Year-end tax planning toolkit. Year ending 30 June 2016

Transcription

1 Year-end tax planning toolkit Year ending 30 June 2016 May 2016

2 The contents of this document are for general information only and do not consider your personal circumstances or situation. Furthermore, this document does not contain a detailed or complete explanation of the law, as provisions or explanations have been summarised and simplified. This document is not intended to be used, and should not be used, as professional advice. If you have any questions or are interested in considering any item contained in this document, please consult with your Pitcher Partners representative to obtain advice in relation to your proposed transaction. Pitcher Partners disclaims all liability for any loss or damage arising from reliance upon any information contained in this document. Pitcher Partners Advisors Pty Ltd, May All rights reserved. Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation.

3 Table of contents

4 Glossary ACA AMIT ATO BAS CFC CFI CGT CIV ESIC ESS ESVCLP ETP DTA FAT FATCA FBT FITO FTDT FTE GST HELP IDS IEE IGA IMR LAFH LISC MIT MLR MLS NANE Allocable cost amount Attribution managed investment trust Australian Taxation Office Business activity statement Controlled foreign company Conduit foreign income Capital gains tax Collective investment vehicle Early stage investment company Employee share scheme Early stage venture capital limited partnership Eligible termination payment Double tax agreement Financial acquisitions threshold Foreign Account Compliance Act Fringe benefits tax Foreign income tax offset Family trust distributions tax Family trust election Goods and services tax Higher Education Loan Program International Dealings Schedule Interposed entity election Inter-governmental agreement Investment manager regime Living away from home Low income superannuation contribution Managed investment trust Minimum loan repayments Medicare levy surcharge Non-assessable non-exempt 4 Year-end tax planning toolkit 2015/16

5 OTE PAF PAYG PE Pitcher Partners PSB PSI RSA R&D RITC RTP SBE SG TFN TOFA TSL UPE Ordinary time earnings Private ancillary fund Pay-as-you-go Permanent establishment Pitcher Partners Advisors Proprietary Limited Personal services business Personal services income Retirement savings account Research and development Reduced input tax credit Reportable tax position Small business entity Superannuation guarantee Tax file number Taxation of financial arrangements Trade Support Loan Unpaid present entitlement Year-end tax planning toolkit 2015/16 5

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7 Introduction Welcome to the Pitcher Partners 30 June 2016 year-end tax planning toolkit. Year-end tax planning As the financial year draws to a close, it is time to start thinking about whether your year-end tax planning is in order. Tax planning not only requires consideration of income and deductions for the year, but also requires you to consider whether your compliance requirements have been met. This includes whether appropriate elections are made within the time requirements, the preparation and maintenance of appropriate documentation (such as trust minutes) and forward planning of your tax affairs. Our tax toolkit is here to assist you in this process. Interactive PDF This document has been created as an interactive PDF. This means you can check boxes, record notes and submit this back to Pitcher Partners for discussion. What this document does This document provides an outline of the tax issues that should be considered before year-end. This document has been updated for new developments and (where relevant) the 2016/17 Budget announcements. This toolkit is specifically tailored to address the taxation concerns of taxpayers in the middle market and includes checklists covering both corporate taxpayers and private groups. What this document doesn t do This toolkit is not intended to be a comprehensive document covering all taxation issues that require consideration. This is because every taxpayer s circumstances are unique. Instead, this document is only intended to provide you with a broad range of issues for consideration before the end of the financial year. Take care about tax planning Tax planning may often result in a taxpayer paying less income tax in a given income year. It is noted that the definition of a tax benefit under the tax anti-avoidance provisions is broad enough to cover a deferral of income tax. Therefore, the tax anti-avoidance provisions must always be considered as part of your year-end tax planning. We have included a number of anti-avoidance or integrity provisions for your consideration in Section 13 of this toolkit. How will you find what you are looking for? To assist you in quickly locating the area of tax that is relevant to you, this document has been divided into sections. The sections either relate to a specific type of taxpayer (for example, a company or trust) or to a specific tax topic (for example, capital gains tax). Furthermore, Section 2 of this toolkit provides a summary of all of the questions contained in Sections 3 to 13 of this toolkit. The following diagram provides a simplified outline of how this toolkit is arranged. Year-end tax planning toolkit 2015/16 7

