As humans and other types of tax-payer entities approach 30 June each year, there’s generally a mad scramble to make sure everything that can be done has been done on time to maximise tax refunds or minimise payables. While every client is different, a few summarised themes from our practice in financial year end tax planning discussions are as follows:
- Deferring or bringing forward derivation of income (revenue): if you think or know that you’ll make more or less money next year, then it may make sense to ask your payroll manager to defer any bonus payment to 1 July or not send out your invoices for June work until 1 July.
- Bringing forward or deferring deductions (revenue): you may be a high income individual who has maternity leave coming up. Accordingly, it might be good to pre-pay interest on an investment property mortgage or buy a business depreciating asset before 30 June to take advantage of the instant asset write off rules or the temporary full expensing concessions before they expire.
- Book squaring (capital): if you have carried forward capital losses and are wanting to offset them against current year capital gains, you may choose to “square your book” before 30 June. By triggering A1 gains on sale of assets which have embedded capital gains you can cleanse your tax profile. Alternately, you may want to trigger current year capital losses on some assets and gains on others to offset any CGT payable. It should be noted with caution that wash trading is not book squaring. Wash trades are artificial and result in no material difference in economic exposure to an asset for a taxpayer. While book squaring is legitimate tax planning, wash trading is not and it should not be engaged in.
- Concessional super contributions: this one is tricky but can be super high value. There are heaps of rules around how much a member can contribute and how much of that contribution can be deducted each year. There’s also rules around a 5 year rolling sunset for carried forward concessional headroom that are hard for most taxpayers to understand and will require professional advice to navigate. On top of all the tax law here, there are strict cash receipt rules so, if a taxpayer intends to claim a personal deduction, the trustee of their superfund needs to have physically have received the cash contribution before midnight on 30 June which is easier said than done because sometimes, thanks to delays in a clearning house, contributions can take up to a week to clear.
- Division 83A income: people getting paid in > $1k of shares from their employer need to understand the implications of non-cash assessable income. There are many inter-related tax planning opportunities & pitfalls associated with deriving 83A non-cash income and you should seek professional advice if you are in this position.
- Trust distributions: Trustees need to ensure that beneficiaries are made presently entitled to an identifiable amount of net trust income before midnight on 30 June each year. Generally, trustees should have held planning meetings with their tax accountants in the calendar month of May to decide on how the trust income for the year to date is likely to be distributed at year end. This meeting, along with the distribution decision, should be recorded with a signed minute which is filed for record keeping and future reference. There are complex rules around things called “reimbursement agreements” and how section 100A applies thereto. Trustees should seek professional tax advice.
- ASIC fees are all indexed on July 1st: if you have a private company and are thinking about doing a 10 year advanced payment of the annual company statement fee to ASIC, do so before 30 June to avoid the price increase. This one applies to all ASIC fees capable of being prepaid and taxpayers should seek advice from their registered ASIC agent here.
To discuss your situation and find out if there is anything you should do in the lead up to financial year end, call Chris at Solve on 0414 985 724 or email chris@solveaccounting.com.au