How we can use legitimate tax deductions to minimise your taxes.
The Clock is Ticking………
Once again we are at the end of another financial year.
The key items that we all need to consider before 30 June, 2018 are as follows:
Key Superannuation Points to Consider;
- Superannuation Contributions
This year we are looking to supplement the SGC contributions to your Super fund with another contribution from you personally to maximise your concessional contribution up to the $25,000 limit.
The additional contribution can be claimed as a tax deduction in your personal tax return.
This will allow you to minimise your personal tax and make further savings for the future into your super fund.
Please note the current before tax cap on personal deductible contributions is $25,000 per financial year.
To claim a deduction, you must give notice to the trustee of your super fund and have it acknowledged in writing before it can be claimed as a deduction.
- Non- Concessional Contributions – Superannuation
An after Tax non concessional contribution can be made of up to $100,000 or $300,000 over a 3 year period.
If your contributions exceed $1,400,000 please discuss with us as you may not be able to make further non-concessional contributions under the new transfer Balance Cap Rules.
- Government Co- Contribution – Superannuation
In the 2017/18 Financial year, if you are the middle to low income earner, adding to your super from after-tax money could see you entitled to a government co-contribution worth up to $500.
To be eligible you need to earn less than $51,813 in the 2017/18 Financial Year and be aged below 71 at 30 June 2018. You must also have a total superannuation balance of less than $1.6 Million at the start of the financial year to be eligible.
The maximum co-contribution of $500 is available if you earn less than $36,813 in the 2017/18 Financial year and if you have made a contribution yourself of at least $1000. The co-contribution steadily reduces as your income rises, and until it reaches zero at an annual income of $51,813.
- Spouse Super Contribution Tax Offset
If your spouse or partner’s assessable income is less than $40,000 in a financial year and you decide to make super contributions on behalf of your spouse, you may be able to claim a tax offset for yourself.
The maximum tax offset available is up to $540 if your spouse receives $37,000 or less in assessable income in the 2017/189 financial year. The tax offset is progressively reduced until it reaches zero for spouses who earn $40,000 or more in assessable income in a year.
- First Home buyers – Superannuation
You may be able to make voluntary superannuation contributions to use towards a deposit of your first home, under the First Home Super Saver Scheme (FHSSS) starting from July 1 2017. Voluntary contributions you make, plus associated earnings, can be accessed from 1 July 2018 subject to meeting eligibility criteria. Whether using concessional or non-concessional contributions, the total amount of contributions you can withdraw is capped at $15,000 a year (or a maximum of $30,000 in total).
Superannuation Guarantee contributions, as well as contributions that don’t count towards or are in excess of the contribution caps, cannot be accessed under FHSSS as part of your deposit.
- Downsizer Contributions
From July 1 2018, if you are planning on downsizing your family home of ten years or more and are aged 65 or over, you may be able to contribute up to $300,000 from the sale proceeds to superannuation as a downsizer contribution. If you have a spouse they could also contribute up to $300,000 to their superannuation from these proceeds.
Downsizer contributions do not count towards your before or after-tax contribution caps or caps on contributions for total superannuation balance. You can find out more about whether you might be eligible at ato.gov.au
Key Elements to consider for your Company Tax;
Asset Write Off for Small Business
The extension of the federal government’s instant write-off scheme for another 12 months to 30 June 2019 was a welcomed part of the budget this year.
To recap, a small business with an aggregated turnover of less than $10 Million can claim an immediate tax deduction for assets costing less than $20,000 (GST inclusive). This includes individual assets that form part of a set. The immediate write-off applies equally to the purchase of new and second-hand assets which are used in the business.
In the interests of maintaining positive cash flow, you should consider making these purchases now to minimise the time between purchase and tax deduction.
- Tax Rate reduction
From 1 July, company tax rates will be reduced from 30 percent to 27.5 percent for companies with turnover between $25 Million and $50 Million.
As a result, where possible, we should be assisting with urgent tax planning now to bring expenses forward to this year, or delay the derivation of income until next year.
Linked to this, with the decrease of the corporate tax rate for small businesses, the maximum franking credits that can be allocated to dividends will also decrease from 30 percent this year to 27.5 percent next year and beyond. Ideally, we should be sitting with you to review the franking account position to assess whether it is better to pay out franked dividends this year. If not addressed, businesses may end up with excess franking credits which will be largely useless.
- Single touch payroll
Following the urging of the ATO, employers with 20 or more employees should be acting now to ensure they are prepared for Single Touch Payroll (STP).
When fully rolled out, employers will need to report their employees’ tax and super information to the ATO through payroll software that is STP ready.
This will come into effect from July 1 2018, therefore it is something we need to be prepared for now.
- Small Business – CGT Concessions.
In the event that you have been able to sell your Small Business you can minimise any tax payable but you need to satisfy a series of tests and be under the $6million dollar Limit for yourself and your spouse.
The tests are the Active asset test, the 15 year exemption, and the Retirement exemption with a limit of $500,000 per person. A Total cap to go in super of $1,445,000.
The benefit is that the amount contributed to the fund will be treated like a non- concessional Contribution (not taxed in or out)
- Super Balance less than $500,000
From July 1 2018, if individuals have a total superannuation balance of less than $500,000, they will be able to ‘carry forward’ any unused amount of their concessional contributions cap. The unused concessional contributions cap can be accessed on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
For their employees, employers should consider bringing forward June quarter superannuation payments one month early. This will get it all squared off, allowing businesses to start the year afresh.
- Super Guarantee Amnesty
It’s also worthwhile reminding you of the Superannuation Guarantee Amnesty. If an employer has been concerned about whether they have been contributing the correct amount of superannuation now is the time to act!
On 24 May 2018, the government announced a 12-month Superannuation Guarantee Amnesty, which provides a one-off opportunity for employers to self-correct past SG non-compliance without penalty.
Of course, employers will still be required to pay the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge. As is typically the case with amnesties, if you haven’t been doing the right thing and don’t come forward during the amnesty period, you can expect to pay higher penalties in the future if subsequently caught.
The amnesty does not apply to the period starting on April 1 2018, or subsequent periods – thus, current EOFY planning needs to include a review of superannuation payments on behalf of employees since 1 April 2018 to ensure everything is in order. This is going to be on the ATO’s radar come the end of the amnesty, so if you have any concerns, ensure you arrange a review with us now.
With significant changes taking place we all need to focus on what events may affect us or our businesses
- There are new reporting requirements for all SMSF with Funds in Excess of $1million on a quarterly Basis.
- New tax scales and lower super limits.
- The ATO is targeting all Deductions and requiring evidence in many cases. The ATO is also looking to control Payroll and SGC contributions with the new single touch payroll requirements with all employers required to lodge monthly by 1 July, 2019.
- We are all living in a new technology driven environment.
If you would like to discuss any of the foregoing please give us a call.
Best wishes for the new tax year.