Taxation Matters

Our smart end-of-year tax strategies for SME owners this year are headed by the need to guard against paying unnecessary tax, if possible, triggered by deemed dividends and excess super contributions.

Beginning from 2009-10, deemed dividends will arise for the personal use of private company assets such as luxury boats and ski lodges by shareholders or their associates for free or below-market rates. And concessional contribution caps have been halved from this financial year.

The Australian Taxation Office will crack down on fraudulent returns, systematic underreporting and non-payment of GST debts during the next financial year, and may even be focusing on fraudulent SMEs instead of bigger business.

As part of the Government's 2010-11 Budget, released last night, the Government will spend $445 million over the next four years to stamp out the cash economy and promote GST compliance.

While the Federal Government's 2010 Budget proposal for a 50% tax savings discount and a standard $500 deduction for work-related expenses grabbed most of the headlines, a key issue for businesses was the proposal on the CGT treatment of "earnout arrangements".

Unless you've been living in a cave, or preoccupied by the latest series of Master Chef, you're no doubt aware of the release of the Henry Tax Review and budget.

While most of the commentary in the media has been around how the Federal Government responded to the Henry Review with its own raft of tax reform measures, unfortunately for SMEs there hasn't been a lot about how it will directly affect them.

They say the only two guarantees in life are death and taxes – but primary producers can do something that is guaranteed to ease the burden of taxes through savvy investing.

The Federal Government introduced the Farm Management Deposit (FMD) scheme to provide primary producers with an ability to set aside pre-tax income and earn interest.

A key benefit is the deposit only becomes taxable in the year of withdrawal, allowing primary producers to reduce their taxable income. To qualify for a FMD and receive tax benefits, deposits have to be held for a minimum of 12 months.

1. Company tax drops 2% from 30% to 28%. For 'small business' the reduction kicks in from 2012/13. For 'large companies' it is phased in at 29% for 2013/14 and 28% for 2014/15.
   ACTION: Claim all your deductions you can this year. Deductions are worth less with a lower tax rate. Trusts and partnerships miss out. Should you convert your business to a company? You then miss the CGT concession. Therefore, assets are better off in non-company entities.

The Tax Office has reminded employers about their FBT obligations in relation to company vehicles particularly those who took advantage of the investment allowance as vehicles purchased may have an associated FBT liability.

The use of some motor vehicles may be exempt from FBT if employers meet the eligibility criteria. The FBT exemption is limited to certain vehicles where private use of the vehicle is limited to specific circumstances.

The government has decided to implement four changes to superannuation.

The capital allowances provisions will be changed to allow small businesses:

•  to write-off immediately assets valued at under $5,000 (compared with the current $1,000 limit), and
•  to write-off other assets (ie assets valued at over $5,000) in one depreciating pool at the rate of 30%. Currently, depreciating assets may be allocated to two different depreciating pools. This will not apply to buildings.