Tax Planning April 2014

Posted on April 1, 2014 by paololencioni

There’s four key things that all business owners MUST consider RIGHT NOW. Three of them are brilliant wealth creation ideas. Please read on!

30 June is only 13 weeks after the beginning of April. It’s not a long time at all. This year let’s try and use all of them.

Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If you leave your tax planning until the end of May and early June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.

So for 2014, our invitation to you is to START NOW with your tax planning.

4 Key Tax Planning Strategies

Over the next 4 weeks, we will send you one e-mail per week covering one of our 4 key tax planning strategies. These are:
1. Establish a Self Managed Super Fund (SMSF) – How to make it your family’s wealth VAULT and legally pay NIL tax at retirement.
2. Debt Optimisation – Pay off your home loan sooner, minimise non-deductible interest and maximise your tax deductions for investments.
3. Trust Distribution Resolutions needed BEFORE 30 June 2014 – or pay up to 46.5% tax on trust profits.
4. General tax planning strategies – Key items that mean $ in your pocket.

So keep an eye out for our emails over the next 4 weeks, and we’ll outline in detail for you how to save $ and at the same time grow your family’s wealth in a low-risk manner.

How our Tax Planning Process works

First of all, we request from you details of your expected income and business profits for the 2014 tax year (1 July 2013 to 30 June 2014). This includes all wages / employment income, interest and dividends and rental income received, business profits / losses, and any capital gains / losses you expect to make.

Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $200,000 for 2014. This would result in $66,547 tax and Medicare levy payable.

Secondly, we look at all of your tax planning options. Some of these may be things to do in your business, and some of these may be investment / wealth creation options.

Third, we provide you with a report that explains in plain English the tax planning strategies we recommend and exactly how much tax you will save.

And finally, we provide you with an easy-to-follow Action Plan to ensure that both you and we can do everything that needs to be actioned before 30 June.

Tax Planning Strategy #1:

Establish a Self-Managed Super Fund (SMSF) – How to make it your
family’s wealth VAULT and legally pay NIL tax

Everyone is talking about SMSF’s these days. Recent changes to the laws for operating SMSF’s have in our opinion made them an option that most of our client’s needs
to consider.

Very simply, a SMSF is a super fund that you fully control. You make all the investment choices – including shares, managed funds, property, and cash. SMSF’s can now
borrow from a bank to purchase investment properties.

Strategy

Choosing the right STRATEGY for your SMSF is the key.

A brilliant strategy is buying your clinic building in your SMSF, even if you currently own it in another name:

You can use money in your SMSF as a deposit and borrow into a special super fund borrowing arrangement with the bank to complete the transaction. The market-value
rent your clinic pays to the SMSF is fully tax deductible to the business, the SMSF only pays tax at 15%.

Upon retirement the SMSF members start a pension and either choose to rent the building to the new business owner (a good and reliable tenant giving ongoing income
to fund retirement).

Alternatively, if you sell the building, the sale of the SMSF-held property is capital gains tax free because the SMSF is in pension phase. When the transaction is complete
the super fund has liquid assets to pay your retirement income.

Estate Planning

Another key reason for using a SMSF is that it gives you very exact estate planning options. For example, you can nominate a specific dependent (spouse or child under 18)
to receive your super benefit if you die. Unlike a Will, this cannot be contested.

Would you like NO TAX on your Investments?

Once you turn age 60, you can start to pay yourself a pension from your SMSF, and there is NO tax on income of the SMSF and NO tax on any capital gains.

This means you can gradually sell down assets (including property) held in your SMSF and pay NO TAX regardless of any capital gain you make.

We believe this is an absolutely brilliant outcome – and it’s possibly far better than owning an investment property in your individual name or in a Family Trust.

Tax Planning Strategy #2:
Debt Optimisation – Pay off your home loan sooner, minimise bad debt and maximize your tax deductions for investments.

How would you like to legally reduce your tax by $500 or $1,000 or $5,000 or more?

Here’s how to do it:

The Strategy behind Tax Planning

The tax you pay depends on your taxable income (all assessable income less allowable tax deductions), and the tax rates
that apply to that income.

