Tax Planning for the year ahead
May 2008

With the increase in the level from where the top marginal rate applies, a maximum tax rate of 30% can generally be achieved.  Thus planning one's tax impost should take up 30% of your time when running your business.

Tax planning requires care and diligence and needs to be done before the commencement of the tax year as the Tax Office is now very capable  of stopping last minute and poorly planned arrangements.

The type of things that need consideration are:

• how to avoid the Personal Services Income regime

• the structure required to stream income to persons on lower tax brackets, eg trusts, deceased estates and  dividend access shares

• planning for superannuation as you reach the age milestones of 55, 60, 65 and 75

• the use of gearings, negative or positive, to increase your wealth with the tax advantage of the deduction of interest and switching income to capital gain

• how to benefit from the small business capital gains tax concessions

Small Business Tax Concessions

A number of years ago a Simplified Tax System (STS) was implemented.  This, as our cynical clients guessed, did not make life simplified at all but increased the complexity of taxation and meant that accountants had to navigate two systems with two different rules. Thus most accountants did not encourage their clients to enter the STS.

The rules changed 1st July 2007.  Any business with turnover less that $2million is defined as a small business. The use of the various concessions is now optional.  These concessions include:

• simplified depreciation rules

• simplified trading stock rules

• special rules for prepaid expenses

The small business concessions currently being used by our clients include:

• accounting for GST on a cash basis

• paying GST by quarterly installments

• various CGT concessions

• FBT car parking exemption

• PAYG instalments based on GDP-adjusted notional tax.

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