We have discussed business structures on another page and so here we will list in bullet point format some of the tax planning measures that you might consider:

• Consider whether you should trade as a limited company, or as an unincorporated entity such as a sole proprietor or partnership. The level of tax on company profits is now significantly less than the highest marginal rate of personal tax (30% from 01/07/2001 vs. 48.5%) and therefore a company may be appropriate if funds can be retained in the business.
• Ensure that bonuses to directors or employees are incurred before the end of the financial year - a deduction is not available otherwise (unlike the UK where a deduction is available for bonuses provided in the company's accounts, so long as it is paid within nine months of the end of the accounting period to which the bonus relates).
• Review fringe benefits provided to staff - particularly motor vehicles - with a view to repackaging salary and benefits (salary sacrificing) to the benefit of both parties.
• Ditto superannuation arrangements - and ensure proper super contribution arrangements are in place to ensure the non-deductible superannuation guarantee charge (payable in the event that an employer does not provide the required minimum level of superannuation support for employees) is avoided.
• Review the tax deductibility of leasing vs. hire purchase commitments prior to entering into contracts.
• Write off any bad debts before year-end to ensure tax deductibility.
• Do not invoice work in progress before year-end if it can just as easily be billed early in the new financial year.
• In the case of family companies, consider paying salaries and/or declaring dividends to the lower income-earning spouse or partner - always having regard to the requirement for salaries to be "reasonable" with regard to the duties performed and responsibilities assumed, and the anti-avoidance provisions in relation to dividends that might be considered to have been "diverted."

Just a few words about using companies located in "tax havens" in an effort to save tax. In general we discourage using such vehicles - as once the shareholders have established tax residency in either the UK or in Australia they are subject to "Controlled Foreign Company" legislation, and, in Australia, the Foreign Investment Fund provisions, both of which operate to deem income arising overseas in low-tax jurisdictions as accruing to resident shareholders, even if not actually distributed. And of course the Australian source income of a non-resident company remains chargeable to tax in Australia.

Hopefully the above gives you some pointers to the issues pertaining to tax savings - if you think you are going to need assistance with tax planning for your business please do not hesitate to contact us. And register with us to be kept up to date on changes in the tax laws affecting business in Australia.

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