Your Tax Planning Guide for 2018

A new financial year means having to deal with new challenges in understanding your taxes, especially with the several changes that are put in place for the 2017/18 income year.

We’ve rounded up a couple of important guidelines to let you in on the latest updates for the 2018 tax year that you should know and act on before June 30th of this year. Make sure to take down some notes, especially where you are most concerned.

General Year-End Tax Planning Strategies

As business owners, your priority is to ensure that you’ve complied with all necessary requirements to claim deductions for the tax year 2017/18, starting with clearing off bad debts before June 30.

Employer and/or self-employed superannuation contributions must also be paid to the super fund before June 30, and should be within the contributions cap of $25,000 for all individuals regardless of age.

Remember that small businesses with a turnover of less than $10M can claim expenses prepaid, up to 12 months in advance. Larger businesses with a turnover of above $10M, are limited to expenses costing below $1,000.

It can be quite tricky to map out what strategy to go for when it comes to reviewing your business’ assets and stocks. Better to seek out professional advice and help before making a move that ends up in losses.

Income Tax Changes for Small Businesses

The income tax offset for small businesses has not changed. The offset is 8% discount on the income tax payable on any income received from a small business entity with an aggregated turnover of less than $5M. Unfortunately, this offset is not claimable for scenarios where the small business entity is a company. The maximum offset claimable is $1,000 a year.

Small business owners also take note that an immediate deduction is still available for a business asset that costs less than $20,000 when acquired and first used, or installed ready for use on or before June 30, 2018.

Income Tax Changes for Individuals

Changes personal superannuation changes now allow all individuals under 75 years old (including those aged 65 to 74 who meet the work test) to claim a deduction to personal contributions made.

As for rental properties, travel expenses in relation to inspecting, maintaining, or collecting rent from residential investment properties are not deductible — unless you are in the business of property investment.

Superannuation Changes

Regarding superannuation changes, the concessional contributions cap for the year 2017/18 has been reduced to $25,000 for all individuals (regardless of age), while the non-concessional contributions cap has been reduced to $100,000.

As for retirees or those approaching retirement, the earnings from the transition to retirement pension will be taxed up to 15% from July 1, 2017. However, do note that the earnings of ordinary pensions are still tax-free.

The low-income superannuation tax offset has replaced the low-income superannuation contribution scheme. With this new scheme, those with an adjusted taxable income of up to $37,000.00 will receive a refund going into their superannuation account of the tax paid on their superannuation contributions with a cap of $500.

As for high-income earners, their maximum super contributions base is $211,040 per annum for the 2017/18 tax year, and they are liable to pay the Division 293 tax once their income reaches $250,000 for surcharge purposes.

Capital Gains & Fringe Benefits Taxes

Changes in CGT affect foreign and temporary residents. For vendors who are foreign residents who dispose of a taxable Australian property, the buyer would be required to withhold 12% of the selling price — unless the vendor has a clearance certificate from the ATO. In addition, foreign/temporary residents are not eligible to avail of the main residence exemption as well starting May 9th of 2017.

As for the FBT, the rate for the year ending March 31, 2018, is at 47%.

Need some help with your tax planning?

If you find yourself in need of some additional guidance in properly handling your taxes given these changes for the year, then feel free to drop us a message to explore how we could work together in acing your taxes — especially if you’re a small business owner.

Browse through our range of services to find out how our team here at Astute Advisory Group can be of service to your tax planning requirements.

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