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TAX PLANNING

Suggested Review Steps -this Firm can assist as you need, but act NOW.

  1. Review current profit and cash flow position
  2. Status Quo : Project Taxable Income assuming no action taken
  3. Determine tax planning objective -is projected Taxable Income higher or lower than "norm" ? Do you have a debit or credit loan with your Trading entity ? Is any credit loan subject to small business carve out or is it equity for Tax purposes ? Are you required, or do you need to pay, a franked dividend before year end ?  care re tax & superannuation surcharge.)
  4. Consider impact of any changes in Company or large fall in individual Tax Rates from 1 July, on tax payable and shareholder franking credits.
  5. With the fall in the Fringe benefits tax rate to 46.5 % from 1 April 2006 are certain fringe benefits prior to 1 July 2006 more valuable coupled with the fall in tax rates from 1 July 2006 ?
  6. Examine Taxation Options available. Each entity is different.
  7. Is your Company permitted to retain profits after payment of taxation ?  (See Personal Services Income and Non-Commercial business losses)
  8. Does your business use the Cash or Accruals Basis of Accounting for Income Tax purposes ? -affects how income is assessed and expenses claimed) 
  9. Note changes to STS system from 1 July  2007 -increasing upper limit to $ 2 million and permitting Accruals accounting for income tax. Can the business utilise STS or is it better off with the increases in depreciation provided to Non-STS taxpayers from Budget Night 9 May 2006 ?
  10. What will be the PAYG and GST impact of legally altering the timing of derivation of assessable income or allowance of taxation deductions for expenditure ?
  11. Examine existing work-in progress that may be complete by 30 June and (expenditure) obligations (e.g. quarterly superannuation guarantee ) which may be required to be met in June or July.
  12. Decide whether alteration of timing of items will legally achieve objective set at Step 3 above.
  13. If yes to above, then review checklist below for implementation ideas. 
  14. From 1 July 2006 Cost of private company formation to fall by $ 400 GST Free, per Federal Budget May 2006.

 

IMPLEMENTATION VARIABLES

VARIABLE NOTES - some relevant considerations
INCOME Alienation of personal services income -certain deductions non-allowable

Professional Practice companies -break-even requirement

Accounting Method recognition of assessable income -cash or accruals

If on accruals, consider bad debt write offs now!

-date cut-off for year end -care that all income is declared in accounts to 30 June.

Type of income ? Derivation varies with each type-

Business income is assessed when earned (accounting method), Interest dividend and rent is assessed usually on receipt.

GST impact of alteration

Eg Company Tax rate to fall to 30 % from 1 July 2001

Expected income

Trading Stock Valuation options- scrap or separate obsolete stock. 

Review Capital Gains Tax position - should you dispose of any item to offset a realised capital loss against a realised gain before or after 30 June ?

Bad Debts -write off if on accruals basis.
DEDUCTIONS See above considerations especially GST impact, alienation of personal services and non-commercial losses. Is it worth purchasing a new business car to claim GST credit? (Budget) The timing of the GST credit will vary with each situation. eg Cash Basis taxpayer using HP finance- GST claimable with each payment.
Depreciation Opportunity for Small Taxpayers to claim outright deduction for small items"if elect "STS

Examine depreciation impact of any pre 30 June acquisitions.     

Scrap or dispose of obsolete or worn out items

$ 300 write off
Negative Gearing Can be applied to any income earning investment, but seek advice and be careful re commercial viability and non-commercial loss provisions. 
Prepayments Simplified

Prepayments Large Companies

 Small Businesses (<$ 1 mill average turnover)

Until 30 June 2001, small businesses  could claim up to 13 months in advance.  But check this before proceeding. After that date small businesses that do not opt for STS will have prepayments apportioned over relevant period. (as below for larger businesses.)

Larger Businesses : Care re expenditure > $ 1,000 and where service to be performed is more than 13 months - deduction may be required to be spread over period. (Special rules apply over three years from 21 Sept 99)

Some Items for review :
Rent
Can consumables (not trading stock) be acquired -say 3 months advance supplies
Lease payments
Interest - extra care here !
Audit and accounting fees
Repairs and maintenance
Subscriptions -business, trade and association
Donations
Superannuation Pay Super guarantee obligations and any additional by 30 June to obtain deduction   See     Maximum Deductions 
Wage Bonuses Pay by 30 June to obtain deduction 

Any reason to bring forward bona fide redundancies or retirement of an employee ?

Review any workers compensation payroll tax impact.
Franked Dividends Pay to solve any debit loan problems and take advantage of higher franking rate (pre fall in company tax rate.
See Full Disclaimer. The material on this Website has been prepared in good faith for the benefit of clients and associates but does not represent legal or professional service and should not be relied on in any matter or used for decision-making without appropriate professional advice. No responsibility will be accepted arising in any way for errors or omissions in the material herein. Please consult this Firm for professional advice.

 

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Last modified: June 30, 2006