Tax Planning Starts Now
30 June will be here before we know it.
With the end of financial year approaching quickly, NOW is the time to discuss with us the actions you can take before 30 June 2023 to reduce your tax and grow your wealth.
With the upcoming 2023 Federal Budget in May 2023, we expect there will be a lot of tax changes announced that may affect you.
Imagine what you could do with your tax saved! You could:
- Reduce your home loan
- Top up your Super
- Save for a holiday
- Deposit for an Investment Property
- Pay for your children’s education
- Upgrade your car
Let us help you get the most out of the upcoming months.
Too often, we end up suffering because we have procrastinated and not made a positive decision to do something. If we all leave your tax planning until the end of June, quite frankly there may not be enough time to do anything significant to legally reduce your tax.
So, for 2023, our invitation to you if you have not chosen one of our fixed price options already, is to start now with your tax planning.
VALUE TO YOU (Benefit)
By forecasting your expected 2023 income and tax payable for all individuals and entities in your family group, we can then develop strategies to “spread” your income across your family group in the most tax effective way – and legally reduce your tax.
The overall estimated benefit to you could result in a large family group tax reduction.
THE PLAN (Work Involved)
To achieve this extra benefit for you, we will need to:
- Estimate the 2023 Taxable Income for all individuals and entities in your family group
- Estimate the initial 2023 Tax Payable for all individuals and entities
- Develop “income spreading” strategies to reduce your overall family group tax payable
- Advise you of tax reduction strategies for 2023
- Meet with you and answer any questions you may have about our tax reduction strategy advice
All up it will be an extra day’s work for us.
Here is the Plan we have developed to assist you over the next few months leading up to 30 June 2023 (Please see the attached for greater detail):
We’ll review your business profits and personal income for the 9 months to 31 March 2023, estimate your profits and personal income for the entire 2023 year, and develop some initial tax planning strategies to reduce your tax for your entire business and personal group.
In May/June we’ll have a face to face or an online video meeting to discuss our recommendations. We’ll agree on an action plan to get things done before 30 June 2023.
Any major developments from the federal budget in May will need to be reviewed to ensure your plan will still receive the benefits we expect.
Our tax-deductible price for our Tax planning advice to you will be $750.00 Plus GST. If our tax planning recommendations do not save you at least this much you will not be charged.
Should extra services be required such as capital gains tax calculations there will be further negotiated costs with yourself.
We estimate that the tax savings and other benefits you will receive from our advice will be far greater than the price of our Tax Planning service!
As soon as you have your accounts reconciled to 31st March 2023, please let us know and we will commence work on your plan ASAP.
Please reply to this email ASAP to let us know if you are interested in saving tax with our Tax Planning advice and assistance.
Our Tax Saving and Tax Planning advice is entirely optional, but we strongly recommend it.
We look forward to hearing from you soon and helping you to save tax in 2023!
Key Tax Planning Strategies
Our five key tax planning strategies are:
- The Secrets to Tax Planning
- The Chance to top up your Superannuation.
- Why use a “bucket” company?
- Minimise Your Business Tax
- Minimise Your Personal Tax.
For 2023, key priorities are likely to include:
- Reviewing whether you can still allocate trust distributions (from your Family Trust or Discretionary Trust) to adult children or parents as a result of the newly released ATO Tax Rulings
- Maximising superannuation contributions – and using carry-forward amounts from prior years if applicable to make even larger superannuation contributions
- Bringing forward deductible expenses
- Deferring taxable income
- Managing capital gains
- Using a Family Trust or a “bucket company” to cap your tax at 25% or 30%
When you retire, your superannuation is likely to become an important source of your income. That’s why it’s a good idea to top it up while you are working.
But did you know, there are also some excellent tax benefits you can take advantage of right now – just by making your own voluntary superannuation contributions?
Generally, money invested in super is taxed at a lower rate than your personal income tax rate.
In the lead-up to 30 June 2023, we want you to be aware of opportunities to save tax with super contributions.
