game of taxes – play the game

Many Australian’s aren’t aware that as a taxpayer you have a right to “plan” how much tax you pay in the next financial year. This is done by legally organising your tax affairs in the most effective way prior to 30 June.

With the Federal Election around the corner and given the recent ‘Game of Taxes’ played by both major parties, it has never been more important to get your financial affairs in order. We have summarised the major changes that may affect you if Labor is elected.

Changes that will affect your tax:

Franking Credits

The proposed changes will see the rollback of refundable franking credits introduced by the Howard government. The impact will be predominantly felt by shareholders and now is the time to carefully plan how best to utilise your existing franking credits, before it’s too late;

Trust Distribution Tax

The thorn among the weeds! For some time, Labor have sought to apply a standard tax rate of 30% to all trust distributions. This is purely targeted at income splitting and increasing tax revenue. This potential change has put a specific focus on trust distributions prior to 30 June and now is the time to act to ensure your trust distributions are tax effective;

Negative Gearing

The proposed changes to negative gearing not only effect rental properties as perceived, they affect all investments such as shares, management funds etc. All investments prior to 1 January 2020 will be fully grandfathered, meaning they can still be negatively geared. However! A word of caution! Any change to the investment may change the grandfathering and you risk losing the negative gearing benefits. Talk to us to determine the impact on your investment strategy;

Capital Gains Tax

Planning on buying and selling assets? You need to talk to us. The proposed changes will see the capital gains discount for assets held longer than 12 months drop from 50% to 25%. This will apply to all investments post 1 January 2020 and any current investments will be grandfathered;

Other methods:

Along with these Labor changes, there are still conventional methods that you need to be aware of when organising your tax affairs.

• Deferring Income – Cashflow dependant, you may want to consider deferring any invoicing until after 30 June.  A day or two may save you large amounts of tax;
• Employee Superannuation – Paying superannuation prior to 30 June for your employees will allow a tax deduction in the current year;
• Stock – Consider writing off old stock;
• Small Business Asset Write Off – Consider purchasing an asset that you need prior to 30 June, provided the amount is below $30,000;
• Trust Distributions – Preparing strategic trust distributions based on your current information, can be an excellent tactic to minimise tax;
• Super Contributions – Business owners may wish to contribute amounts to their personal superannuation fund to take advantage of the deduction and the lower tax environment;
• Bad Debts – Consider writing off bad debts that are unrecoverable;
• Commercial Arrangements – Ensure effective arrangements are in place prior to 30 June.

If you are ready to take control of your financial affairs click here to contact our office and start the tax planning process today.