With just a couple of weeks to go until June 30, business owners and individuals are being urged to get their tax planning in order.
Alongside your usual health and hygiene decisions
concerning the timing of expenses and deductions, there are a few critical changes this year that will be imposed on taxpayers for the first time, which can not be amended when you submit your tax return later in the year.
The Federal Government is finalising legislation that will affect trusts and, Division 7A, and while the ink isn't quite yet dry, it will be important that trustees properly document income sources, trust beneficiary tax profiles, and how the income is distributed before June 30.
You'll also need to ensure that you've made clear determinations about dividends and franking.
These are critical components that the ATO will use to determine the tax liabilities for individuals connected with trusts, and will provide leverage to apply penalties to both the trust (or company) and individuals if this information isn't recorded correctly.
The best defence is offense, so now is the time to be talking to your accountant or tax advisor about getting the figures right in your trust's accounting and balance sheets including making trust distribution decisions and putting place appropriate documentation prior to 30 June.
After 30 June passes you'll be assessed on the data you have provided and that can't be changed and if no decision is made then the trustee may be assessed at the highest tax rates.
For more information about what the impacts are likely to be if you don't, read Trust Legislation May bite Deep if You're Not Prepared
and Watch Out for Division 7A
Effective tax planning for your business means making the most of the opportunity to time your savings and give your business a health check, in particular making sure your records are up to date and cleaning up any of your financial reporting in preparation for a new year.
Now is also the time to be deciding whether to bring forward some of your expenditure and ensuring you take advantage of the timing benefits
of doing so. Of course, you need to make sure you have the cash in your business to do so, but some of the key things you might want to consider are:
- Paying bonuses and timing your expenses
- Taking advantage of prepayment opportunities
- Identifying bad debts & impairment within your inventory
- Making the right decisions and elections (see trusts and
- division 7A)
- Paying liabilities that are only deductible in the year of payment
- Accelerating costs if you have the cash flow to do so
- Buying cars for small business
Of course, these are just some of the things you can do before the end of June 30. Talk to us about your specific business needs.
Personal tax planning can make a bit difference to your end of year bottom line, and there are a few changes taxpayers should be aware of.
The Federal Government introduced means-testing for the private health insurance rebate scheme as part of this year's Federal Budget, so it's worth considering pre-paying your premiums.
The ATO has clarified its position on prepayment so that if you've paid your premiums ahead of time you're likely to get the benefit of the current rebate at 30%. If you have incurred medical expenses or are able to stock up on your pharmaceuticals, now's the time to do it because the net medical expenses rebate is also set to change from July 1.
For the self-employed,thinking about topping up your super (or your spouse's super) means any additional contributions must be made by June 30 to be deductible. If you're able to maximise the superannuation contributions, do so, but be aware of the contribution limits and penalties that may apply if you pay too much.
If you receive a living away from home allowance (LAFHA
) for working away from home, there are a number of changes that will affect you and your employer. These changes are not yet law but are expected to apply from 1 July 2012. LAFHA is complex, so it's worth having a discussion with your advisor to find out how the changes affect you and your family if you're a temporary resident.
With the changes that are coming into play with the new financial year, it's important to get your paperwork in order and consult your tax advisor before June 30.
Apart from the fees being tax-deductible, our team will be able to ensure your paperwork is in proper order and help you to make the most of your tax planning.
Contact the team on 02 9957 4033 to book an appointment or discuss your tax planning needs.
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Last updated June 2012. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.
This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.