As this financial year begins to come to a close, we begin to reflect on the year that was and the year to come. For some, there are some key compliance issues to deal with prior to 30 June. For others, there are opportunities available to act now to ensure the best possible result when tax time comes around.
Opportunities for Individuals
While tax legislation for individuals has not significantly changed in several years, this year brings some changes to superannuation which can provide some substantial tax benefits. A summary of the changes are as follows:
- Individuals with more than 10% of their total income from salary or wages can now claim a tax deduction for super contributions – previously only salary sacrifice arrangements could generate these tax savings.
- From 1 July 2018 a bring forward rule will come in to force, which applies to individuals with a total superannuation balance of less than $500,000 at 30 June in the prior year. This allows for any unused concessional contributions to roll into future years, accumulating for up to 5 years.
- Changes to the non-concessional contributions caps also now restrict the amount of money that can be contributed after tax to superannuation, with severe tax penalties for exceeding the caps.
Individual taxpayers should also be aware of the ATO’s crack down on deductions. It is important to ensure all documentation is gathered, including:
- Receipts for deductible expenses, such as:
- Motor vehicle expenses
- Work related expenses
- Self education expenses
- Travel expenses
- Rental property expenses
- Up to date motor vehicle logbook (required every 5 years, when you purchase a new vehicle or when circumstances change).
Opportunities for Businesses
Tax planning provides business owners with the information they need to make operational decisions coming up to the end of the financial year. These decisions create opportunities for businesses to save on tax and plan for the year ahead.
There have been significant changes to business tax legislation in the last few years. Tax planning will ensure businesses are taking full effect of the available tax concessions, including:
- Small business accelerated depreciation rules.
- $20,000 immediate write off for small business asset purchases which ends at 30 June 2019*. (*12 month extension from 30 June 2018 proposed in 2018 budget not yet law).
- Reduced company tax rates for a greater number of companies than prior years.
- Dividends declared and paid to shareholders before 30 June 2018.
- Review PAYG Instalments paid and variations to June quarter BAS.
- Review of loans to shareholders and associates to ensure compliance with Division 7A.
Opportunities for Trusts
Tax planning of some form is vital for Trusts.
Each year Trustees must determine how to distribute trust profits by 30 June. Deciding what class of income and which beneficiary should receive distributions requires careful consideration of both the trust’s and beneficiary’s circumstances to ensure the best outcome for all, including tax minimisation. Tax planning enables trustees to make a well-informed decision on how best to allocate the trust’s income and ensures the necessary declarations are documented prior to 30 June.
To understand more about how tax planning can help you save tax, please contact your Altitude Adviser to discuss your tax position and ensure you are maximising your tax affairs before 30 June.