PLANNING TIME – Part 2
By Clinton Fraser
“There are a number of sneakers that can crawl under the radar and cause significant tax headaches if not addressed PRIOR to 30 June 2015.”
Last month in the first of a two part series we explored the initial first phase of the tax planning process being the preparation of forecasts, tax projections and the tax timeline.
Since that time I hope you have found the winter wetsuit, had plenty of waves and good sell through on winter season stock.
Apart from the obvious reasons for tax planning there are a number of sneakers that can crawl under the radar and cause significant tax headaches if not addressed PRIOR to 30 June 2015. This is where your Accountant will bring in their technical expertise and utilise the depth of specialist skill sets.
If you operate a Company there are very specific rules with regard to how you extract your profits and cash from the company. The application of the Division 7A debit loan rules can have serious adverse taxation impacts for clients. These rules can now extend further to effect Trusts also. Reviewing and forecasting inter entity and owner loan accounts is critical. The determination of appropriate dividend strategies and the repayment of loans can mitigate any of these hidden tax nasties if done before 30 June.
If you operate a Trust in your structure you will already know that the trustee must now determine in writing how to treat the income of the trust prior to 30 June. Failing to do so can trigger an assessment at trustee level with the adverse application of a 47% tax rate to the whole assessable income of the Trust. Your Accountant will assist with the preparation of distribution minutes that comply with the terms of your trust deed, and achieve the most effective distribution strategy and tax outcomes for family groups.
Another common discussion topic at this time of year is superannuation contribution strategies. Careful consideration of how superannuation applies to your overall wealth position and retirement targets will influence your pre 30 June contributions having consideration for concessional and non-concessional contributions and the optimal dollar value of contributions. For those with a SMSF the drawing of pensions within minimum and maximum amounts prior to 30 June is essential to ensure ATO compliance.
The above is a guide to only a few of the key themes, issues and actions we discuss and work with our clients in the final quarter of the financial year. It is often the time we have the most valuable impact to our clients financial and taxation affairs. Every client and their financial circumstances are unique and often each year is different to the one before (as well as ATO rules and interpretations).
The time to act is now. Working collaboratively together with your Accountant is critical to your financial and taxation related management and hopefully maximising your time in the water!