Article by Eamonn Lanagan Byfields Director
Hopefully by this time of year your seeding program is almost complete, you are confident in your program and you have reviewed your tax position ahead of 30 June. A tax plan should be like a cropping plan, it considers the years before, lessons learned, great achievements and sets you up for the current and future years. It is integral to review your tax position with enough time to align your tax planning with your long-term business and personal goals.
As Brant Jansen’s article from 22 May explained, there are strategies to push the tax down the line, strategies that cost significantly more than they save and then strategies that permanently reduce tax payable. Pulling hundreds of thousands out of the overdraft in late June to stick into Farm Management Deposits may not be the best long-term strategy.
The long-term strategy should always be discussed along with the tax planning, while reviewing prior year strategies and lessons to be learned for the current and future years.
Some of the topics which we regularly discussed in our planning meetings are:
Succession and Family Law – It is simple to make distributions from a family trust for an immediate tax saving, however consideration must always be given to the effect of any entitlement created. If the older generation is looking to step away from the farm business in the coming years, are the current transactions and distributions simplifying this process or making it more complex? Or are you considering the black sheep of the family and their potential claim?
Business Structures – Ensuring your business structures meet your needs is a key to business efficiency. Often the simplicity of continuing with a structure you always have used may be exposing you to liabilities, additional tax and may significantly slow future succession. Modern structures allow for proactive planning and simplified and orderly succession. Understanding your current structure, its advantages and limitations should always be a priority.
Retirement and Superannuation – There are many opportunities to use tax planning to prepare a future income stream separate from the farm business. This may be achieved through contributions to super or through investments in tax advantaged entities.
The significant advantages available for smaller contributions and building a super balance have recently been overshadowed by the Government’s plan to tax unrealised gains. This may present an opportunity to use the various concessions to reset the value of the farmland held in super, transfer the land to the next generation and keep your super balance under the $3m threshold.
Wills and Estate Planning – While discussing future plans, it is always wise to consider what would happen if things do not go to plan. It is vitally important to have a will to ensure that your wishes are met and those left behind are not paying out much of the benefit in legal fees. An Enduring Power of Attorney is also important to ensure trusted individuals can act on your behalf if you lose capacity. There may also be many assets (super, trust and company assets and jointly held assets) which cannot be willed directly, and require specific instructions or documents to ensure benefit is received.
General Business Review – the work and preparation ahead of planning meetings requires the accountant to review in detail the records for the year. This is a good point to refresh any training, new methods for bookkeeping efficiency or features of programs, identify potential risks and pick up any missed receipts. Regularly we see significant underclaims of Fuel Tax Credits due to old usage percentages rolled forward or GST underclaimed on financed machinery.
Byfields’ accountants care for your business and enjoy helping you review your business and work towards your long-term goals. Too often we meet clients who have stuck it out, believed a change is too hard or had received poor advice. We are able to put in place strategies to achieve their goals and set up an efficient business and succession structure. The best time to plant a tree was 20 years ago, the second best time is now. If you start the discussion now, you will not be wondering “what if?” in 5 years’ time.
Contact the specialist team at Byfields to start the discussion www.byfields.com.au