TAX BENEFITS FROM SUPERANNUATION CONTRIBUTIONS
There are several ways you can get tax benefits from super contributions:
How “Concessional” Super Contributions are Taxed
Concessional (before tax) super contributions include employer super contributions made on your behalf, any salary sacrifice contributions you make, or any personal contributions that you claim a tax deduction on in your tax return. These contributions are taxed at 15% when they are received by your super fund (up to a limit of $27,500 per year), provided your annual earnings combined with superannuation contributions are less than $250,000 annually.
Personal super contributions are especially useful for people who are on higher marginal tax rates or if their employer refuses to set up a salary sacrifice arrangement.
The people who would benefit the most are those who earn above $45,000 per year, as this is where the marginal tax rate plus Medicare Levy rises to 34.5%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That’s a big tax saving!
Catch Up Super Contributions
If you haven’t made maximum annual super contributions in any year from 2019 onward, you can make “carry-forward” concessional super contributions if you have a total superannuation balance of less than $500,000. You can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.
HOW LOW-INCOME EARNERS ARE TAXED
If you’re a low-income earner (earning up to $37,000 per year), the low-income superannuation tax offset ensures that you don’t pay a higher rate of tax on your super contributions than your income tax rate. The offset will be paid directly to your super account and the payment will be equal to 15% of your concessional contributions for the year, capped at a maximum of $500.
Individuals who earn between $42,016 and $57,016 during the 2023 financial year may also be eligible for super co-contributions from the government of 50 cents for each dollar, up to a maximum of $1,000 in non-concessional (after tax) contributions.
HOW HIGH-INCOME EARNERS ARE TAXED
If you earn more than $250,000 a year (including super contributions), your concessional contributions are taxed at an additional 15%, bringing the total tax on these contributions to 30%. However, this is still less than your marginal income tax rate of 47%. This extra 15% is known as Division 293 tax. Only the concessional contributions which make your total income exceed $250,000 are subject to the additional tax.
If your concessional contributions exceed the concessional contributions cap of $27,500 per year, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can choose to withdraw some of the excess contributions to pay the additional tax.
PROFITS FROM A TRUST?
Do you have a Discretionary or Family Trust that generates profits? If yes, then this strategy may apply to you.
In the lead up to 30 June 2023, we want you to know why using a “bucket company” can be a great strategy for saving tax on trust profits distributed.
A “bucket company” allows you to “cap” the tax on profits distributed by a trust to 30% or 25%. This is much less than the individual top marginal rate of 47%!
Here’s how this works:
Assume a trust earns $250,000 in profits from business.
Option 1: Distribute profits 50 / 50 to Individuals 1 and 2. Total tax (inc. Medicare Levy) payable = $66,734 (26.7%)
Option 2: Distribute $90,000 each to Individuals 1 & 2 and distribute balance of $70,000 to a “bucket” company at a 25% tax rate. Total tax payable = $60,534 (24%). (Note: This strategy assumes that the $70,000 in cash is available to be distributed to a bucket company, otherwise what is known as a Div 7A Loan Agreement will need to be entered into and loan repayments made over a 7-year period.)
The VALUE of this strategy is $7,100 in TAX SAVED!
The cash in a “bucket company” can be used to invest in shares, property, or to lend to other entities at a specific interest rate.
Important: You need to discuss this with us BEFORE you do it. There are different tax laws that affect the use of this strategy, and whether your “bucket company” can use a tax rate of 30% or 25%.
As your Accountants, we are very aware of these tax laws and can make this easy for you.
In the lead-up to 30 June 2023, we want you to be aware that you need to complete your Trust Distribution Resolutions before 30 June. Why? To avoid paying extra tax of up to 47% of Trust profits.
How can this happen?
If a Trustee of a Trust fails to make a resolution to distribute the income of the Trust before the end of the financial year, the Trustee may be assessed by the Australian Taxation Office (ATO) on the Trust income at the highest marginal tax rate of 47%, rather than the intended beneficiaries being taxed at generally much lower tax rates.
For further information and expert assistance to prepare your tax return and maximise your tax refund, contact our office today!
CMA ACCOUNTING & TAXATION SERVICES
a 926 David Low Way, Marcoola QLD 4564
p 07 5448 8161 e firstname.lastname@example.org
General advice disclaimer
General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.]