8 SUMMARISED YEAR-END PLANNING CHECKLIST [Section 2] Income [Section 3] CORE SECTIONS Deductions [Section 4] Individuals Trusts Companies Partnerships [Section 5] [Section 6] [Section 7] [Section 8] ENTITY SPECIFIC QUESTIONS Capital gains tax Finance issues International tax Super, GST & state taxes Integrity provisions [Section 9] [Section 10] [Section 11] [Section 12] [Section 13] SPECIALIST TOPIC QUESTIONS We trust you will find this document useful when considering your 30 June 2016 tax planning. Please talk to your Pitcher Partners representative if you would like more information or clarification of some of the issues raised in this document. Disclaimer The contents of this document are for general information only and do not consider your personal circumstances or situation. Furthermore, this document does not contain a detailed or complete explanation of the law, as provisions or explanations have been summarised and simplified. This document is not intended to be used, and should not be used, as professional advice. If you have any questions or are interested in considering any item contained in this document, please consult with your Pitcher Partners representative to obtain advice in relation to your proposed transaction. Pitcher Partners disclaims all liability for any loss or damage arising from reliance upon any information contained in this document. Pitcher Partners Advisors Pty Ltd, May All rights reserved. Pitcher Partners is an association of independent firms. Liability limited by a scheme approved under Professional Standards Legislation. 8 Year-end tax planning toolkit 2015/16

9 Summary checklist Enter your details If you are completing this document as a checklist and wish to submit this back to your Pitcher Partners representative, please complete your details in the following check boxes. Enter entity name Enter contact details Background The following simplified checklist contains a high level summary of the planning items that are covered in more detail in this toolkit. We have provided a reference link to the detailed discussion of each of these tax planning items. We recommend that you work your way through this summarised checklist at first instance. Where items appear relevant, those items should be tagged using the check boxes. The detailed item can then be reviewed in more detail to determine whether the planning opportunity is relevant to your circumstances. Income This section deals specifically with the treatment of income that you may have received or derived during the income year and whether such income should be attributed to the 2016 income year or included as income in the 2017 income year and subsequent years. Business income If you derive business sales income, you may be able to legitimately defer sales invoicing or bring forward sales invoicing (in appropriate circumstances). Section 3B Tax on business income If you are a small business entity ( SBE ), your income could be taxable at the lower tax rate (28.5% for a company, and a 5% discount for an individual capped at $1,000) in the 30 June 2016 year. From 1 July 2016, the tax rate will be reduced to 27.5% for SBEs, which will include companies carrying on business, where their aggregated turnover is less than $10 million. From 1 July 2016, the discount rate will also be increased to 8% (capped at $1,000), with the turnover threshold also being increased to $5 million. Businesses need to consider the timing of income, franking credit impacts and whether there are advantages in moving to a corporate structure post-30 June 2016 Section 3C [NEW ITEMS FOR 2016] Accrued/unearned income If you record accrued or unearned income in your accounts, you may be able to defer recognition of that income for tax purposes. Section 3D Trade incentives Discounts and other incentives on trading stock or services are typically brought to account in a different income year for tax as compared to accounting. Sections 3E and 3F Disputed amounts It may be possible to defer the recognition of disputed income amounts until you have settled the dispute. Section 3G Year-end tax planning toolkit 2015/16 9

10 This section deals specifically with the treatment of income that you may have received or derived during the income year and whether such income should be attributed to the 2016 income year or included as income in the 2017 income year and subsequent years. Construction contracts Where you enter into construction contracts that are not your trading stock, you may be able to utilise one of the different methods of income recognition allowed by the Australian Taxation Office ( ATO ) for tax purposes. Section 3H Insurance proceeds If you received insurance proceeds, you should examine whether the proceeds are in fact assessable and when you need to bring the proceeds to account for tax purposes. Section 3I Grants, bounties, subsidies If you receive grants, bounties or subsidies, you should examine whether they are in fact assessable and when you need to bring the proceeds to account for tax purposes. Section 3J Disaster relief money Exemptions may be available for disaster relief money received. Section 3K Interest income For interest received around year-end, examine the timing of interest income closely for tax purposes as interest is typically assessable on a receipts basis. Section 3L Dividend income Dividends accrued may not be assessable at year-end if they are only declared by not paid. Make sure you also take into account franking credits in your tax planning. Section 3M Shareholders and their associates/former associates If you are a shareholder (or an associate or former associate of a shareholder) in a private company and have received a loan from, had an expense paid by or undertaken any other transaction with that company or a related trust during the year then you may be deemed to have received a taxable dividend from this company. Section 7G Retail premiums If you received a retail premium as a non-participating shareholder during the year, this amount may be treated as an unfranked dividend. Section 3N Trust distributions Year-end tax planning should take into account the expected tax distribution that you may receive from trusts (rather than the expected accounting/cash distribution amount). Section 3O Rental/leasing income Consider whether your rental income activities are passive (and therefore on a cash basis) or constitute a business (and therefore possibly on an accruals basis). This can have an effect on the timing of income brought to account. Section 3P Foreign taxes If you received foreign income subject to foreign tax, make sure you claim your foreign tax offsets and ensure you gross-up the foreign income for planning estimates. Section 3Q Non-assessable amounts Consider whether any income you have received this year can be treated as non-assessable. Section 3R Personal services income If you provide services through a trust or company, there is a risk that the income could be your personal services income ( PSI ) and attributed to you directly. You should consider the PSI rules appropriately before year-end. Section 3S 10 Year-end tax planning toolkit 2015/16

