t pay tax on money you are unable to collect.
  • Review your asset register – identify and scrap any obsolete items of plant and equipment for a tax deduction of the written down value.
  • Prepare for your stock take at year end by identifying old or obsolete stock that can be written off.
  • Pay your employees super prior to 30 June for a tax deduction this year.
  • If your business is running at a loss, speak to us about the non-commercial loss rules and what is required to deduct the losses from other income.
  • Make sure you have all details required from your contractors to complete your taxable payments report.
  • Have you considered the super stream requirements for your employees? Small employers (those with < 20 employees) will be required to be super stream compliant by 30 June.
  • If you have a company, review any loans that the company has made to associates and contact us to ensure the most tax effective strategy is in place for repayment.
  • If you have a trust, review the year and with us, plan for and document year end trustee resolutions as to the distribution of income

Superannuation

There were significant changes announced in the Budget in regards to superannuation and it is vital that you understand what can be done before 30 June 2016 to build your retirement savings whilst minimising the implication of tax.

Current concessional contributions cap limits to apply until 30 June 2017

For anyone who is under age 50 this financial year the maximum amount of concessional contributions that can be made to superannuation without penalty is $30,000.  However, for anyone aged 50 and above the maximum amount is $35,000 (please note that the higher cap applies to those who turn 50 during the financial year).

Concessional contributions include amounts you may make as salary sacrifice, Superannuation Guarantee or personal deductible contributions, if you qualify.

If you are older than 65 you will need to meet a work test to contribute to super in most cases.  You will need to work for at least 40 hours during 30 consecutive days at any time during the financial year to make concessional and non-concessional contributions to super (it has been proposed in the Budget that this test will be removed from 1 July 2017) .

It was announced during the Budget that from 1 July 2017, the concessional contribution limit will be reduced to $25,000 for all individuals.

Changes to non-concessional (after tax) contributions

The Government has proposed to introduce a $500,000 lifetime cap on non-concessional contributions that will include all NCCs made since 1 July 2007. This measure takes effect from 7:30pm (AEST) 3 May 2016.

If you are planning on making a non-concessional contribution, you will need to determine if your non-concessional contributions made since 1 July 2007 equal or exceed $500,000. If they do then you cannot contribute further to your fund (if you have exceeded the cap you do not need to withdraw the excess contributions).

If you haven’t reached the cap of $500,000 as at 3 May 2016, then you can continue to make non-concessional contributions up to the cap. If you then exceed the cap, you will need to withdraw the excess or face a penalty tax.

 Government co-contribution

If your adjusted income is less than $50,454 you may like to take advantage of the Government co-contribution.  You can do this by making non-concessional contributions before the end of the financial year.  For every dollar of contributions that are eligible, the Government contributes 50 cents to your superannuation up to a maximum government co-contribution of $500.

For 2015/16, the maximum government co-contribution is payable for individuals on incomes at or below $35,454 and reduces by 3.33 cents for each dollar above this, cutting out completely once an individual’s total income for the year exceeds $50,454.

Drawing superannuation pensions

If you are in pension phase make sure the minimum pension has been paid to you for this financial year prior to 30 June 2016.  By not receiving the required minimum pension any income earned on your pension investments in your superannuation fund will be taxed at 15% rather than being tax free if the pension rules are met by the fund.

Rectification of Audit Management Letter Points

It is vital that all audit management letter points raised in completing your SMSF’s 2015 audit have been addressed and rectified prior to 30 June 2016 to ensure penalties are not applied by the ATO.

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