We’re in the last quarter of the financial year, so now is a great time to forecast how your 16/17 year will wrap up. Early planning will ensure you have time to implement some strategies to support your objectives, minimise your tax liability this year having regard to small business company tax rate cuts next year and utilise opportunities that will disappear from 1 July 2017.
With a number of legislatives changes coming into effect after 30 June 2017, there are at least 5 good reasons to sit down with your adviser and do year end planning this year.
In light of the numerous changes effective after 30 June, we have outlined 5 good reasons that should motivate you to have a year-end planning discussion this year:
- The small business $20,000 immediate asset write-off, currently available to a business with <$2mil turnover, will cease on 30 June 2017. Following agreement with minor parties, it is anticipated that Company Tax Reform legislation will pass in May expanding the definition of Small Business to a <$10mil turnover, creating a small window of opportunity for all businesses with turnover <$10mil to bring forward asset purchases to pre 30 June.
- With the Tax Reform and change of Small Business definition to extend to businesses with <$10mil turnover, these companies will also enjoy a 27.5% company tax rate in 16/17 year. By extension, we anticipate that companies with <$25mil turnover will secure a tax rate of 27.5% from 17/18 year. This should trigger active exploration of strategies to defer profit to the lower tax year.
- A raft of Super Reforms come into effect 1 July 2017 with a range of superannuation options available for a limited time. Tax deductible concessional contribution limits of $35,000 for members aged 50+ and $30,0000 for members under 50 will both reduce to $25,000 from 1 July 2017. Taking advantage of these higher limits could save tax this financial year and boost retirement savings.
- Maximising the availability of optimally streaming income to lower income family members is important this financial year and is going to be increasingly important in the financial year 17/18 when the double contributions tax applies to ‘income’ from $250,000 down from $300,000. This division 293 tax results in superannuation contributions being taxed at 30% rather than 15% once ‘income’ (where ‘income’ is defined in a similar way to the application of the Medicare Levy) exceeds the limit.
- Use your early year-end planning as means of understanding your financial results, determine what improvements you can influence over the next 12 months and what profit result is achievable if you put in that effort. Access tools we use to perform what-if scenarios to help with quantifying the benefits of future opportunities, including making changes such as investing in more staff, equipment or marketing. Once you have your plan for the next 12 months, we’ll help you monitor your progress and keep you on track to achieve profit growth.
During the end of year planning discussion with your adviser, you can expect:
- An estimate of Income Tax payable for this year, the amounts and timing of Tax instalments for next year
- A summary of options for the mix of salary (and Tax to be withheld), dividends (where appropriate) and Superannuation contributions to be paid this year
- Advice on Tax planning initiatives that may be undertaken to minimise Income Tax for the current year
- Determine how Family Trust income is to be distributed so Trustees’ Resolutions can be prepared before 30 June.
End of year planning is not just about minimising the tax bill, we need to look at your whole of business, the way it operates and its likely future needs and ensure the options presented meet the financial position and objectives of the owners.
Hanrick Curran’s Federal Budget Update and 2017 Tax Planning Guide will be issued following the release of the Federal Budget; look out for our special Federal Budget Bulletin for these details.
Hanrick Curran can assist you to realise the benefits of year-end planning in 2017 and support you to keep your business on track to achieve profit growth in 2018. Contact your usual Hanrick Curran adviser or alternatively, Jamie Towers, Tim Taylor, Matthew Beasley, Tony Hunt or Nathanael Lee on 07 3218 3900.
Please note that this publication is intended to provide a general summary and should not be relied upon as a substitute for personal advice.