TAX PLANNING FOR 2010
The end of the 2010 financial year is fast approaching! This is an appropriate time to review your options to legally minimise your taxes.
Your Tax Planning Review with Us
We will need to review your expected income for the year so that we can calculate the appropriate mix of salary / wages payments and superannuation contributions for you.
Can you please send in to our office by post or e-mail the following information NO LATER THAN 31 May 2010:
- Estimate of business profits, personal income, salary and wage income, interest, dividends, capital gains, and rental income for the period 1 July 2009 to 30 June 2010
- A copy of your business Profit & Loss Statement for the period 1 July 2009 to 31 March 2010 and Balance Sheet as at 31 March 2010 (if we don't already have a copy of these documents)
We would like to either meet with you or have a phone meeting with you well before 15 June 2010 to allow us both enough time to implement any tax planning strategies we jointly decide upon.
NOTE: The following information in this e-mail is of a general nature and does not take into account your individual needs and objectives. Please do not act on any information in this document before seeking advice from your Accountant at Specialised Business Solutions.
Tax Planning for Business Owners
Business owners may be able to take advantage of these tax planning strategies:
1. Concessional Superannuation Caps
The concessional superannuation caps for 2010 are $25,000 for persons under age 50, and $50,000 for persons aged 50 and over. Do not go over these limits! Note that employer Super Guarantee Contributions are included in these caps. Where a contribution is made that exceeds these limits, the excess is taxed to the fund member's account at an effective rate of 46.5%. In order to claim a tax deduction in the 2010 financial year, the contribution must be received by the super fund by 30 June 2010.
2. Employee Superannuation Payments
To claim a tax deduction in the 2010 financial year, you need to ensure that your year-end employee superannuation payments have CLEARED your business bank account by 30 June 2010. For any last minute superannuation payments, we recommend that you arrange for a BANK CHEQUE made payable to your employee super fund prior to 30 June 2010. This ensures that your payment has actually cleared your bank account prior to 30 June, and will allow you to claim a full tax deduction in the 2010 financial year.
3. Defer Income
Where practical, defer issuing further invoices and/or receiving cash and debtor payments until after 30 June 2010. However, please note that you will still have to pay tax in 12 month's time on any income deferred.
4. Bring Forward Expenses
Purchase consumable items BEFORE 30 June 2010. These include stationery, printing, office and computer supplies.
5. Repairs & Maintenance
Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2010.
6. Motor Vehicle Log Book / Odometer Reading
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12 week period must be on or before 30 June 2010. You should make a record of each motor vehicle's odometer reading as at 30 June 2010.
7. Defer Investment Income and/or Capital Gains
If practical, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets to occur AFTER 30 June 2010. The Contract Date is the key tax date for working out when a sale occurred, not the Settlement Date!
8. Private Company Loans (Division 7A)
Business owners who have borrowed funds from their company must ensure that the appropriate principal and interest repayments are made by 30 June 2010.
9. Year End Stock Take / Work in Progress
If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2010.
10. Write-off Bad Debts
Review your Trade Debtors listing to write off all Bad Debts BEFORE 30 June 2010. Prepare a minute of a Director’s meeting, listing each Bad Debt as evidence that these amounts were actually written off before year-end.
11. Tools of Trade / FBT Exempt Items
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to acquire equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Notebook Computers, Personal Electronic Organisers, Mobile Phones, Digital Cameras, Briefcases, Protective Clothing, and Computer Software. If structured correctly, the Employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the cost of the equipment), and the employee’s salary package will only be reduced by the GST exclusive cost of the items purchased. You should buy these items before 30 June 2010.
12. Small Business Concessions - Prepayments
"Small Business" entities can make prepayments (up to 12 months) on expenses BEFORE 30 June 2010 (e.g. Rent, Interest on Loans) and obtain a full tax deduction in the 2010 financial year.
Tax Planning for Individuals
Here's some tax planning strategies for individuals that may be applicable to you:
1. Claim Your Education Tax Refund
Families receiving Family Tax Benefit (FTB) Part A can claim a 50% refund every year for education expenses of up to $750 for each child at primary school (maximum tax offset of $375 per child per year) and up to $1,500 for each child at secondary school (maximum tax offset of $750 per child per year). The refund is only available for certain expenses such as laptop computers, internet connections, educational software and textbooks.
2. Superannuation Contributions
Individuals may be able to make tax-deductible personal contributions to superannuation to reduce their taxable income. The advantage of this strategy is that superannuation contributions are taxed at 15% compared to personal income tax rates of between 31.5% and 46.5%. Superannuation contributions are limited to $25,000 per year for a person under age 50, and $50,000 for a person aged 50 and over. Any contributions in excess of these limits can be potentially taxed at a rate of 93%. To be eligible to claim a personal superannuation contribution as a tax deduction, you need to satisfy the 10% test, meaning that the amount you earn as an employee must be less than 10% of your combined assessable income and reportable fringe benefits for the year.
3. Ownership of Investments
A longer term tax planning strategy can involve reviewing the ownership of your investments. Any change of ownership needs to be carefully planned in relation to any capital gains tax and stamp duty implications. Investments may be owned by a Family Trust, which has the key advantage of providing flexibility in distributing income on an annual basis and an ability for up to $3,000 per year to be distributed to each child or grandchild tax free.
4. Property Depreciation Report
If you own an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital allowances on capital items within the property. The cost of this report is generally recouped several times over by the tax savings in the first year of property ownership. The SBS Team can arrange an expert Quantity Surveyor to prepare this report for you.
5. Sacrifice Your Salary to Super
If your marginal tax rate is more than 15%, salary sacrifice can be a great way to boost your superannuation and pay less tax. By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax.
6. Prepay Expenses
Expenses relating to investment activities can be prepaid before 30 June 2010. You can prepay up to 12 months of interest before 30 June on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June, including rental property repairs, memberships, subscriptions, and journals.
7. Protect Your Income
Possibly your greatest asset is your ability to earn an income. Income protection insurance replaces up to 75% of your salary if you are unable to work due to sickness or an accident. The insurance premium is tax deductible. The SBS team can assist you with advice and quotes for income protection insurance.
8. Realise Capital Losses
Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains. Please note that any assets sold at a loss should not be immediately re-acquired, as the ATO will view this as tax avoidance. Please contact the SBS Team for specialist advice in this area.
9. Qualify for a Government Co-Contribution
If your total income is less than $61,920, you may be eligible for a super co-contribution from the Federal Government. For each dollar in personal after-tax super contributions, the Government will contribute $1 up to a maximum co-contribution of $1,000 for those earning less than $31,920. For the purposes of this test, income is assessable income plus reportable fringe benefits and reportable employer super contributions, less any business income deductions.
Your Action Plan
Contact the SBS Team TODAY by replying to this e-mail or by telephone on (07) 3221 1100 before the 30 June deadline for assistance to legally minimise your tax!
We look forward to meeting with you soon!
Kind regards
THE SPECIALISED BUSINESS SOLUTIONS TEAM