11 This section deals specifically with the treatment of income that you may have received or derived during the income year and whether such income should be attributed to the 2016 income year or included as income in the 2017 income year and subsequent years. Extraordinary items If you have received extraordinary (or significant) receipts during the year, these items must be examined closely from a tax perspective. Section 3T Notes Review notes taken in relation to the section. Section 3U Deductions This section deals specifically with the expenses that you may have incurred during the income year and whether such expenses can result in a deduction for the 2016 income year or need to be deferred to the 2017 income year and subsequent years. General rules Consider all material expense items to determine whether there is any risk that certain items may not be deductible (for example, they are of a capital nature). You should ensure an appropriate review of all such expenses to determine their deductibility and any opportunities that may exist for such expenses. Section 4A Capital expenditure If you have identified non-deductible capital expenditure, you should consider your ability to claim a black hole deduction over five years or, alternatively, include the costs in your cost base of an asset. There is an immediate deduction available for a range of expenses incurred by a startup business from 1 July Section 4B [NEW ITEMS FOR 2016] Bad debt deductions If you have doubtful debts, you can possibly bring forward deductions if you are able to write those amounts off as bad debts for tax purposes before 30 June Section 4C Trading stock valuation Where you hold trading stock, you can choose to value trading stock at yearend at cost, market selling value, replacement value or obsolete stock value. This can have the effect of either bringing forward deductions or shifting the amounts to the following year. Section 4D Depreciating assets (all entities) If you have depreciating assets, there are a number of options that allow you to accelerate depreciation claims for the current year. Section 4E Depreciating assets (small business entities) If you have depreciating assets and you are a SBE, further tax incentives can apply to provide a higher deduction claim for the current year. Section 4F Project pools If you have identified non-deductible capital expenditure, you should consider your ability to claim the capital expenditure as a project pool cost over the life of the project. Section 4G Internal labour costs Where you internally construct assets, you may be required to capitalise labour costs for tax purposes. This may defer deductions claimed (i.e. over the depreciable life of the asset). Section 4H Commercial websites If you have incurred costs with respect to a commercial website that you use in your business, you may be able to claim deductions, or otherwise, claim capital depreciation costs. Section 4I [NEW ITEMS FOR 2016] Year-end tax planning toolkit 2015/16 11

12 This section deals specifically with the expenses that you may have incurred during the income year and whether such expenses can result in a deduction for the 2016 income year or need to be deferred to the 2017 income year and subsequent years. Employee bonuses Consider whether your accrued employee bonus plan for 30 June 2016 can be treated as deductible for the current year by changing aspects (for example, approval timing) of your plan. Section 4J Exempt income deductions If you derive exempt type income, a number of your expenses are likely to be non-deductible. This should be reviewed to determine the correct position. Section 4K Foreign exchange Consider whether the (tax) foreign exchange provisions will give rise to significant adjustments at year-end. Consider if there are any opportunities to reduce compliance under the provisions by making certain elections before year-end. Section 4L Gifts and donations Review your deductions (or proposed deductions) for gifts and donations and their impact on your tax losses. Section 4M Interest deductibility If you have significant interest or debt deduction costs during the year, you should closely consider whether you are precluded from deducting such amounts. Sections 4N and 10B Prepaid expenditure There are still some opportunities for some prepayments to be fully deductible upfront if they: are made by individuals and small businesses; or represent excluded expenditure for all other taxpayers. Section 4O Service fees If there are management fees and service fees charged between your group entities, you should ensure all paper work or agreements are put into effect before year-end and that the fees are commercially justifiable. The ATO has been targeting these items in recent years. Section 4P Capital support payments The ATO takes the view that capital support payments made by a parent to its subsidiary will be on capital account and non-deductible. Accordingly, consider whether it is better to structure the arrangement as an appropriate arm s length service fee. Section 4Q Deductions for contributions You may be able to claim a deduction for superannuation contributions by paying the amounts to the fund (i.e. received by the super fund) before year-end. Sections 4R and 12A Trade incentives If you provide discounts and trade incentives on your sales, these items are generally deductible at a different time for tax as compared to accounting. Sections 4S Tax losses for infrastructure projects If you are involved in large scale infrastructure projects, there are provisions which may allow certain entities to recoup early stage losses for approved projects. Section 4T Notes Review notes taken in relation to the section. Section 4U 12 Year-end tax planning toolkit 2015/16

