May 2014 Newsletter
There are many ways in which entities can defer income, maximise deductions and take advantage of other tax planning initiatives to manage their taxable incomes. Taxpayers should be aware that in order to maximise these opportunities, they need to start the year-end tax planning process early.
Deferring assessable income
Income received in advance of services being provided is, generally, not assessable until the services are provided.Taxpayers who provide professional services may consider, in consultation with their clients, rendering accounts after 30 June in order to defer the income.
Taxpayers should review all outstanding debts prior to year-end to determine whether there are any debtors who may be unable to pay their bills. Once a taxpayer has done everything in their power to seek repayment of the debt, the taxpayer could consider writing off the balance as bad debt.
Companies should ensure that all dividends paid to shareholders during the relevant franking period (generally the income year) are franked to the same extent to avoid breaching the benchmark rule.
Taxpayers should review trust deeds to determine how trust income is defined. This may have an impact on the trustee’s tax planning.
Capital gains tax
A taxpayer may consider crystallising any unrealised capital gains and losses to improve their overall tax position for an income year.
For 2013–2014, a $35,000 concessional contributions cap applies for those who were aged 59 years or over on 30 June 2013. The $35,000 concessional cap will apply from 2014–2015 for those aged 49 years or over on 30 June of the previous income year.
Fringe benefits tax
The four rates used in the statutory formula method for determining the taxable value of car fringe benefits are being replaced with a single statutory rate of 20% for fringe benefits.
The current government has proposed to cancel the carbon tax-related income tax cuts that are legislated to commence on 1 July 2015, and repeal the associated amendments to the low-income tax offset (LITO)