Planning to beat the taxman!
How time flies, less than two months to go to the end of another financial year. To most people Christmas comes in December each year, but get your tax planning right, and your Christmas can come early.
Each year tens of thousands of Australian small business operators pay more tax than they need to and management rights operators are no different. There are always legal and cost effective measures that can be put in place prior to the end of the financial year that can save you significant amounts of money.
Importantly, to be effective, most tax planning measures must be in place before midnight on 30 June each year so time is fast running out. Taking the time to meet with your accountant before 30 June just makes smart financial sense. Your accountant should review your current business structure to ensure it is the most appropriate for you to access all possible tax effective opportunities. They should be able to also provide you with a strong indication of what your tax obligations will be for the current year a full 12 months before it is due. A proactive accountant will also go to the next level providing you with a customised menu of options for legally minimising your tax liability.
Legislation changes frequently, so that great plan that worked so well last year just may not apply again this year. Examples of strategies that may just deliver an early Christmas present courtesy of the tax man might include:
• Restructuring debt to maximise interest deductions
• Using superannuation smartly
• Prepaying expenditure including interest
• Deferring taxable income
• Maximising depreciation deductions
Importantly any strategy you implement should by tailored to your personal circumstances to ensure it is compliant and cost effective.
Super savings – Superannuation and specifically self managed superannuation is becoming increasingly popular with business operators in the accommodation industry as they identify opportunities to utilise their superannuation savings to invest in the industry they know and understand. With recent government announcements indicating a proposed increase in the government pension eligibility age it is all the more reason to consider self funding your retirement. Superannuation is the most tax effective way to make it happen.
One of the benefits of becoming more mature is that the government allows you to contribute more into superannuation and claim a tax deduction. This year, if you are over 60 you are allowed to contribute $35,000 into Superannuation and claim a deduction. Under 60 years of age and you are restricted to $25,000. From next financial year the higher rate of deductible contributions applies from the age of 50 years.
Don’t forget if your objective is to maximise your superannuation balance you can continue to make non-concessional contributions (contributions for which you are not claiming a tax deduction) of up to $150,000 per year or $450,000 every three years. With a tax rate of nil on superannuation income once you are 60 years of age and retired there is no better way to legally avoid the tax man.
The federal budget is about to be announced. With a recent change to a conservative government that is keen to reign in the deficit we could see a number of tax minimisation measures come under the microscope. As a result we may find budget announcements that restrict opportunities to minimise tax from 1 July and beyond. All the more reason to seek advice now.
In an ever increasingly complex tax system, it is vital to have customised strategies and solutions that align with your long term goals. Whether you are looking to fund a bigger property next time round, invest in a partnership or simply retire and take the time to smell the roses the strategies you put in place now should have your ultimate goal in mind.
Ultimately, successful business operators appoint specialists in the industry from the outset and are guided by their sound advice along the way. The accommodation industry has a long established history of delivering strong returns to operators at a relatively low level of business risk particularly where the right advice has been followed along the way. Make sure you maximise those returns by ensuring you aren’t paying any more tax than is necessary.
The information, opinions or conclusions provided above are generic in nature and do not express individual advice or recommendations. You should always consult a suitably qualified professional before taking any course of action outline above.
