Tax Planning – 2014
Last Minute Tax Planning
Tax planning isn’t limited to the last few weeks of the tax year. The best tax planning forms part of your business structuring and is incorporated into decisions throughout the year. Having said that we appreciate that most business owners are very busy so we have listed a few last minute tax planning ideas:
What is new?
There are two interesting points to keep in mind:
a) there is a temporary tax increase of 2% for incomes exceeding $180,000 for the next 3 years so it may be better to claim deductions next year rather than this year.
b) the superannuation caps increase to $30,000 for concessional contributions (where you claim a tax deduction) and $180,000 for non concessional contributions (no tax deduction) so if you wish to contribute more than $450,000 into your fund then it may be best to wait till the following tax year to apply the $540,000 ‘bring forward rule’ from 1 July 2014.
If you are 49 years or older at 30 June 2014 then you can contribute a further $5,000 as concessional contributions. Please note that superannuation rules are complex and require specific advice to tailor a superannuation strategy to suit your needs.
1 – The boring stuff
It’s not very exciting but you need to check that all your paperwork is in order before 30 June 2014. Especially important are trust distribution resolutions, where the trustee of a trust determines who receives the income of the trust for the year in question.
2 – Pay early
If you have the cash then you could pay expenses before 30 June 2014 to claim the tax deduction this year, essentially bringing forward the tax benefit 12 months.
3 – Bad Debts
If you have delinquent clients with outstanding invoices then you could write off the debt before 30 June 2014 to claim this amount as a tax deduction. Please note that the bad debt needs to be written off in your internal records before 30 June.
4 – Superannuation
For your employees: Pay your employees superannuation before 30 June rather than 28 July. Superannuation is only tax deductible when it is paid and paid on time rather than when the debt is incurred.
Personal: You may be able to take advantage of the spouse super contribution tax offset and/or the super co-contribution.
5 – Incurring
You can generally claim a deduction for an expense you incur in the everyday running of your business in the year in which you incur it. For example, an expense is incurred when you receive an invoice, even if you haven’t actually paid it. This is known as the accruals method of accounting. However, if you are using the cash (receipts) accounting method, you can claim a deduction in the year in which you pay the expense, rather than in the year you incurred it.
6 – Contract date rather than settlement date
Please note that you have a capital gains event when a contract is signed, not when the contract settles! I know of situations where contracts were signed before 30 June and the settlement was after 30 June with the expectation that the capital gain would fall into the following year.
7 – Structuring
How long have you been in your current business or investment structure? Tax laws and your needs change over time so it may be time to review your structure to see if changes are appropriate. There is a fine balancing act between flexibility, asset protection, control and tax planning.
8 – And the most important item: Planning
Our most successful clients place more importance on planning for the new financial year rather than focusing only on ways to reduce their tax bill at year end. Now is a great time to set goals for the next year which should align with your business strategy and vision.
Please note that this is merely general discussion and not advice. Please contact our offices for specific advice.