Capital Gains Tax Retirement Business
Capital Gains Tax Retirement Business document sample
Shared by: nyy13910
R&G TAX REPORT May 2002 Time for Tax Planning • In line with the Arthur • Maximise prepayments sub- Year End Tax Murray case, taxpayers may ject to existing transitional Planning be able to defer recognition rules. of income received before • Consider the appropriate- year end for services not yet ness of the low value pool As we approach year end it is performed. for depreciation of plant time to focus on tax planning issues, including the deferral of • Royalties and insurance and equipment. income, the acceleration of proceeds are typically • Consider realising foreign deductions and other planning assessable on a cash basis. exchange losses and deferr- initiatives. • Derivation of income in ing the realisation of gains. Important matters to consider general might be deferred • Ensure that bonus obligat- are outlined below. where possible. ions are incurred before year end. Accelerating Deductions Deferring Income Here are some initiatives to Capital Gains Tax In relation to the derivation of accelerate deductions: income, note the following Here are some strategies to points: • Ensure that superannuation minimise CGT: contributions are paid by • Defer a disposal to a • Most taxpayers will not be year end. assessable on interest, div- subsequent income year. idends or rent until it is • Write off bad debts before • Defer a disposal to ensure received (unless otherwise year end. the asset has been held for paid or credited on their • Ensure that audit fees are at least 12 months, to behalf); this creates an incurred before year end, in (potentially) benefit from opportunity for deferral. accordance with Tax Ruling the 50% discount. • Work in progress of pro- IT 2625. • Match gains and losses fessional practices will not • The outlay for deductible where possible to avoid be assessable until there is expenses may be brought carrying forward a capital at least an entitlement to forward. loss. bill. • Consider scrapping stock • Consider the availability of • Long-term construction and plant and equipment of rollover relief for disposals contract income may be nil value before year end. to related parties. recognised using either the • Value stock at a lower • Utilise the CGT small billings or estimated profits replacement price or market business and retirement method. value where appropriate. concessions. . . . over please • Utilise the CGT small • Consider whether the • Consider bringing forward business and retirement commercial debt forgive- income or deferring ex- concessions. ness rules could apply and, penditure to use up losses, • Consider whether non- if so, whether grouping and consider whether intra- deductible costs may be rules or other planning group asset transfers or included in an asset’s cost initiatives can mitigate the dividend payments should base. impact. be made before the intro- • Ensure optimum utilisation duction of consolidation • Seek a liquidator’s deter- rules. mination to crystalise a of franking credits (includ- capital loss on valueless ing the 45-day holding • Consider whether year end shares in a company in period rule). asset valuations are approp- liquidation. • Consider making a family riate (for entities that trust election where a trust propose to consolidate). • Consider whether it is more beneficial to utilise the 50% holds shares acquired after • Is there any entitlement to a discount rather than frozen 31 December 1997 to refund of franking credits? indexation. maintain franking credit • Consider whether non- benefits. commercial loans made to a Other Issues • Consider whether the non- company may be treated as commercial loss rules equity under the debt equity Other important matters apply. rules. include the following: • Consider the effective lives • Try to match foreign source of depreciable assets. SGC for Casual income of a particular class Employees with related expenditure, to • Where loans have been avoid a quarantined foreign made involving non- loss. resident associates, consider The Federal Court recently the application of the thin upheld an AAT decision that a • Plan to utilise foreign tax capitalisation rules. temping agency was liable for credits against Australian the superannuation guarantee tax on foreign income of the • Consider international related-party transactions, charge (SGC) in relation to its same class or transfer the casual employees. credits to a group company. whether arm’s length prices have been charged, and It confirmed that ‘ordinary • Avoid paying rebateable whether there are transfer dividends to a loss hours of work’ for SGC pricing issues to address. purposes are the actual hours company. • Identify and address other worked rather than the • Remember that year end international tax issues, minimum number of shifts trust distributions and such as permanent estab- specified in an employment income injections may lishments and controlled contract. affect a trust’s ability to foreign companies. recoup prior year tax losses and bad debt deductions. • Consider whether a family Super Payments to trust election should be • Consider the impact of made because of losses or People Leaving private company loan rules bad debts in trusts or Australia and whether loans can be companies owned by trusts. structured to comply with the provisions to avoid a • Do the alienation of A bill has been introduced into deemed unfranked dividend personal services income Parliament proposing a tax of and franking debit. rules apply? Is a personal up to 40% on certain super- services business deter- annuation payments made to • Ensure that minimum pre- mination required or can the persons who have permanently scribed repayments are rules be avoided through departed Australia. Super- made on private company careful planning? annuation funds will be loans as required. required to withhold the tax. Important: This is not advice. Clients should not act solely on the basis of the material contained in this Bulletin. 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. The Bulletin 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.