Final tax planning tips for EOFY 2017

While the end of the financial year is almost upon us, there are still a few things you can do to minimise your tax obligations. Let’s focus on three different ways.

1. Make a large Superannuation contribution

The law has changed quite significantly with regard to Superannuation contributions. As we discussed recently, after 1 July 2017, you’ll no longer have the opportunity of making the kind of large Super contributions that were previously available.

This video explains the changes in a succinct way:

As we mentioned earlier, there are several (rapidly closing) windows of opportunity for people before 30 June 2017:

  • If you are under 65, you can still bring forward up to three years of non-concessional (after-tax) contributions at the current rate of $180,000 per year, to a total of $540,000. (This assumes you haven’t already used this facility in the previous two financial years, and a work test applies if you’re over 65.)
  • If you’re aged 50 or more, you can make concessional (tax-deductible) contributions of up to $35,000 per year, or $30,000 if you’re under 50. This cap will be lowered to $25,000 for all ages from 1 July 2107.

2. Consider a ‘bucket company’

Simply stated, if you have a trust that needs to distribute its income to individuals, you can cap the amount distributed to ensure that individuals don’t have to pay the highest rate of tax on the trust income.

Distributing income directly to individuals means they are fully responsible for paying tax on the amount they receive, as shown in the video below.

However, setting up a ‘bucket company’ and distributing a portion of the trust’s income to that company can help to save tax. The bucket company doesn’t engage in any business itself; it’s simply an asset holding company. In the example below, by reducing the amount of income distributed to each individual and distributing the remainder to the bucket company results in an overall tax saving of $6,840.

3. Make a trust distribution resolution before 30 June

If you have a discretionary or family trust, you must ensure that you make your resolution to distribute your trust income by 30 June. Any resolution made after that date could be subject to the top tax rate of 49%.

Any resolution to distribute your trust income must be in accordance with the trust deed. While many resolutions need to be made in writing, some don’t – but we do recommend a written document as the best way to ensure it’s a valid resolution.

The video below explains the issue in more detail.

Need help minimising your tax obligations? There is still time to come and see us for a discussion about the ways you can legally reduce your tax burden. Just give us a call on 07 3822 7201 to set up your appointment.

 


 

General advice warning

The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.