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End of Financial Year- Checklist
Issue: 476 - Tuesday, 23 June 2015
In this Issue
- End of Financial Year- Checklist
1. End of Financial Year- Checklist
The end of financial year (EOFY) is fast approaching and it’s important to ensure that all your accounting and tax matters for the 2014/2015 financial year are in order before June 30 2015. Now is also a good time to start planning for 2015/2016. Being organised and proactive now will help to ensure your business and/or personal affairs can continue to flourish in the coming years. Read on for our tips to assist you in your EOFY planning...
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Family Trusts
Do you need to update your Family Trust Deed to ensure that it has maximum flexibility from a taxation perspective? The tax law has recently been changed to deal with a number of issues relating to the taxation of trusts, some of which were highlighted by the High Court’s decision in Bamford. The Tax Laws Amendment (2011 Measures No. 5) Act 2011 makes provision for “streaming” of capital gains and franked distributions to specific beneficiaries of a family trust, and taxing capital gains and franked distributions to which no beneficiary is specifically entitled in the same way as the other income of that family trust.
Gold and Platinum Members read on for more information about “Bamford”, and how you can tell if your Trust deed has been updated to accommodate “Bamford” and other recent changes
If your trust earns income, then it is vital that you prepare your income distribution minutes before 30 June. Gone are the days when the ATO gave some leniency in this and allowed you to prepare your minutes after the financial year had ended.
Just as your Trust Deed must be updated in accordance with the “Bamford” and “Streaming” rules, so too must your Trust Distribution Minutes be in an appropriate format.
If you are using the same pro-forma income distribution minutes that you have always used, be aware that there may be adverse tax consequence involved in this. You can download our Trust Distribution Minutes Library for complying Minutes for the 2015 financial year.
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Shutting down unwanted structures
The end of financial year is a good opportunity to review any redundant business structures such as Trusts or Companies.
Often these entities were set up for a purpose in the past and were either never utilised, or no longer hold any assets. If the entity is no longer required then it may be wise to close it down.
Reusing existing entities at some future point is not always wise, particularly given the cost to set up new “cleanskin” entities is relatively low. You can also then be certain that the new structures will not have any unwanted “baggage”.
You can shut down unused Family Trusts using our Family Trust - Vesting kit for only $249.
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Self Managed Superannuation Funds
Each year your SMSF needs to be audited, so it is important to have your SMSF deed in order before the end of the financial year.
You can ensure that your deed and Investment Strategies are up to date and compliant with the latest legislation with our SMSF - Deed Update, Investment Strategy and Derivative Risk Statement for SMSF Documents.
In addition to ensuring deed compliance, your Auditor will also be checking to see that any assets of the SMSF are recorded in the Trustee’s name. You will be required to show sufficient evidence to demonstrate that the asset in question is an asset of the SMSF. Preparing a Declaration of Trust (before you purchase the asset) or an Acknowledgement of Trust (if you have already purchased the asset) will assist in providing this evidence.
If your SMSF has invested in property, you will also need to show that any rental agreements are on commercial “arms-length” terms. This will involve a properly drafted lease agreement such as our Commercial Lease.
If a pension was commenced during the year, then ensure it is correctly documented by taking advantage of our “Pension Pack”.
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Debt Collection
EOFY is the ideal time to sit down with your accountant or book-keeper to review your finances. It is also the ideal time to chase up any debtors or to write off debts that are unrecoverable. If your business invoices clients, it is important to identify any clients who are not paying their accounts on time, or who are not paying them at all. If you are aware of any prolonged debtors or debts that may be unrecoverable, take a look at our “Demand for Debt” documents, which are useful as a last effort at collection before writing the debt off.
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Division 7A
Start thinking about any loans companies you control have made to their shareholders or parties related to those shareholders. You will need to complete a Division 7A Loan Agreement for any loans made throughout the year which remain outstanding. It accordingly may be better to repay any money lent before the end of the financial year.
Platinum Members read on for a tip about Division 7A.
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Business Growth
If you own a business, the EOFY is also a good time to review and update your business and marketing plans. It may also be the ideal time to review your business structure.
Part of your business plan should be to include succession and exit strategies. Even if you intend on being in the business for years to come, you should still look at ways in which to maximise your business’ value, minimise its risk and reduce its dependency on the owners.
Some helpful tools in achieving this can be found in the Webinar “Maximising your Business Value”. Also, consider formalising your succession plan with a Buy Sell Agreement and appropriate insurances.
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Estate Planning
When you are reviewing your business affairs, take time to also ensure that your own personal affairs are in order. Whilst not financial year critical, reviewing your own Estate Planning is an important task that needs to be performed regularly. Do you have a Will? If so, does it need updating? There are LOTS of reasons why your Will may need to be updated. Just a few include:
- Relationships: perhaps new children, friends or relatives have entered the picture. Or maybe you have married or divorced since making your last Will. Did you know that in some States and Territories marriage or divorce can completely nullify an existing Will?
- Relocation: you may have moved interstate or overseas. Different States and Territories have different rules when it comes to estate taxes and the way they treat property.
- Finances: your financial situation may have changed in some way. You may like to consider creating a Family Trust or a Testamentary Trust, which could help reduce your tax burden, and that of your dependents.
Other estate documents you may consider include Enduring Powers of Attorney or Enduring Powers of Guardianship. Find out more about these documents by clicking here.
For a full list of the documents that Law Central provides that can help your business, please click here.