Tax minimisation and planning checklist for June 30th

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Tax Minimisation
Partner & Head of Tax
May 4, 2020
minute read

Your proactive business tax planning checklist

With the end of the financial year looming, it’s time to ensure you have the right plans in place. Thorough tax preparation, and putting the right tax strategies in place now, can save you big once 30 June rolls around.

Liston Newton Advisory take a proactive approach to tax planning, both for now, and for the long term.

Contact your Liston Newton tax adviser today to discuss your personal and business tax planning, to how you can prepare for the new financial year.

At Liston Newton Advisory we focus on both short- and long-term planning.

We meet with our clients prior to 30 June every financial year. Here we look at your business’ profit to date and provide you an estimate of the tax likely to be payable at the end of the financial year.

But this is only the likely amount. To help you reduce this figure, we employ strategies to minimise your taxable income, and help keep more of your income in your account.

This differs from person to person, and business to business, depending on your financial situation.

Your short-term tax planning checklist

There are a number of tax minimisation strategies you can put in place now that will help reduce your tax burden come 30 June.

Contribute more money to your super

Making a voluntary super contribution is a fantastic way to both save for your future, and take advantage of generous tax deductions. Each year you can contribute up to $25,000 in deductible super contributions, which makes a big difference in the amount of tax you pay. It can even help to stop you from jumping into another tax bracket.

Bring forward your expenses

In some cases you’re able to pre-pay your expenses for the coming financial year. This includes things like insurance, professional memberships, and even your rent. This means that you’re not only covered for the coming year, but you’re also able to claim these as deductions in the current financial year.

More effective income distribution (for trusts)

If your business is structured under a family trust, you’re in control of how your income is distributed. As the one in control of its income, this means you can adjust your income percentage so that it’s more tax effective for you and your family.

For example, if you’re close to hitting a higher tax threshold, consider reducing your income percentage for this year. While your income may be less, staying in a lower tax bracket means you ultimately get to keep more of your money in your pocket.

Look at what asset purchases you can make in the business

If there’s anything that your business may need in the future, or there’s anything on your business wish list, now is the time to buy it. Within reason, of course.

More than just stationery and new furniture, making big capital purchases allows you to take advantage of the government’s instant asset write-off. This way, you’re able to write off the purchase amount from your assessable income instantly, thereby reducing your taxable income before the end of the financial year.

On 24 March this year the Coronavirus Economic Response Package Omnibus Bill 2020 was approved, which has significantly increased the instant asset write-off threshold.

Under this bill, between 12 March 2020 and 30 June 2020, the threshold has been increased to $150,000 (from $30,000). Business eligibility has been expanded to businesses with a $500 million turnover.

Delay your invoices or income

Review your invoicing and see if there’s scope to postpone any upcoming invoices until July. This reduces your taxable income for the year, but also ensures that you’ll start the new financial year on a strong income footing.

Long term planning: your business tax checklist

Long term tax planning focuses on the bigger picture so you’re not making last minute decisions each year. This isn’t just stressful, it also means that you can’t plan effectively.

Long term tax preparation is the most effective way to minimise your tax. Here are some clever tax minimistation strategies we help our clients put in place that go beyond the current financial year.

Review your business structure

Your business is like a machine, constantly moving forward, so it makes sense that things are going to change in its operation. And as your business grows, so to do your tax obligations. In some cases, the business structure you started out on may not be the most tax effective for your current and future situation.

We work with you to review your business’ structure and determine if it’s still the best option. For example, you may have started your business as a sole trader, but you’ve had significant growth, pushing you into the highest tax bracket.

In this case, restructuring your business as a company can reduce your tax payable to a flat 27.5% — a big leap when compared to 45%.

Review your personal asset structures

Much like your business structure, reviewing the structure of your personal assets, and where they’re held, can allow you to reduce the amount of tax you pay in your investments.

Investing to minimise your tax payable

Making certain types of investments act in a similar way to purchasing business assets, but they take a more long-term view.

  • Negative gearing. For example, taking advantage of negative gearing on an investment property is an effective way to both minimise the tax you pay year on year, but also create a long-term investment plan.
  • Investing in a new company allows you to take advantage of Early Stage Investment Company (ESIC) concessions. ESIC concessions grant you a 20% tax offset on the amount you invest in them, and are free from capital gains tax for a 10-year period.
  • For multiple investors, you can take advantage of an Early Stage Venture Capital Limited Partnership. This works in much the same way as the ESIC structure, and provides a 10% tax offset on your investment.

Review your beneficiaries (for trusts)

If you operate a trust, ensure that your beneficiaries are clearly outlined and any resolutions are documented prior to 30 June. This allows you to ensure all the trust’s derived income is distributed. Otherwise, any income that isn’t distributed gets assessed at the highest marginal tax rate.

Should you have income protection?

Income protection puts a plan in place should you no longer be able to receive income. It’s also tax deductible — but only when separate to your super. So any income protection you pay through your superannuation plan is just an expense.

Consider taking out income protection from a third party. This helps maintain peace of mind that your family is taken care of should anything happen to you, and you can also claim these payments as a tax deduction.

The final word on tax preparation

Preparing for the end if financial year is all about preparation—both short- and long-term.

With regular tax preparation meetings in place, our clients know what tax to expect more than nine months prior to the tax payment deadline.

Then, with the right tax strategies in place, we help you minimise this amount, so you can enjoy more of your hard-earned income.

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