13 Individuals This section considers specific year-end taxation issues associated with individuals. ATO compliance activity The ATO are scrutinising claims made by individuals for work-related expenses, rental property expenses and interest deductions on the private portion of loans. Section 5A [NEW ITEMS FOR 2016] Tax rates The tax rates for 30 June 2016 are the same as 30 June For an individual resident taxpayer, $133,920 of taxable income (which equates to a fully franked dividend of $93,744) provides an average tax rate of 30% for 30 June Section 5B Medicare levy As part of your ordinary tax planning, understand your Medicare levy and consider any opportunities that may reduce this levy. Section 5B Private health insurance rebate Please note that the private health insurance rebate is now adjusted for on the lodgement of your income tax return. This can either increase or decrease the total amount payable on lodgement of your individual return. Section 5C Rebates and offsets A large number of different rebates and offsets are available to reduce taxable income. You should consider the availability of these items for the current year. Section 5D Work expenses and substantiation Ensure you have documentation to substantiate claims of $300 or more. You should understand what claims are covered by the substantiation requirements. Section 5E Work-related car expenses Ensure that you record your odometer readings for 30 June 2016 and consider a log-book for your car (to maximise options for car expense deductions). Section 5F Work-related travel expenses Examine whether any additional travel (local, interstate, overseas) expenses are deductible for the 30 June 2016 income year and ensure you have satisfied the substantiation requirements. Section 5G Work-related clothing, laundry and cleaning Consider whether you can claim a deduction for the cost of buying or cleaning: occupation specific or protective clothes; or unique, distinctive uniforms. Section 5H Other work-related expenses Consider the deductibility of other work-related expenses including home office expenses, occupancy expenses, work-related development and support, tools and equipment and overtime meal allowance expenses. Section 5I Specific industries If you work in a specific industry, you should consider the ATO s guide on workrelated expenses that applies to that industry. Section 5J Self-education expenses Review whether education expenses are deductible and apply the nondeductible threshold of $250 to appropriate expenses. Section 5K Work-related expenses you cannot claim Review whether there are specific rules that will deny a deduction for your work-related expenses. Section 5L Year-end tax planning toolkit 2015/16 13

14 This section considers specific year-end taxation issues associated with individuals. Prepaid expenses Consider whether you can prepay certain expenses before 30 June 2016 to bring forward deductions to the current income year. Section 5M Salary sacrifice Ensure that you have appropriately considered the requirements for an effective salary sacrifice arrangement (for example, into superannuation). Section 5N Employee share schemes If you have received shares and/or options/rights as an employee, you need to consider the employee share scheme ( ESS ) provisions and whether an amount will be assessable to you. Section 5O Foreign employment income You will need to review the income tax and FBT consequences where you have received foreign employment income. Section 5P Non-commercial losses If you carry on business in your own name, losses related to the business activities may not be deductible under the non-commercial loss provisions. Section 5Q Personal services income Where you have provided services and you have operated through an entity, you need to consider the possible application of the PSI rules. Section 5R Living away from home ( LAFH ) changes If you have received a LAFH allowance during the 30 June 2016 income year, you should consider a review of these amounts. Section 5S Overseas repayment of HELP and TSL debts If you are living or intending to live overseas, and have a HELP or TSL debt, you need to advise the ATO of your new contact details. Section 5T Capital raising tax incentives If you are investing, or planning to invest, in an early stage venture capital limited partnership ( ESVCLP ) or an early stage investment company ( ESIC ), consider whether you are eligible to receive a non-refundable carry-forward tax offset in respect of your investment and whether you will qualify for CGT relief on the investment. Section 5U [NEW ITEMS FOR 2016] Notes Review notes taken in relation to the section. Section 5V Trusts This section considers specific year-end taxation issues associated with trusts. ATO compliance activity The ATO is continuing its trust compliance activities during the current income year and has received extra funding through its Tax Avoidance Taskforce that will target high wealth individuals. You should carefully review all of your trust requirements before year-end. Section 6A [NEW ITEMS FOR 2016] 14 Year-end tax planning toolkit 2015/16

