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Minimise Your Business Tax

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MINIMISE YOUR BUSINESS TAX

TAX PLANNING GUIDE

Imagine what you could do with tax saved?

  • Reduce your home loan
  • Top up your super
  • Have a holiday
  • Deposit for an Investment Property
  • Upgrade your Car

Here’s a guide to the strategies you can use to minimise your business tax.

IS YOUR BUSINESS A“SMALL BUSINESS” ENTITY?

Small businesses can access a range of tax concessions from the ATO. To qualify as a “Small Business Entity”, the business must have an aggregated turnover (your annual turnover plus the annual turnover of any business connected / affiliated with you) of less than $10 million and be operating a business for all or part of the 2018 year.

REDUCTION IN COMPANY TAX RATES FOR SMALL BUSINESSES

The company tax rate for businesses with less than $10 million turnover is 27.5%.

If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 27.5% for the 2018 year. Note that this company must have business operations to qualify for the reduced company tax rate.

INSTANT DEDUCTION FOR ASSETS LESS THAN $20,000

If your business is a Small Business Entity, the following tax concessions apply:

  • Depreciating assets valued at less than $20,000 will be immediately deductible
  • Depreciating assets valued at more than $20,000 will be depreciated in one pool at a rate of 15% in the first year and 30% in future years
  • If your pool balance at the end of the year is less than $20,000 before applying any other depreciation deduction, the entire pool balance can be written off.

You should buy these assets before 30 June 2018.

If your business is not a Small Business Entity, you will need to depreciate all assets purchased over $300. Any assets purchased for $300 or under can be immediately deducted.

MAXIMISE DEDUCTIBLE SUPER CONTRIBUTIONS

The concessional superannuation cap for 2018 is $25,000 for all individuals. Do not go over this limit or you will pay more tax!

Note that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions charge.

For the contribution to be counted towards the employee’s 2018 contribution cap, it must be received by the fund by 30 June 2018.

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 buy equipment with a tax benefit.

Items that can be packaged include handheld/portable tools of trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones.

If structured correctly, the employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, 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 2018.

PAY EMPLOYEE SUPERANNUATION NOW

To claim a tax deduction in the 2018 financial year, you need to ensure that your employee superannuation payments are received by the super fund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2018.

You should avoid making last minute superannuation payments as processing delays may cause them to be received after year-end. If for any reasons you end up having to make last minute payments and you would like to claim them as deductions for the current year, contact us immediately and before you make any payments for possible resolutions.

DEFER INCOME

If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2018.  This strategy pushes tax payable to future years.

BRING FORWARD EXPENSES

Purchase consumable items BEFORE 30 June 2018. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.

REPAIRS & MAINTENANCE

Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2018.

DEFER INVESTMENT INCOME & CAPITAL GAINS

If possible, 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 2018.

The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!

MOTOR VEHICLE LOG BOOK

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 2018. You should make a record of your odometer reading as at 30 June 2018 and keep all receipts/invoices for motor vehicle expenses.

An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

INVESTMENT PROPERTY DEPRECIATION

If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.

PRIVATE COMPANY

(“DIV 7A”) LOANS

Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2018. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return, or risk having it counted as an unfranked dividend in the return of the individual.

YEAR-END STOCKTAKE / WORK IN PROGRESS

If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2018. Review your listing and write-off any obsolete or worthless stock items.

Talk to us about your different options for valuing Stock, and how they affect your tax payable.

WRITE-OFF BAD DEBTS

Review your Trade Debtors listing and write-off all bad debts BEFORE 30 June 2018. Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2018.

SMALL BUSINESS CONCESSIONS - PREPAYMENTS

“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) BEFORE 30 June 2018 and obtain a full tax deduction in the 2018 financial year.

TRUSTEE RESOLUTIONS

Ensure that the Trustee Resolutions are prepared and signed BEFORE 30 June 2018 for all Discretionary (“Family”) Trusts. Please see us for more information about these resolutions.

Talk to us TODAY before the 30 June 2018 deadline for assistance to reduce your tax!

 

VFG-extra-1.jpg

Vision Financial Group

a Shop 10, North Point Retail Mackay

p 07 4951 7900 e dgarnham@visionfg.com.au

 

This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of your specific circumstances.

Vision Financial Group has moved!

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Vision Financial Group is delighted to announce that we have relocated to new business premises (with on site and street parking available).

We are now at Shop 10, Northpoint Retail in the Harvey Norman complex Mackay.

Please note our office number is still 0749 517900 following the move to our new premises, and all other contact details including e-mail, postal address and mobile number will remain the same.  Thank you for your continued support and the opportunity to be of ongoing service to you and look forward to meeting you at our new premises in the near future.

What every employer needs to know about fringe benefits

On 31 March 2017, the Fringe Benefits Tax (FBT) year ends. The ATO will be reviewing whether all employers who should be paying FBT are, and that they are paying the right amount.

