SUPER AND STRUCTURING STRATEGIES TO BE DONE NOW
It feels like the years are getting shorter, and 30 June is only a couple of months away, so it’s time to start thinking about how you can keep your tax bills to a minimum. There are a couple of reasons that make it worthwhile putting some thought in a bit earlier than usual this year.
The Federal Budget will be handed down early this year
Every year we get nervous that the budget will contain an announcement that catches our clients by surprise. This year is no different, and it seems certain that there will be some changes to superannuation tax concessions in this budget.
You have probably heard that the government has brought the Federal Budget forward to 3 May this year, so we have a little less time to get ready for potential changes.
We recommend giving early thought to maximising your 2016 superannuation contributions before budget night to ensure that you won’t be impacted by any announcements. If you’re over 55, you should also give consideration to starting any new pensions before 3 May.
Small Business Restructure Rollover and NSW Stamp Duty Abolition
In our January 2016 newsletter, we discussed new measures to allow small businesses (i.e. broadly those with a turnover of less than $2 million per year) to change legal structure without incurring CGT at the time of the change. This legislation received royal assent on 8 March 2016, and applies for transfers occurring on or after 1 July 2016.
This new concession is aimed at deferring the CGT that would otherwise be imposed on small businesses that choose to move to a more appropriate business structure. For example, you may have started a modest small business as a sole trader in order to minimise set up costs. The business has grown and is now successful and is valued at $1 million with an annual turnover of $1.5 million and a profit of $250,000. You want to move it to a discretionary trust structure to better limit your liability and provide for your family. Such a change before 1 July 2016 might incur tax of up to $245,000, but if it takes place after that date this tax is deferred until you ultimately sell the business. Depending on your circumstances you would likely reduce your annual income tax bill by at least $10,000 per year, but possibly much more.
Stamp duty on the transfer of business assets is also set to be abolished from 1 July 2016, providing further advantage. In the above example, stamp duty of approximately $40,000 would also be saved by acting after 1 July.
Of course, it’s not as simple as it sounds. There are already Small Business CGT Concessions that might provide the same or a better outcome, and certain conditions apply to both the new rules and the old. It is vital that you obtain good advice before undertaking a restructure to make sure you choose the right option for your situation.
Because of the lead time required in a restructure, you should contact us as soon as possible to start planning for it. Aside from considering the options and implications, it takes time to attend to practicalities like setting up new entities, applying for tax registrations, arranging banking and merchant facilities, and attending to new contracts with employees, suppliers and customers.
The tax planning season has started at Stanley & Williamson. In addition to the above, we have a comprehensive checklist and a set of strategies that we can tailor to all kinds of business.
Our team is looking forward to discussing them with you and helping you save some tax, as well as giving you peace of mind that you won’t get on the wrong side of the ATO. So, if you’re interested in meeting to discuss, please contact us as soon as possible.
Kreston Stanley Williamson Team
*Correct as of April 2016
*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.