15 This section considers specific year-end taxation issues associated with trusts. Small business tax rates Corporate beneficiaries of small businesses operated through trusts may not be eligible for the reduced rate of tax of 28.5% (for the year ending 30 June 2016) or 27.5% (for the year ending 30 June 2017), which may otherwise be available to small businesses that operate through corporate structures. You should consider whether your business structure is appropriate. Section 7A [NEW ITEMS FOR 2016] Trustee tax rate To avoid a trustee tax rate of 49%, ensure that you make beneficiaries entitled to all of the income of the trust before 30 June 2016 (or an earlier time if required by the trust deed). Section 6B Trustee resolutions Distribution resolutions or distribution plans should be completed before yearend (or earlier if required by the trust deed) and evidenced. Section 6C Meaning of income Review the trust deed to determine how income is defined to ensure the distribution resolutions are effective in distributing all trust income (to avoid a trustee assessment). You will also be required to disclose income per your deed in your 30 June 2016 tax return. Section 6D Distribution of timing differences (general) The ATO has been focusing compliance activity on taxpayers taking advantage of timing differences between a trust s net income for tax purposes and its income for trust purposes by using a corporate beneficiary to avoid top-up tax in the hands of individuals. Care needs to be taken if you expect taxable income to exceed accounting profit. Section 6E Distribution of timing differences (unit trusts) As beneficiaries of unit trusts can be taxable on a distribution of timing differences, consider whether it may be possible to align tax and accounting by defining income as taxable income for the current income year. Section 6F Trust to company distributions Ensure that you have appropriately considered Division 7A where your trust distributes (directly or indirectly) to a corporate beneficiary Sections 6G and 7G Trust streaming Legislation only specifically allows streaming for capital gains or franked dividends. You should ensure you comply with these rules if you wish to stream for the current year. Section 6H Capital gains versus revenue gains If you have derived substantial capital gains, you need to consider the ATO s ruling that may seek to treat those gains on revenue account (and not subject to a 50% discount). Section 6I Trust losses and bad debts Trust losses and bad debt deductions may be denied if a family trust election ( FTE ) is not made, or if the trust loss provisions are not otherwise satisfied. Consider these rules if you are expecting to make a tax loss or if you are recouping tax losses. Section 6J Franking credits If you receive dividends through the trust, franking credits may not flow through the trust unless the trust is a fixed trust or the trust makes a FTE. Section 6K Injection of income If there is more than one trust in your group, trust-to-trust distributions to take advantage of losses in a trust may create taxation issues if a FTE is not made. Section 6L Year-end tax planning toolkit 2015/16 15

16 This section considers specific year-end taxation issues associated with trusts. Interest expenses and distributions Interest deductions may be denied where finance is used to fund distributions (of income or capital) to beneficiaries. You may consider alternatives to help protect interest deductions. Section 6M Family trust elections Critically review your FTE requirements for the year to ensure you protect bad debts, carry forward losses and franking credit flow-through. Make sure all new trusts have made an election to be within the family group. Section 6N Tax file number withholding The trustee must obtain tax file numbers ( TFN ) from beneficiaries before 30 June 2016, which have not previously been reported, to avoid penalties. This needs to be reported to the ATO by 31 July Section 6O Review trust deeds Consider reviewing your trust deed before year-end to ensure that the deed is still appropriate for the type of distribution for 30 June and future years. Section 6P Superannuation deductions Consider carefully the deductibility of payments for superannuation contributions made for directors of a trustee company. Section 6Q Trust distributions to a superannuation fund Non-arm s length income derived by a superannuation fund (which may include discretionary trust distributions or private company dividends) can be taxed at a rate of 47% in a superannuation fund. Section 6R Notes Review notes taken in relation to the section. Section 6S Companies This section considers specific year-end taxation issues associated with companies. ATO compliance activity The ATO is continuing to scrutinise the taxation affairs of companies and has indicated numerous areas it will be targeting for 2016 and The Government has also increased funding to its Tax Avoidance Taskforce, which will target high wealth individuals. You should consider whether any of your arrangements are those that have been identified by the ATO, and, if required, you should consider appropriate action. Section 7A [NEW ITEMS FOR 2016] Tax rates SBE corporate tax entities are subject to tax at a rate of 28.5% for the year ending 30 June All other corporate tax entities are subject to corporate tax at a rate of 30%. A tax rate of 27.5% is to apply to SBE corporate tax entities with annual aggregated turnover of less than $10 million for the year ending 30 June You should consider whether it is appropriate to transition your business to a company structure. Section 7B [NEW ITEMS FOR 2016] Payment of dividends If the company has current year losses, or prior year retained losses, a dividend paid by the company may not be frankable unless you fall within the ATO s guidelines. Section 7C 16 Year-end tax planning toolkit 2015/16

