June 2023 | VOLUME 179
KSW Newsletter for Clients and Associates of Kreston Stanley Williamson
Understanding the Tax Implications of Forgiving a Debt
Forgiving an amount owing by a company can have tax implications for both the company and the shareholder. From the shareholder’s perspective, forgiving a loan triggers Capital Gains Tax (CGT) event C2, possibly resulting in a capital loss. For the company, debt forgiveness rules apply to “commercial debts” and determine how the forgiven amount is treated. The forgiven amount can decrease tax losses, capital losses or cost bases of other assets in the company. There are other complexities where the loan may have some market value at date of forgiveness.
Our article here provides an overview of the tax implications associated with forgiving a debt, both from the perspective of the company and the shareholder.
Has your business done everything possible to minimize tax prior to 30 June?
As the end of the financial year approaches, it’s essential to implement effective tax planning strategies. Strategies such as deferring income, bringing forward expenses, reviewing trading stock, and utilising concessions like Temporary Full Expensing can help reduce your tax liability. Additionally, consider actions like writing off bad debts, prepaying expenses, and managing loans and distributions. By taking advantage of these strategies before 30 June, you can optimize your tax position and maximise deductions.
Our article here provides a range of strategies to consider before June 30th.
Tax Planning for Individuals – What to do prior to 30 June!
As the financial year draws to a close, it’s important for individuals to engage in tax planning. Act before 30 June by reviewing capital gains, paying deductible expenses, adjusting work-from-home expense claims, maximising super contributions, looking at utilising unused caps, prepaying loan interest and reviewing salary packaging.
These, along with other strategies, are detailed in our article here which will help you understand the different key considerations for individuals to optimise their tax situation.
What happens if I don’t take my minimum pension withdrawal by 30 June 2023?
SMSF members with Account Based Pensions (ABPs) must withdraw their annual minimum pension by the end of each financial year. Failing to meet this requirement can lead to penalties. If the minimum pension is not met, the pension effectively ceases, resulting in up to 15% tax on earnings. It is crucial to review and fulfill pension obligations in a timely manner to avoid such consequences.
Our article here discusses the penalties and potential consequences of not meeting the minimum pension withdrawal requirement.
Kreston Stanley Williamson
*Correct as of 13 June 2023
*Disclaimer – this article has been produced by Kreston Stanley Williamson as a service to its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas contained in this article, it is imperative you seek specific advice relating to your particular circumstances. Liability limited by a scheme approved under professional standards legislation.
