Super and Structuring Strategies to Be Done Now
As the years seem to pass quickly, it’s essential to acknowledge that 30 June is approaching within a few months. Therefore, now is an opportune moment to contemplate tax planning strategies to minimise your tax bills effectively. This year, initiating this process earlier than usual is particularly advantageous for a few compelling reasons.
The Federal Budget will be handed down early this year
Every year we get nervous that the budget will contain an announcement that surprises our clients. This year is no different, and it seems inevitable there will be some changes to superannuation tax concessions in this budget.
You probably heard that the government had brought the Federal Budget forward to 3 May this year, so we have a little less time to prepare for potential changes.
We recommend giving early thought to maximising your 2016 superannuation contributions before budget night to ensure any announcements won’t impact you. If you’re over 55, you should consider 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 to transfers occurring on or after 1 July 2016.
This new concession aims to defer the CGT that would otherwise be imposed on small businesses that move to a more appropriate business structure. For example, you may have started a modest small business as a sole trader to minimise set-up costs. The business has grown and is now flourishing 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 limit your liability and provide for your family.
Such a change before 1 July 2016 might incur a 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 transferring business assets will also be abolished from 1 July 2016, providing a further advantage. In the above example, a 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. Small Business CGT Concessions already might provide the same or a better outcome, and certain conditions apply to both the new rules and the old. Before restructuring, you must obtain good advice to ensure you choose the right option for your situation.
Because of the lead time required in a restructuring, 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 to tailor to all kinds of businesses.
Our team looks forward to discussing them with you, helping you save some tax, and 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 this, please contact us as soon as possible.
Kreston Stanley Williamson Team
*Correct as of April 2016
Disclaimer – Kreston Stanley Williamson has produced this article to serve 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 in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.