17 This section considers specific year-end taxation issues associated with companies. Franking distributions You should appropriately manage your franking account balance to ensure that you do not create a franking deficit at year-end (and incur franking deficit tax). Small business corporate tax entities should ensure that they do not over-frank their distributions where they are subject to the reduced tax rate of 28.5%. Section 7D [NEW ITEMS FOR 2016] Distribution statements If you have paid (or will pay) dividends for the current year, you need to ensure compliance with the distribution statement requirements (otherwise the dividend will not be frankable). Section 7E Debt that can be treated like equity All loans made to companies should be reviewed to ensure that they are on terms that allow them to be treated as debt for tax purposes and are not inadvertently treated as equity (and thus interest will be non-deductible). This will typically require a 10 year repayment period or an appropriate interest rate. Section 7F Division 7A You should review Division 7A before year-end to ensure that you do not inadvertently trigger a deemed unfranked dividend to a shareholder or associate for any loans, payments or debt forgiveness transactions provided by the company. Sections 7G, 7H, 7I, 7J and 7K Company losses If you are utilising prior year tax losses, or have tax losses in the current year, you will need to consider the carry forward tax loss provisions. Section 7L Share capital transactions If your share capital account has moved for the current year, you should examine those movements very carefully. They may result in an unfranked dividend or untainting tax liabilities. You may be able to correct these if identified before year-end. Section 7M Tax consolidation choice to consolidate If you are making a choice to consolidate, you need to keep a separate hand written choice. You will also need to consider whether tax funding and tax sharing agreements are put in place before (or close to) year-end. Section 7N Tax consolidation change in members If members have joined or left during the income year, you are required to notify the ATO within 28 days. You are also required to update your tax funding and tax sharing agreements. Section 7O Tax consolidation updating tax costs If entities have joined a tax consolidated group during the year, you should ensure that you have recalculated the tax cost base of assets and liabilities, as this could materially impact your 30 June 2016 tax calculation. Section 7P Tax consolidation disposal of entities If entities have left a tax consolidated group, the cost base of the shares needs to be recalculated based on the underlying tax cost of assets and liabilities of the leaving entity. This can have a material impact on any capital gain or loss on sale of the leaving entity. Section 7Q [NEW ITEMS FOR 2016] Tax consolidation deductible liabilities and new acquisitions If a tax consolidated group is planning to acquire new entities with deductible liabilities after 1 July 2016, consider whether the proposed changes will apply to you. Section 7R Year-end tax planning toolkit 2015/16 17

18 This section considers specific year-end taxation issues associated with companies. Research and development Consider the effect of the research and development ( R&D ) tax incentive provisions on your R&D deductions for 30 June Section 7S R&D ineligible companies If you carry on R&D activities and you have more than $100 million of R&D expenditure, legislation has been passed that will restrict an R&D tax incentive claim for 30 June Section 7T R&D feedstock adjustments If you claim R&D related to feedstock expenditure, you may be required to include an adjustment in your assessable income. Section 7U Reportable tax positions Consider whether you need to prepare the reportable tax position ( RTP ) schedule in the tax return. To avoid disclosures, you may need to ensure that you have appropriate opinions on material tax issues. Consider implementing an appropriate tax risk management procedure. Section 7V Pay-as-you-go instalments Determine whether the pay-as-you-go ( PAYG ) instalment for the fourth quarter for 30 June 2016 can be varied. Section 7W Director penalty regime Ensure that you are up to date with super and PAYG payments and consider implementing control procedures dealing with the director penalty regime. Section 7X Capital raising tax incentives If you are investing, or planning to invest, in an ESVCLP or an ESIC, consider whether you are eligible to receive a non-refundable carry-forward tax offset in respect of your contributions or investment. Section 5U [NEW ITEMS FOR 2016] Tax transparency The ATO is required to publicly report tax information for certain corporate tax entities. A private company with $200 million of turnover will be subject to these rules. If you will be subject to these rules, you should consider whether amounts are disclosed in your tax return correctly. Section 7Y [NEW ITEMS FOR 2016] Notes Review notes taken in relation to the section. Section 7Z Partnerships This section considers specific year-end taxation issues associated with partnerships. Professional practices with trusts as partners The ATO is reviewing professional practices that report a trust as a partner in the tax return. There may be ways in which to mitigate this risk by following ATO administrative guidelines. Section 8A [NEW ITEMS FOR 2016] Professional practices (unincorporated and incorporated) If your professional practice has a practicing member that is not a natural person, the ATO has indicated that it will not stand by its no goodwill view for incoming and leaving members. There may be ways in which to mitigate this risk. Section 8B [NEW ITEMS FOR 2016] 18 Year-end tax planning toolkit 2015/16

