It’s tax time, and there are several changes that will come into effect on July 1 that you need to be aware of in order to optimise your personal and business tax affairs.
MWM Advisory is across the latest rules and regulations, so that you don’t have to be.
Below is a short rundown on some of the major issues to be aware of as the new financial year approaches.
Instant asset write off extended and expanded
For the first time, the popular $20,000 instant asset write off is available to businesses earning up to $10 million annually.
The measure allows businesses under the turnover limit to write off the value of assets worth up to $20,000 in their entirety in the first year of purchase.
Initially slated to end on 1 July, 2017, the Federal Government unexpectedly extended the deal by one year when it released its recent Budget.
There are a wide range of assets that can be claimed under the instant write-off, including cars, IT equipment, office equipment (including coffee machines and art), and more.
Outstanding ATO debts could affect your credit rating
If you have an outstanding tax debt with the Australian Tax Office, it is imperative that you contact the agency to organise a payment plan before 30 June, or your credit rating could be at risk.
In the new financial year, the ATO will be allowed to share debtors’ information with credit agencies, in an effort to reclaim the $19 billion in overdue tax that is outstanding – $12.7 billion of which is owed by businesses earning less than $2 million each year.
Sole traders should be careful, because their personal credit rating is at risk. To ensure you don’t get caught up in this blitz, you must make contact with the ATO by June 30 to sort out a payment plan for your debt.
Small businesses grow under Enterprise Tax Bill
The passage of the Enterprise Tax Bill through the senate has several implications for business owners:
- – Small business tax concessions can now be claimed by businesses earning below a $10 million turnover threshold, up from $2 million before the bill was passed.
- – Small business capital gains tax concessions are still only available to businesses earning under $2 million.
- – Businesses with an annual turnover under $50 million will enjoy a staggered reduction in the corporate tax rate, which will reduce to 27.5% this financial year.
- – For unincorporated businesses, such as sole traders, partnerships and trusts, there is an increase to the aggregated turnover threshold to $5 million for access to the small business income tax offset from 2016-17, and the small business tax discount is increased to 8%, capped at $1000.
Important steps to reduce your tax
As we have previously reported, it is important to take the late, great, Kerry Packer’s advice to minimise your tax, because if you don’t, ‘you need your head read’.
There are several important deductions to keep note of this year.
First, there is a one-off opportunity for high income earners – those earning $180,000 and above – to reduce their tax burden due to the timing in reduction of the fringe benefits tax rate and the end of the 2% ‘deficit tax’ that ends on June 30. It is complicated, so call MWM Advisory to ask more about this opportunity.
Also, pay back any money you borrowed from your business before the calendar ticks over into the new financial year, or set up a formal loan agreement, otherwise the money you took out of the business will be taxed at your marginal tax rate.
In other business-related housekeeping, directors’ fees and employee bonuses may be deductible for the 2016-17 financial year. For trusts, ensure decisions to distribute pre 30 June income are documented in writing.
Superannuation changes to keep in mind
Wide-ranging superannuation reforms come into effect on 1 July 2017. First, it is important that the SMSF trustee has current valuations for all assets within the super fund structure, completed by relevant experts using a methodology that is fair and reasonable.
If you have $1.6 million or more in a pension phase account, talk to MWM Advisory about how to reduce the level below that amount by 30 June to ensure you are not subject to a transfer balance tax.
If you are in a salary sacrifice agreement to make concessional super contributions, ensure that they do not exceed the new $25,000 limit in FY 18.
These are just a few of the issues that should be considered when completing your FY17 tax return. To ensure you get the most out of your return, and you aren’t stung with unexpected charges, call MWM Advisory now on (07) 5596 9070.