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Welcome to the June newsletter.
This month’s business quote is courtesy of Douglas MacArthur:
“There is no security on this earth. There is only opportunity”
With 30 June not far away, we have dedicated most of this month’s newsletter to strategies that you may wish to consider in relation to year end planning.
CGT and Income Deferral
Capital gains tax arises in the financial year in which agreement for sale of an asset is reached. Accordingly, if you are contemplating the sale of an asset, delaying the date upon which the agreement for sale occurs until after 30 June may be attractive as a way to take advantage of the reduction in personal income tax rates that takes effect from 1 July and would mean that any taxation due is deferred for 12 months. Similarly, if income has not yet been derived, then deferral until after 30 June may achieve a similar outcome.
Superannuation
If you have changed jobs during the year it is possible to salary sacrifice the maximum deductible superannuation contribution for each employer. The deduction limits apply on a “per employer” basis rather than a “per taxpayer” basis. This means that if you have sacrificed your maximum deductible contribution with one employer and change jobs to a new employer (not being an employer within the same corporate group) further salary sacrifice superannuation can be contributed by the new employer.
Equally for self employed persons, contribution by your company can be supplemented by contribution by you personally in limited circumstances. If you feel this opportunity is potentially of value to you please contact our office.
Increasing Superannuation Contributions
If you are close to retirement, the limits on annual deductible contributions mean that it is important to maximise the amount contributed to superannuation each year. Borrowing to do so may be attractive due to the tax free status now conferred on superannuation pensions and lump sum withdrawals.
This strategy requires careful execution however can produce substantial taxation savings in appropriate circumstances. We therefore recommend you contact us if this strategy is of interest.
Capital Losses
If you have sustained any capital losses on shares or other invest
ments
, and have already derived an assessable capital gain in the 2006 financial year, you may wish to realise the capital loss. Capital losses can be carried forward indefinitely but cannot carry back against capital gains. A capital loss derived in one year can however offset capital gains in that same year thus reducing the amount of CGT payable on any assets sold.
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Bringing Forward Income!
It would be a rare circumstance for a taxpayer to choose to bring forward income ahead of tax cuts. However changes that take effect from 1 July mean that the effective tax rate on eligible termination payments paid by an employer (for example a golden handshake) will increase from 31.5% to 46.5% for amounts over $145,000. If you are contemplating cessation of employment that will give rise to such a payment, you may wish to discuss this strategy with us.
WorkChoices
As readers would be aware, the industrial relations system in Australia continues to go through a period of change. The latest change means that any entity trading as an incorporated body will now fall within the WorkChoices rules. If your business is being carried on in the form of a sole trader or partnership, you may not be eligible for the WorkChoices initiatives. To be certain of access to the initiatives, conducting your business as an incorporated entity is one strategy that may have appeal. Change to your structure effective 1 July may be convenient and therefore if this strategy if it is of interest to you please get in touch soon.
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