19 This section considers specific year-end taxation issues associated with partnerships. Varying distributions For common law partnerships, consider the ability to vary distribution entitlements before 30 June Section 8C Equity contributions You should appropriately consider equity contributions made to a partnership by a company and the Division 7A treatment of such contributions. Section 8D Notes Review notes taken in relation to the section. Section 8E Capital gains tax This section considers a number of year-end considerations for capital gains that may have been derived during the income year. General Ensure that you have considered all contracts and capital receipts for the year to determine whether a capital gain or loss has occurred. Section 9A Small business capital gains tax concessions Where you conduct a business (either directly or indirectly), consider your ability to reduce capital gains tax ( CGT ) under the small business concessions. Section 9B CGT discount Consider whether assets disposed of were held for over 12 months and thus qualify for the CGT discount. If the amounts are material, you may need to review whether the ATO may treat the amounts as being on revenue account (and not eligible for the 50% discount). Section 9C CGT discount (non-residents) Non-resident individuals no longer qualify for the CGT discount. The provisions may allow for a full or partial discount in certain cases. Taxpayers should consider obtaining a market valuation of their taxable Australian property held at 8 May 2012 or assessing the discount available based on the days on which they were an Australian resident compared to the total period of ownership of the asset. Section 9D Earnout arrangements The capital gain on the sale of a CGT asset can be deferred if you qualify for the new earnout rules. Section 9E [NEW ITEMS FOR 2016] CGT exemptions Consider the many CGT exemptions that may apply to reduce your capital gain or loss. Section 9F CGT rollovers Consider whether the CGT rollovers may apply to reduce your capital gain or loss. Section 9G [NEW ITEMS FOR 2016] Main residence exemption Ensure you have applied the main residence exemption correctly for any sale of residential property and adjacent land. Section 9H Notes Review notes taken in relation to the section. Section 9I Year-end tax planning toolkit 2015/16 19

20 Finance issues This section considers a number of year-end considerations for financial transactions and financial type entities for the income year. Loan rationalisation and debt forgiveness You may wish to consider rationalising inter-entity loans at year-end, to simplify loan arrangements and Division 7A compliance. However, consider the tax consequences that may occur on a loan rationalisation or debt forgiveness during the year. Section 10A Interest deductibility If you have significant interest or debt deduction costs during the year, you should closely consider whether you are precluded from deducting such amounts. Section 10B Capital protected borrowings Interest deductions may be denied in respect of the funding of capital protected shares, units or stapled securities. Section 10C Taxation of financial arrangements general On an annual basis, you need to consider whether the taxation of financial arrangements ( TOFA ) provisions will start to apply to your entity or group of entities. Section 10D TOFA elections TOFA can provide taxpayers with a number of elections that allow tax to be aligned with accounting for financial instruments. If such elections are of interest, they need to be made before year-end. Section 10E TOFA consolidated groups If your group is subject to TOFA, and an entity has joined your tax consolidated group, make sure that you have applied the special TOFA rule to liabilities of the joining entity (which treats such amounts as assessable). Section 0 TOFA compliance issues If your group is subject to TOFA, the ATO is conducting ongoing compliance activity. Accordingly, you should ensure you are comfortable with your TOFA positions. Section 10G FATCA compliance If you have US investments, have beneficiaries or controllers that are US citizens, or if you simply have an entity that invests in Australian funds, the Foreign Account Compliance Act ( FATCA ) provisions could apply. You should carefully consider your FATCA obligations. Section 10H Financing structures If you are considering creating a new investment structure, or considering investing in such a structure, consider whether a number of the new legislative regimes can assist your structure or will provide an incentive for your structure either before or after 30 June (i.e. including the new AMIT regime, IMR regime, ESVCLP regime, ESIC regime, crowd-funding regime and the proposed collective investment vehicle [ CIV ] regime). Section 10I [NEW ITEMS FOR 2016] Notes Review notes taken in relation to the section. Section 10J 20 Year-end tax planning toolkit 2015/16