To help you meet your fringe benefits obligations, we’ve put together a list of essentials every employer needs to know about FBT and review every year, such as:

  • Should I be registered for FBT?
  • What information do I need to give my accountant?
  • Are there any changes to the FBT rates come 1 April 2017?
  • What is exempt from FBT?
  • How can I reduce my FBT liability?
  • Do I need to review our salary sacrifice agreements?

These questions are all answered for you below, as well as some log book management tips and new rules that have been introduced to salary sacrificed meal entertainment benefits.

 

FBT Rate changes

On 1 April 2017, the FBT rates will decrease to:

FBT Rate                                    47%

Type 1 Gross Up Rate           2.0802

Type 2 Gross Up Rate           1.8868

 

Should you be registered for FBT?

Generally, if you have employees, including directors and you provide them with cars, car parking, entertainment (food and drink), employee discounts, reimburse private expenses etc, then you are likely to be providing a fringe benefit and we will need to register your business for FBT.

It’s important you start gathering all of the details of these provided benefits as soon as possible using our annual FBT Questionnaire so we can calculate any potential FBT liability and lodge your FBT return on time – due 25 June 2017 with payment to be made by 28 May 2017.

 

What items are exempt from FBT?

If you’re providing items like mobile phones, laptops, tablets, portable printers, protective clothing, tools of trade etc., or minor and infrequent benefits that are less than $300 in value, you are unlikely to have to worry about FBT.

You can fill out our short FBT Questionnaire to 100% sure.

 

An easier way to manage your vehicle log books  

For employers with 20 or more ‘tools of trade’ cars – a car required for the job, like for a sales rep travelling extensively for the business – the ATO has a new process for validating the business use percentage of the car.

It’s called the ‘simplified method’, and if you meet the access conditions, you can apply an average business use percentage to all ‘tools of trade’ cars in your fleet for first log book year and the next 4 years. Conditions to be met are:

·     valid log books kept for at least 75% of the cars in the log book year;

·     the employer chose the make and model of the car, not the employee;

·     each fleet car has less value than the ‘luxury car’ limit when purchased, generally $64,132 in 2016/2017;

·     the cars aren’t provided under a salary packaging arrangement / employee remuneration package; and

·     your employees can’t choose to receive additional remuneration in lieu of using the cars.

Is it time to review your salary packages?

With the FBT rate changing again on 1 April 2017, it’s a good time to review all existing agreements so that you and your employee know what the package will look like once the rate drops to 47%.

The lower rate will, in general, make salary packaging less expensive to provide and an opportunity to look for potential savings. For example, for employees earning above $180,000 there is a one-off opportunity between 1 April 2017 and 30 June 2017 to reduce their taxable income with the FBT rate drop covering the 2% Debt levy imposed.

Be careful though not to drop the individual’s income below the Debt levy threshold, and make sure the benefits provided under the salary sacrifice agreement replace amounts that would have been payable as salary, the employee agrees in writing to forego income before it is earned in return for benefits of a similar value, and the sacrificed amount comes out of the employee’s wages and not reimbursed into their bank account.

 

New rules for meal entertainment benefits that are salary sacrificed

Where an employee agrees to receive meal entertainment benefits instead of future salary, i.e. as part of a salary sacrifice arrangement, concessions have been removed as of the 2017 FBT year. There are 3 key changes to note:

·     these benefits are to be included in the employee’s individual fringe benefits amount being reported on the payment summary when it exceeds the $2,000 reporting exclusion threshold;

·     you can no longer use the 50-50 split or 12-week register methods to value these benefits; and

·     a new separate $5,000 cap for ‘salary sacrificed’ meal entertainment benefit now exists for employees of charities and not-for-profits. If these benefits exceed the cap the excess will be counted toward their current $31,177 exemption or $17,667 rebate cap.

 

Ways you can reduce your FBT liability

Here are some ways in which you can reduce your FBT liability:

·     replace your fringe benefits with cash salary;

·     provide benefits that your employees would be entitled to claim as an income tax deduction if they had to pay for the benefits themselves;

·     look at providing benefits that are exempt from FBT; and

·     use employee contributions, for example, an employee paying for some of the operating costs of car fringe benefit such as fuel that you don't reimburse them for. Though you should note that employee contributions may be deemed assessable income to you and subject to GST.

 

How we can help you!

The FBT year ends on 31 March 2017, so be sure to complete and return the FBT Questionnaire as soon as possible so you don’t miss the lodgment date of 25 June 2017, and meet the payment due date of 28 May 2017.

We look forward to helping you meet your FBT obligations and are available anytime to answer any questions you have around reducing your FBT liability or creating effective salary sacrifice arrangements.

Tax Planning Starts Now

There are 5 key things all business owners must consider right now. Some of them are brilliant wealth creation ideas. Please read on…

30 June will be here before we know it. Let us help you get the most out of the upcoming months.

Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If we all leave your tax planning until the end of May and early June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.

