Getting the better of the tax man: 10 strategies for managing and limiting your tax burden Presented by: Michael Derin, Managing Director, Azure Group29/03/12 1
Strategies to manage tax Tax cannot be avoided but it can be managed29/03/12 2
1. Tax planning Help to understand & reduce tax burden for both business & owner Pre-June on accurate results to end of March Good structure & consider the whole group, family & shareholders Manage profits & tax over a number of years Should have long term focus → Consider future plans & impact future tax liabilities eg asset sale/purchase, investment in new equipment, selling the business, property, super & succession planning29/03/12 3
2. Account record keeping Managing tax effectively is impossible without accurate, reconciled & up-to-date financial accounts – like flying blind Realistic Defined Balance P&L short & sheet & P&L & cash flow long term forecasts goals29/03/12 4
3. Director/shareholder loans Confusing & complex area Interlinked with family trusts & income streaming → Example - Director/shareholder draws down profits from company but does not declare income Solutions → Repay loan before 30 June → Pay dividends Consider costs of Division 7A loans – is it worth it?29/03/12 5
4. Staff wages & benefits Contractors v employees FBT – entertainment & car benefits, associated party benefits, FBT gross up Traps of workers’ compensation, payroll tax & SGC29/03/12 6
Minimising tax Everyone must pay tax but by adopting smart tax planning strategies you can limit your tax liability so you don’t end up paying more than you should29/03/12 7
5. Superannuation Can be the best tax effective structure in Australia Every dollar contributed up to age base limits can save you tax Limits to how much can be contributed → $25K pa or $50K pa for those over 50 with a super fund below $500K → Excess contributions tax → SMSF – “In house assets” → Spouse contributions29/03/12 8
6. Splitting income between people Bramford case Allows you to distribute wealth for maximum tax benefits, particularly if one spouse isn’t working Distributing wealth to children – new restrictions Need to be aware of tax limits, ie higher tax rate kicks in at $80K pa29/03/12 9
7.Cash basis for small businesses Profits on cash basis may be less than accruals basis, reducing tax liability Prepayments Accelerated depreciation29/03/12 10
8. Managing income tax across financial years Cash v accrual basis makes a difference Inventory/trading stock management Employee SGC Differed & unearned revenue Timing of expenses Debtors – bad debts Managing employee leave Tax losses – franking credits29/03/12 11
9. Concessions & deductions Donations Bad debts Staff bonuses Pay staff super on time Pre-paying expenses Write off obsolete trading stock/inventory Repairs to workplace and/or equipment Small business assets, obsolete items, scrap29/03/12 12
10. Capital gains - business Trapping gains in companies Small business CGT concessions → 50% discount → 50% active asset reduction → Super rollover relief – life time cap $500k pp → Rollover of assets relief29/03/12 13
Michael Derin firstname.lastname@example.org/03/12 14
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