Leaping into the new financial year: are you across all the changes and the implications for your business?
The start of a new financial year is a great time for business owners to take note of key changes to ensure they start the new fiscal year with the right foot forward.
What are the changes?
Extension of the instant asset write-off: The immediate write-off of concession on depreciable assets with the value of less than $20,000 has been extended for another twelve months to 30 June 2018. From July 1, businesses with an accumulated turnover of less than $10 million will also be able to access this concession.
Reduction of the corporate tax rate: Another measure introduced in the Federal Budget sees the progressive reduction of the corporate tax rate from 30 per cent to 25 per cent by 2027. From July 1, the 10-year plan will reduce the tax rate for businesses with an annual turnover of $10 million or less to 27.5 per cent.
Changes to concessional and non-concessional contributions caps: If any of your employees choose to salary sacrifice, from July 1, the before-tax contributions cap will be reduced from $30,000 or $35,000 if they are aged over 49 to $25,000 for all.
For any after-tax contributions, the previously announced $500,000 lifetime non-concessional cap will be replaced with an annual $100,000 non-concessional cap, with a total of $300,000 allowed in contributions over a three-year period, provided the super balance is less than $1.6 million.
Introduction of the $1.6 million transfer balance cap: There will be a balance cap implemented to superannuation accounts that hold more than $1.6 million in the new fiscal year. If your super exceeds the cap, it is important to ensure that the excess is either removed from the account or otherwise it will be subject to a 15 per cent tax rate.
What can you do?
Plan ahead: Although tax planning often comes to the forefront of business owners’ minds at this time of the year, it is a key contributor to how you structure your your business affairs. Therefore it is important to note that tax planning should be considered throughout the year.
If you start a new business, acquire another business or even change something in your pre-existing business, it is important to consider what the tax planning implications might be and whether your current structure is appropriate.
This extends to capital spending and spending on assets, do any of the assets in your business need replacing? Take advantage of the instant asset write off by ensuring that any new assets are purchased and ready to use in the business by June 30 to ensure you receive an outright deduction.
Pay attention to superannuation: For many business owners and individuals, making personal contributions of up to $30,000-$35,000 will be advantageous ahead of the lowering of the concessional caps from July 1.
For individuals, superannuation contributions are the main tax planning mechanism, so for any employees within your business, providing superannuation over and above the 9.5 per cent guarantee should be encouraged, as the amount sacrificed is reduced from their wage rather than being taxed with the wage. When it is deposited into your employee’s superannuation fund it is taxed at 15 per cent against whatever their marginal tax rate is, determined by their salary bracket.
Remember that planning is key and consulting with your accountant or adviser will set you up for success in FY2018.
This article was first published by Mybusiness online.
Important: This is not advice. Clients should not act solely on the basis of the material contained in this newsletter. Items herein are general comments only and do not constitute or convey advice per se. Also changes in legislation may occur quickly.
We therefore recommend that our formal advice be sought before acting in any of the areas. This document is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our prior approval.
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