So, for 2017, our invitation to you is to start now with your tax planning.

5 Key Tax Planning Strategies

Over the next five weeks, we will send you one email per week covering one of our five key tax planning strategies. These are:

  1. The Secrets to Tax Planning

  2. Last Chance for big super contributions

  3. Why use a “bucket” company?

  4. Why use a SMSF?

  5. Trust Distribution Resolutions before 30 June

So, keep an eye out for our emails over the next 5 weeks, and we’ll outline in detail for you how to save $ and at the same time grow your family’s wealth in a low-risk manner.

How our tax planning service works

1     First, we request from you details of your expected income and business profits for the 2017 tax year (1 July 2016 to 30 June 2017). This includes all:

  •  wages / employment income
  • interest, dividends and rental income received

  • business profits / losses; and

  • any capital gains / losses you expect to make.

Based on this information, we estimate your taxable income and your tax payable before any tax planning strategies. For example, we may calculate (based on your information) that you have a taxable income of $100,000 for 2017. This would result in $26,832 tax and Medicare levy payable.

2     Secondly, we discuss all your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.

 

3     Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.

 

4     And finally, we provide you with an easy-to-follow action plan to ensure that both you and we can do everything that needs to be actioned before 30 June.

Contact us today to get started!

Don’t wait until June, now is the time to have a chat to us.  

General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

Merry Christmas from the team at Vision Financial Group

Merry Christmas

From the team at Vision Financial Group, we wish all of our clients and business associates a very Merry Christmas.  We thank you for the support throughout 2016 and look forward to working with you all again in the future!

We would like to remind everyone that our office will be closed from close of trade Wednesday 21st December and we will re-open Monday 9th January.

Don't leave your tax planning to the last minute

The biggest changes to super in a decade – how to capitalise now!

Major changes to tax and superannuation have just been approved by the Government in early December 2016.

These are the biggest changes in the last 10 years. They are significant. 

Most of these changes will take place on 1 July 2017.

That’s why we need to start planning ASAP with you.

The expert Vision Financial Team have spent the past 3 months creating a number of cutting edge and brilliant strategies to help you.

Maximise Super Contributions – Large amounts now for possibly the last time

While you might not be flush with cash now and able to put large amounts into superannuation, it’s important that you’re aware of what is possible to maximise your super balance and how to reduce your tax.

The following changes occur from 1 July 2017:

The tax deductible super contribution cap decreases to $25,000 per year from $30,000 per year for up to age 49 or $35,000 per year for age 50 to age 75, after passing a work test if over 65.  

The non-tax deductible super contribution cap decreases to $100,000 per year (provided your super balance is less than $1.6 million) from $180,000 per year.

You may have a once-off opportunity to make a non-tax deductible contribution of $540,000 before 30 June 2017 into super, depending on prior year contributions if any. 

We need to meet and consider your overall personal and family circumstances, and then we can design for you the most tax effective super contributions you can make prior to 30 June 2017.

Other General Tax Planning Strategies

Of course, we’ll consider all the usual 2017 General Tax Planning options for you at the same time.  There are many strategies to consider!

Action Plan

Contact Vision Financial Group TODAY to book in your initial 2017 Tax Planning Meeting with us.  Phone 07 4951 7900 or Email enquires@visionfg.com.au.

Imagine what you could do with your tax saved!

 

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]

 

Advantages and Disadvantages of Buying a Business

Advantages

 Buying an existing business offers a sense of security because you have a good idea of what you’re getting for your money. 

Existing customers and goodwill

An established business will generally come with existing customers, clients, suppliers and staff.  This eliminates much of the effort and expense needed to generate goodwill, branding, advertising and hiring staff. 

Expenses and finance

The business is already operational and stock is already on hand, so your initial expenses would be minimal and you can quickly generate a cashflow.  If you need to obtain finance, it may be easier because the business has a proven track record. 

Training and assistance

First-hand experience is valuable and the previous owner and employees remaining with the business are best placed to give you the training and assistance you need. 

Disadvantages

An existing business does not come with a guarantee of future success!

Goodwill may not last

There’s a risk that customers and clients may leave when the business changes hands.  Staff may wish to leave too and you may have to pay their entitlements, such as long service leave.  The departure of the owner may have a negative effect on the business, so you can’t necessarily guarantee the profits.

Reputation

The business may have a bad reputation or have made a poor impression in the past – this might prove difficult for you to turn around.

Premises and equipment

The premises may be inadequate and the equipment or stock may be out dated or in need of replacing or repair.

Action Plan

Thoroughly research the business!

For expert advice on buying a business, make an appointment to talk with your accountant, solicitor or business adviser.

Contact Vision Financial 07 4951 7900 or email enquires@visionfg.com.au to make an appointment