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News Bulletin : ADA News Bulletin July 2011
56 July 2011 Another financial year is over and there are a number of important taxation areas and changes that practitioners need to be aware of to plan for the year ahead. Tax planning is not just a year end event and should be considered throughout the year as it can require cash flow, time to implement the plan or a change to existing arrangements. dISTRIbUTIOnS TO COMPAnIES There have been a number of significant developments in relation to the taxation treatment of trust distributions to companies in the past 12 months. If you have previously used or intend to use a company beneficiary as part of your practice tax structure, it’s very important that you contact your advisor discuss how these changes affect you this year. PLAnnInG COnSIdERATIOnS MaxiMising allowable DeDuctions Expenses that are incurred can reduce taxable income. Consider when you should incur expenses this year and allow for the cashflow impact. Allowable deductions can include: • Paying bonuses • Minor repairs on property and equipment • Pooling depreciating equipment • Scrapping of depreciating assets • Maximising the depreciation write-off of equipment by purchasing necessary assets earlier Franking creDits Shares must generally be held ‘at risk’ for at least 45 days for entitlement to franking credits. Individuals and superannuation funds can receive a refund of excess imputation credits. non-coMMercial losses Non-commercial loss provisions restrict the ability of an individual who carried on a ‘non-commercial’ business activity to offset that loss against other income earned in that income year. The provisions will not apply if certain tests are satisfied. Plan to minimise the amount of non-commercial losses throughout the year. Individuals with an adjusted taxable income of $250,000 pa or more will generally not be eligible to offset losses from non- commercial activities against practice income. However, there may be an opportunity to request the Commissioner’s discretion to allow you to claim your losses. PaYg PaYMent suMMaries PAYG payment summaries must be provided to employees by 14 July 2011 and lodged with the ATO Office by 14 August 2011. Personal services incoMe There are special rules about the tax treatment of personal services income (PSI). The rules can apply to individuals, contracting dentists through entities such as a company by: • limiting the deductions available; or • attributing personal service income derived by an entity to the individual. An individual or personal services entity is subject to the PSI rules unless it can show that the ‘results test’ is satisfied or it does not derive 80% or more of its income from one practice and passes one of three additional tests. PrePaYMents Only certain prepayments required to be made by law, e.g., worker’s compensation insurance and amounts of less than $1,000 are deductible as incurred. Plan when prepayments should be paid during the year to maximise the tax saving and manage cashflow. shareholDer loans If you or your ‘associates’ borrowed money, received a benefit, or had a debt forgiven from a private company during the year, the Division 7A rules may apply to you. Generally, you have until the lodgement of your 2011 tax return to correct loans outstanding. sMall business entities In general terms, you are a small business entity (SBE) if you carry on practice and your aggregated turnover is less than $2 million pa or is likely to be less than $2 million pa as at the commencement of the financial year. tAXAtiOn inSigHtS for 2012 practice management Compiled by Andrew Chen
ADA News Bulletin June 2011
ADA News Bulletin August 2011