Therefore, your tax is reduced if you:

1. Reduce your income, or

2. Increase your tax deductions.

Seeing we all want to earn more, reducing your income isn’t an option! But increasing your tax deductions definitely is.
Below we have given you a link to 2 Tax Planning Flyers which both list out a number of items that could be claimed as
tax deductions. Use these as a guide, but please CONTACT US if you have any questions or uncertainties about this.

To illustrate: If you need something in July that is classified as a tax deduction, it makes sense to bring this purchase
forward and buy it in June. You then get the tax deduction this year, and not next year.

Warning: Don’t fall into the trap of buying something simply to get the tax deduction for it. If your tax rate (including Medicare Levy)
is say 34%, you would only get 34% of the purchase price back as a tax refund (or reduced tax payable) from a tax deductible item.
You DON’T get 100% of the amount that you spend back as a tax refund (or reduced tax payable).

But if you do need an item for your business or your work and it is tax deductible, we recommend buying it BEFORE 30 June so
that you get the tax deduction this year.

Your Tax Planning Strategy Checklists

Business Owners: CLICK HERE for our Tax Planning Flyer for Business Owners.

Individuals: CLICK HERE for our Tax Planning Flyer for Individuals.

If you are a business owner, please note that we will review BOTH the Business Owner’s Flyer and the Individual Flyer because
both of these apply to you.

Help us to help YOU!

If you spend a little bit of time with us to review your financial situation and discuss your tax planning options, you could end up
saving yourself thousands of dollars.

Now’s the time to do it – please contact our office TODAY to get started!

Debt optimisation (sometimes referred to as “Debt Recycling”) is a financial strategy which creates wealth over time and improves
an individual’s debt structure. Achieved, in the majority of cases by:

• Using all surplus income to reduce the home loan (non-tax deductible “bad debt”);

• Creating or increasing investment debt (tax deductible “good debt”) by drawing against equity in

the home; and

• Using this borrowed money to build an investment portfolio.

It is a great strategy that can be adapted to suit your goals and time horizons. Though, it is important to note that borrowing money to invest and budgeting are key components.

Here is an example of how the assets and cash flow involved in a debt optimisation strategy using a”split loan”:

Tax Planning Strategy #3:

Trust Distributions Resolutions needed BEFORE 30 June 2014 – or pay up to 46.5% tax

If you have a Family Trust (also known as a Discretionary Trust) YOU NEED TO READ THIS!

From the 2011/12 financial year, Trustees who distribute the income of a Trust through a resolution to beneficiaries must
do so BEFORE the end of the financial year (June 30) for the resolution to be effective in determining who is to be assessed
on the Trust’s income.

This is a recent change to the Trust taxation laws that applies to this financial year, and future years.

If a Trustee fails to make a resolution to appoint the income of the Trust before the end of the financial year, the Trustee may
be assessed by the ATO on the Trust income at the highest marginal tax rate (i.e. 45%), rather than the intended beneficiary(s).

Before 2012, the ATO allowed a certain amount of discretion as to when a resolution could be prepared.

However, the ATO now takes the view that following the recent decision in Colonial First State Investments v FC of T 2011 ATC 20-235,
trustees must now resolve to distribute the current year’s income on or before year end to ensure the beneficiary is presently entitled
to trust income.

What You Need to Do

You need to provide us with a Profit & Loss Statement for each Family Trust that you have for the period 1 July 2013 to 31 March 2014.
You also need to send us details of all income earned by all family members during the period 1 July 2013 to 31 March 2014, and your
estimated income for the period 1 April 2014 to 30 June 2014, including any capital gains.

We will then review all options for you, and recommend the most tax effective manner to distribute your Family Trust profits. We will then
prepare the appropriate Trust Distribution Resolution for you to sign before 30 June 2014.

If you already have tax planning as part of your package then this is included as part of your service.

Contact our office TODAY if you have any questions about this information.

Your action now may save you thousands of dollars of unnecessary tax payments!

Tax Planning Strategy #4:

General Tax PLanning Strategies – Key Items that mean $ in your pocket