accountants
If you are finalising your end of financial year accounts and calculating your tax position, keep in mind that there are still options available to save you tax. One of these options impacts on the valuation of your trading stock and if stock is a material asset in your business, you should most certainly consider it. This option provides you with different valuation methods that can be applied to your trading stock.
Most small business owners are pretty close to their business. For many it is a major part of their life and the distinction between personal and business is easily blurred. This can also cross over to their financial affairs with business and personal finances being interlinked.
Some tax planning only creates timing benefits rather than real savings. So the question is; what delivers real results? The majority of tax planning falls into one of three categories - health and hygiene decisions that every business should review each year, timing benefits, and permanent savings.
For many business owners, one of the drivers for being in business is the financial return. It is the reward for the risk you take and the effort you put in. There are plenty of other reasons that people go into business but for most, financial return is in the top 3 reasons.
The FBT year runs from 1 April to 31 March. FBT is one of those areas that many employers struggle with; not because the tax is complex but because of the level of detail required to fulfil your obligations.
For successful businesses, simple business structures often do not work. They leave you risk exposed, are ineffective for tax purposes, and are not efficient for succession or sale. In the early stages of business life the philosophy often is; keep it simple and low cost. This may mean trading as a sole trader, in partnership, or through a simple company structure. Where the business stays small this can be entirely appropriate and may serve you well for the lifetime of the business.
A lot of family businesses use discretionary trust structures. These have been popular because they provide both a level of risk management, separating the business from your personal assets and are also quite tax efficient. A discretionary trust allows the trustee to appoint the income of the trust (this is typically the profit of the business) to any of its beneficiaries in the proportions that it determines from year to year. The entitlement of the beneficiary is not fixed, rather it is a decision of the trustee each year. Normally the trustee is either the key person in the business or a company controlled by this person. In a typical family situation, Mum and Dad may be the trustees or directors of the trustee company. Using this structure business owners have the flexibility to distribute income in the most tax efficient way. None of this has changed.
If you operate a discretionary trust and distribute some of the income of the trust to a related company then a draft tax ruling issued in the week before Xmas may create some additional headaches for 2010.
New tax rates
The 30% marginal tax threshold will rise from $34,001 to $35,001 and the 40% marginal tax rate will be reduced to 38%.
Owning your business premises through your Self Managed Superannuation Fund is a common strategy for many business owners. But have you ever thought about what would happen if one of the fund members died? In many cases the fund would have to sell the business premises as few have the money available within the fund to pay out the deceased member’s estate for their share of the business premises held in the super fund. And, this all has to happen within a relatively short time frame to meet SIS requirements relating to death benefit payments.