2016 Tax Planning

Tax Minimisation strategies – to save you tax

Personal Superannuation

If you choose to contribute to super and cash flow allows it, you can claim a deduction for personal superannuation contributions (either via your business entity or if via your personal name as long as your wages income is less than 10% of your total income). A key point to remember is that the super contribution must be received by the super fund by 30 June (so make sure you transfer the funds a good few days beforehand).

Super Contribution caps

– the 2016 super tax deductible contribution cap is $30,000 for people 49 years old and under, and $35,000 for people 50 and over. If paying a super lump sum before 30 June, don’t forget any wages super guarantee that may have already been paid on your behalf by any employers you work for outside your business, that have made up part of your super limits.

Super caps
2015-16
2016-17
General Concessional Cap – 49 & under
$30,000
$30,000
Concessional Cap – aged 50+
$35,000
$35,000
Non-Concessional Cap
$180,000**
$180,000**
3 year Non-Concessional Cap
$540,000**
**

Different income levels – 2016 v 2017

If you know that your income levels are going to significantly change between this year and next year (either up or down), you may have the opportunity to bring forward or delay some income or expenses, so they can be more effective. As personal tax rates vary at different levels (ie taxable income $37k to $80k: tax at 34.5%; income $80k to $180k: tax at 39%; income over $180k – tax at 49%), moving a tax deduction into a higher earning year, or shifting income to a lower income year, can help save you tax.

Re-structure? – Review your Business Structure

Should your business structure be adjusted to help reduce tax via a company or family trust structure? This may help delay tax to later years, or help share profits amongst family members. It may also offer you better asset protection, to safeguard assets like your home in your own name.

 

Tax Deferral – to delay paying tax from 2016 to 2017

Defer Invoicing

If your cash flow can allow it, consider deferring your invoicing until after 30 June. A one week delay in billing will mean you pay tax on the income a whole year later. Also consider that a few days delay in billing may mean that you get paid a whole month later.

Employee’s Superannuation

By paying your employees’ superannuation contributions before 30 June will allow employee’s super to be a tax deduction in the 2016 year, instead of the 2017 year if paid in July. Also ensure you have paid each employee’s quarterly super within 28 days of each quarter ending, to avoid the Superannuation Guarantee Charge.

Repairs & Maintenance

Are any repairs or maintenance due on equipment, cars or buildings? Why not get it done pre-June rather than just after, so incurring the cost via payment or invoice will allow you the tax deduction by a whole year earlier.

Bring forward other deductions

If your cash flow can allow it, you may want to pre-pay for expenses before 30 June, which may not be due until July or August. I.e. memberships subscriptions, rent, interest (but not the loan reduction), lease payments, insurance, business travel, etc. If you have received the invoice by 30 June, than we can still claim it as a tax deduction, by bringing it in as a creditor.

Incur expenses before 30 June

If you have “incurred” an expense before 30 June, but not yet paid, as long as you receive an invoice dated before 30 June, than this expense can be claimed as a creditor expense in the 2016 year.

Assets up to $20,000 for small business entities

If your assets are pooled for depreciation purposes and you need to replace a business asset (i.e. lap top, work tool or motor vehicle etc.), if the item is under $20,000, consider buying it before 30 June to bring forward the expense into the 2016 year (and therefore the $20,000 can be claimed 100% in the year purchased and not required to be depreciated).

Delaying Capital Gains

Please remember that capital gains are based on the contract date, not settlement date – so if you are selling an investment that you have a capital gains profit, consider delaying the contact signing date until after 30 June.

Trusts

Before 30 June, a trustee resolution needs to be completed declaring how the split of the trust’s profit will be paid to which beneficiaries. We will make contact with all trusts to discuss this resolution further

2016 Individual Tax Estimates

Total Tax and Medicare payable & Average Tax Rates

Taxable income
Tax & Medicare Payable
Average Tax & Medicare
$60,000
$12,147
20.25%
$80,000
$19,147
23.93%
$100,000
$26,947
26.95%
$120,000
$34,747
28.96%
$140,000
$42,547
30.39%
$160,000
$50,347
31.47%
$180,000
$58,147
32.30%
$200,000
$67,947
33.97%
$250,000
$92,447
36.98%

 

The above tax and medicare rates and 2% budget repair tax for income over $180,000. It also assumes tax payer has private health insurance.

Have you been wondering whether a self managed superannuation fund (SMSF) is suitable for you?
With a new financial year about to begin, it can be a good opportunity to seek personal advice on whether a SMSF is right for you. As it can open tax planning opportunities with super contributions; pensions; investment opportunities; transition to retirement pensions; actively work with your super towards wealth creation; reduce administration costs on high balance super funds; property opportunities; rollover of debt free investment or property opportunities; etc.

For advice and assistance on business, super or investment taxation issues, please don’t hesitate to call us.