2020 Tax Planning Issues

Image

Tax planning issues for individuals

Individual tax rates exceed the company tax rate at a fairly low level of profit, so tax planning issues for individuals does including considering the business structures you have in place.

Depending on your personal circumstances, because of future tax liability decreases, you can consider the following general points about reducing your personal income tax for the year ended 30 June 2020:

  1. streaming of income from family (discretionary) trusts;
  2. declaring franked dividends from private companies;
  3. use of salary packaging and salary sacrifice arrangements (eg. car, additional superannuation contributions);
  4. use of income protection policies;
  5. use of negative gearing strategies including; acquiring interests in managed investment schemes (MIS) which have product rulings from the ATO, use of margin lending products to buy shares and buying an investment property;
  6. offset any capital gains with capital losses to minimise capital gains tax (CGT) (NB: The ATO are reviewing 'wash sales' which could result in a capital loss being denied by the ATO);
  7. deferment of sale of CGT assets which will result in a CGT gain to next financial year;
  8. pre-payment of interest or insurance costs by 30 June up to 12 months in advance;
  9. self-education expenses;
  10. additional contributions to superannuation for you and your spouse (taking into account the contribution thresholds); and
  11. charitable donations to a registered charity, public ancillary fund or private ancillary fund.

Tax planning issues for small business operators

If you are involved in a SME, consider these general points:

  1. company tax rates will reduce each year to 2022 for companies with under $50m in turnover, so consider bringing forward deductible expenses;
  2. consider restructuring your business to a company structure. CGT rollover relief may be allowed, depending on the restructure;
  3. make decisions on employee bonuses by 30 June;
  4. pay your employee superannuation before 30 June;
  5. pre-payment of interest or insurance costs by 30 June up to 12 months in advance;
  6. for businesses with less than $50 million turnover, make tax deductible purchases by 30 June by utilising the current $30,000 instant asset write-off available until 30 June 2020;
  7. attend CPD and training courses and pay for other self-education expenses;
  8. ensure withholding amounts are paid to the Australian Taxation Office to claim a deduction (commencing from 1 July 2019);
  9. valuation of trading stock at cost, market value or replacement value;
  10. write-off bad debts, plant and machinery (accruals taxpayers); and
  11. disposal of plant.
Sole traders and partnerships should consider starting a company for their business and utilise CGT roll-overs to reduce their income tax liabilities from 1 July 2018.

SMEs will also need to consider how any proposed changes to Division 7A loans will affect the beneficiaries of unpaid present entitlements (UPEs) because UPEs will now need to be repaid over time, or they will be treated as deemed dividends (expected to commence from 1 July 2020).

Tax planning issues for trusts

For Trustees:

  1. confirm that each beneficiary is eligible to receive a distribution from the trust;
  2. ensure that you document which beneficiaries obtain a share of the Trust’s income by 30 June and maintain a record of the trustee's distribution minutes; and
  3. make any family trust elections.
Trustees will also need to consider how any proposed changes to Division 7A loans will affect the beneficiaries of unpaid present entitlements (UPEs) because UPEs will now need to be repaid over time, or they will be treated as deemed dividends (expected to commence from 1 July 2020).

Request a call back from a tax lawyer

Send us an email for a free consultation
(All fields required)