Want to minimise tax when selling your business?

Are you a business owner who is considering selling your business, but is unsure what the tax implications are?

When it comes to selling your business, there are many decisions to make, and sometimes these decisions may impact your tax liabilities on sale. It is therefore wise to speak to an expert about the road ahead before starting the journey of selling.

If a business is sold without having extensive analysis of its tax implications, you may end up having to pay up to 47% tax on the profit. However with proper consultation well before the sale, you may be able to reduce the income tax liability down (sometimes to nil!). The difference can be enormous when the profit is huge.

For example: a business sale with profit of $3m, with 47% tax, your share to keep is $1.59m, however with a 0% tax, you get to keep $3m. That’s a difference of $1.41m!

Below are some concessions you may be able to use to minimise your tax.

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Mythbusting the tax accountant’s industry

The busy season is here, and we are meeting our clients everyday to help with preparing their tax returns, business and tax advisory and bookkeeping queries. Very often during our conversations they raise some interesting questions, let’s have a look at some of them here.

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Carry Forward Concessional Contributions – are you eligible?

2019/20 is the first financial year that you can take advantage of the new carried forward concessional contributions measure that commenced on the 1 July 2018.

To be eligible, your total super balance must be less than $500,000 at 30 June 2019.  If it is, then you may be able to make additional concessional contributions in the 2019/20 financial year.

What does this mean?

Essentially any unused contribution cap from the 2018/19 year can be carried forward to the current year.  As an example if a member only made a concessional contribution of $10,000 in the 2019 year, they can bring forward the remaining amount of the cap $15,000 ($25,000-$10,000) and add it to their 2019/20 cap.  This would mean that the concessional contribution cap for the 2019/20 increases to $40,000 ($25,000+$$15,000) for that member.

This option would be something to consider if you’re expecting a higher taxable income in the 2019/20 year as personal concessional contributions are tax deductible.  Going forward it would be possible to carry forward unused cap limits for 5 years (starting with the 2018/19 year).

Below is a table the ATO have provided to illustrate how the unused cap works:

Table 2: Unused concessional cap carry forward

Description 2017–18 2018–19 2019–20 2020–21 2021–22
General contributions cap $25,000 $25,000 $25,000 $25,000 $25,000
Total unused available cap accrued Not applicable $0 $22,000 $44,000 $69,000
Maximum cap available $25,000 $25,000 $47,000 $25,000 $94,000
Superannuation balance 30 June prior year Not applicable $480,000 $490,000 $505,000 $490,000
Concessional contributions nil $3,000 $3,000 nil nil
Unused concessional cap amount accrued in the relevant financial year $0 $22,000 $22,000 $25,000 $25,000

 

It can get confusing which is why you should seek professional advice before making contributions in excess of the annual cap.  Getting it wrong can cause excess concessional contribution issues.

If you would like more information on carried forward concessional contributions caps, please contact us.

Aston Accountants can provide you with SMSF Advice with regards to making contributions to super.  If you would like us to assess your personal situation and whether you can utilise the carry forward concessional contributions, please speak to us.

 

 

Where is my PAYG Payment Summary?

It’s tax time and everybody is in a hurry to get their tax returns lodged for a nice little surprise refund from the new Low & Middle Income Tax Offset that has recently passed the Parliament and became law.

 

For those who worked as an employee in the 2019 financial year, you may notice that your employer did not provide you with a PAYG Summary (or Group Certificate). Before storming off to the payroll manager and questioning them, it is nice to know that the law has changed: Single Touch Payroll may now apply to your employer’s business. (What is Single Touch Payroll, or STP?)

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