For businesses to maximise their cash position, they should consider any tax planning opportunities before 30 June.
Tax planning can assist you with the following:
- Maximising tax efficiency
- Reducing the likelihood of unexpected tax liabilities
- Allowing for tax liability funding options to be proactively considered
- Allowing for potential tax issues to be addressed before they become a problem
- Capitalising on tax incentives
- Capitalising on opportunities to grow personal wealth
Click the link below to download our Tax Planning Checklist:
ATO scrutiny on trust distributions increasing
The ATO’s additional guidance on trust distributions shows this is an area it is likely to check closely. The ATO has also recently been awarded more funding in the budget to tackle trust compliance.
Responsibilities and Considerations
Complete Trustee Resolution by 30 June:
Each financial year, trustees must determine which beneficiaries are entitled to the trust income.
Review Trust Deed Regularly:
Understand who the eligible beneficiaries are and the types of income that can be distributed according to the Trust Deed.
Tax Efficiency:
Consider the tax profiles of beneficiaries to ensure tax-efficient distributions.
Importance of Proper Trustee Resolution
Section 100A Compliance:
Ensure that the trust distribution entitlements are valid and that each distribution creates a legal entitlement for the beneficiary.
Greater ATO Focus:
With increased scrutiny on trust structures, accurately completing the Trustee Resolution is crucial for compliance.
Division 7A Loans
The ATO have recently made it aware that Division 7A compliance is going to be an area of focus and audits in the coming year.
Minimum Annual Repayments:
Division 7A loans require minimum repayments of principal and interest each year until fully repaid.
Repayment Methods:
These repayments can be made either through cash payments by 30 June or by declaring a dividend, though the latter may increase tax liability.
Interest Rate Change:
The ATO benchmark interest rate has increased from 4.77% in FY23 to 8.27% in FY24, impacting repayment amounts and the amount of tax payable on the deemed interest income.
Planning Considerations:
Carefully plan the funding of repayments, considering the significate interest rate increase.
If you would like to book a Tax Planning meeting, contact your Harris Black team member.