Article by Bradlee Applegate Byfields Associate
For many businesses, tax planning is treated as something to look at once harvest is finished, the budget is done or as the start of June rolls around. By then, however, many of the best opportunities may have already passed. Good tax planning is not about making rushed decisions at year end. It is about understanding what is likely to happen in the business early enough to structure transactions properly, manage timing, and avoid unnecessary tax surprises.
As part of your long-term tax plan, one option worth considering well before 30 June is the transfer of assets into superannuation. Listed shares, and in some cases business real property such as farmland, can be transferred to a superannuation fund, but the tax consequences need to be worked through carefully. A transfer needs to be made with consideration of capital gains tax, transfer duty, contribution caps and related-party superannuation rules. Where farmland is involved, the small business CGT concessions may be relevant if the asset has been used in the farming business and the eligibility conditions are met. These rules can be valuable, but they are technical and should not be assumed to apply automatically. Most importantly, any transfer of assets to superannuation requires a discussion with your financial advisor to ensure they fit into your broader investment plan.
The purchase of a new block of land presents tax planning opportunities. The structure used at the time of purchase can have long-term consequences for income tax, capital gains tax, succession planning and asset protection. Buying in the wrong name is often difficult and expensive to unwind later. Before signing a contract, consideration should be given to what structure is best suited to assist with the long-term plan for the family and the business.
The structure of machinery purchases should also be reviewed closely. Purchase timing, finance leasing, trade-ins, and the purchasing entity are all issues which can affect the tax payable at the end of the year. In particular, trade-ins for assets purchased under Temporary Full Expensing can come with a sting in the tail, potentially generating large amounts of taxable income.
If you are considering a major transaction or want to understand your likely tax position well before year end, get in touch with your accountant early. A short discussion now can make the difference between having practical tax planning options available and trying to fix the position after the event. At Byfields, we believe tax planning is most effective when it is done on an ongoing basis and before any major decisions are made, not left until June. Contact your Byfields accountant to discuss today