Fusion Partners Central Coast - accountants, business advisors, financial planners Institute of Chartered Accountants

2012 Tax Planning Strategies


Your year end tax checklist

 

created by Lisa Cahill - Fusion Partners Central Coast

08 June 2012

 

Individuals

We liked the following article from the SMH Money section. It’s a good basic checklist for individuals of pre 30 June tax tips.

http://www.smh.com.au/money/tax/june-30-tax-tips-to-save-a-bundle-20120529-1zftb.html

 

Businesses

Tax planning is an important part of any business strategy, without it, your business could be hit with unexpected tax debts, or pay more tax than is necessary. 

 

The first step in effective tax planning is ensuring that your monthly management accounting records are prepared and available soon after each month end. 

 

The monthly review of your Profit and Loss Statement and Balance Sheet is a vital management responsibility that allows you to review your profit position for the year to date and review your current asset and liabaility position.  These two important management reports allow you to estimate your profit for the year, and make an assessment of the cash flow that you have available for use in tax planning strategies. 

 

This will allow you to take advantage of a wide range of tax planning options, to optimise your tax position. 

 

Tax Laws and Government Incentives based upon taxable income, and various other financial measures, change regularly, and many tax planning opportunities that are available, need to be actioned prior to 30 June each year, which makes the need for planning in June vitally important.

 

While each business owner will be in a position to take advantage of different tax planning opportunities, based on turnover, profitability and family structure, some of the common ways to optimise your tax position include:

 

1. Maximising tax deductible superannuation contribution limits – we love superannuation.  While there is no doubt that the ride we have experienced on investment markets over the last 5 years has impacted our superannuation balances, it is important to understand that it is volatility in investment markets, not  volatility with superannuation.  Superannuation remains the most tax effective structure for funding your Retirement.  

2. Salary Planning – it is important to determine the optimum salary to pay each of the business owners, taking into consideration marginal tax rates, government benefits, superannuation guarantee contributions, workers compensation requirements and payroll tax.

3. Capital Gains Tax Management – correct timing of asset sales, can have a large impact on your tax liability.  It is important to time the realisation of capital gains and capital losses, and maximise the use of the correct holding structures, the capital gains discount and the small business capital gain concessions.

4. Defer Income until 1 July – is it possible to defer any of your income until after 1 July, so that the tax liability is deferred until the next year.  This could postpone tax payable by up to 12 months.

5. Prepay Business Expenses – In some instances you may be able to pay additional expenses in June with available cash flow, so that the tax deduction is available to you this financial year.  This could provide a tax benefit 12 months earlier, even though you have only paid the expense a few days earlier.

Remember that the 9% super gaurentee contribution (SGC) that you pay your employees is only deductible in the tax year it is paid, not the year it was incurred. You are required to pay SGC on the 28th day following the quarter end...so if you pay your bills on the last day to improve your cashflow, for the June quarter SGC this means payment is on July 28. This means the expense will be in the 2013 tax year. Pay the super earlier, before 30 June, to claim the deduction in the 2012 tax year. One more tip...If you missed this last year and paid it in July, make sure you don't end up pushing personal super contributions over the $25,000 concesional cap, as you will have 5 quarters of contributions in the one tax year.

 

Disclaimer

This article has been prepared for clients of Fusion Partners Central Coast (FPCC) ABN 37 113 405 218 and others on request.

The article is based upon generally available information and is not intended to be, or to replace specialist advice in the areas covered but rather, the article is intended to be informative and educational only.

Although the information is derived from sources considered and believed to be reliable and accurate, FPCC, its employees, consultants, advisers and officers to the maximum extent permitted by the law disclaim all liability and responsibility for any opinion expressed or for any error or omission that may have occurred in this document.

This article may contain general advice which is defined in the Corporations Act to mean that we have not taken into account any of your personal circumstances, needs or objectives. It is therefore imperative that you determine, before you proceed with any investment or enter into any transactions, whether the investment or transaction is suitable for you in consideration of your objectives, financial situation or needs and you must therefore, before acting on any information included in this article, consider the appropriateness of the information having regard to your personal situation. FPCC recommends that you obtain financial and tax or accounting advice based on your personal situation before making an investment decision.

All investments should be made with consideration of risk after reading the FSG and PDS of the product provider, and after obtaining professional advice from a financial planner.

This article was created by John Cahill, based on legislation in place at the time.  Legislative changes may mean that this information is no longer current.  You should speak to your financial adviser.