21 International tax This section considers a number of year-end considerations where you have international transactions, or inbound or outbound investments. ATO compliance activity The ATO is targeting international transactions and has received substantial funding for its Tax Avoidance Taskforce, targeting both high wealth individuals and multinationals. You should carefully consider whether your arrangements with international parties are likely to be scrutinised by the ATO. Section 11B [NEW ITEMS FOR 2016] Non-resident individual tax rates We have outlined the tax rates for individuals for the 30 June 2016 income year. Section 11C Tax residency and source You should carefully consider whether the relevant entity is a tax resident for the current year, and (where non-resident) whether foreign sourced income has been excluded. Section 11D Temporary resident concessions If you are a foreign citizen and an Australian resident, consider whether you can apply the temporary resident concessions and reduce your taxable income. Section 11E Change in residence A change in residence may have significant tax implications and may also require elections to be made. You should consider your residency status for the income year. Section 11F Controlled foreign companies You should consider whether the controlled foreign company ( CFC ) provisions will result in an accrual of underlying income in your foreign investment, even if your individual interest is a minority interest. Section 11G Transfer pricing Australia s transfer pricing rules apply to all taxpayers that have international dealings and can apply to reconstruct those international dealings. The ATO now have wide powers to increase your Australian taxable income under these measures, which also require documentation to be in place for penalty protection purposes. A number of simplified record keeping options may be available to smaller taxpayers. Sections 11H, 11I and 11J [NEW ITEMS FOR 2016] International dealings schedule Completion of the international dealings schedule ( IDS ) for the 30 June 2016 tax return should be consistent with your transfer pricing documentation for the current year. It is therefore critical to ensure transfer pricing documentation is in place. Section 11K Conduit foreign income If the Australian company is a conduit between foreign entities, the conduit foreign income ( CFI ) provisions may allow unfranked dividends to be paid to non-residents tax free if you meet certain conditions in the relevant income years. Section 11L Foreign income tax offsets Consider your foreign income tax offset ( FITO ) position for 30 June 2016 to determine whether there are any excess FITOs that will be wasted. Strategies can be put in place to help reduce FITO wastage. Section 11M Non-resident distributions Consider whether distributions from non-residents (including capital reductions) can or have been made to an Australian entity in a tax free manner. This is particularly important in 2015/16 as the rules for determining the assessability of distributions changed during the year. Section 11N Year-end tax planning toolkit 2015/16 21

22 This section considers a number of year-end considerations where you have international transactions, or inbound or outbound investments. Non-residents and asset sales Non-residents and temporary residents can dispose of certain Australian assets (for example, certain assets that are not land nor land rich entities) without tax consequences. However, non-residents and temporary residents are no longer eligible for the 50% CGT discount. Section 11O Deductions in earning foreign income Deductions may be denied where a foreign operation in the group produces exempt or non-assessable non-exempt ( NANE ) income to the group. This may be relevant if you carry on a branch (or hold shares in a subsidiary) in a foreign country. Section 11P Deemed dividends Related party transactions may result in deemed unfranked dividends where benefits are provided by a CFC to a shareholder or associate of the shareholder (similar to Division 7A). Section 11Q Thin capitalisation If you are an inbound or outbound entity, the thin capitalisation provisions may deny interest deductions. Addressing your tax gearing ratios before 30 June 2016 may also place you in a much better thin capitalisation position for the 30 June 2016 year. Section 11R Withholding tax and deductions If you pay interest, royalties or other income subject to withholding tax, non-compliance with the withholding tax provisions may result in deductions being denied for the income year. Section 11S Non-resident beneficiaries If you stream classes of income to non-residents (for example, interest) you should consider the ATO s views on streaming and the risk that the current provisions may not support streaming such income. Section 11T Non-resident trusts If you have an interest in a foreign trust for the 30 June 2016 income year, you may need to disclose income in your tax return under the accrual provisions. Section 11U Offshore assets If you have offshore assets or investments that you have not previously disclosed to the ATO, you should consider making a voluntary disclosure to minimise steep penalties and the risk of criminal prosecution for tax avoidance. Section 11V Investment manager regime If you are a non-resident investor that invests in certain assets such as equities or foreign assets, you should consider the application of the new Investment Manager Regime ( IMR ) regime for the year ending 30 June 2016, which could help to ensure that certain gains are not taxable in Australia. Section 11W Managed investment trust fund payments The withholding tax rate on fund payments to nonresidents during the 2016 income is equal to 15% for EOI countries and 30% for non-eoi countries. A special rate of 10% applies to certain energy efficient buildings funds. Section 11X Foreign exchange Consider whether the (tax) foreign exchange provisions will give rise to significant adjustments at year-end. Consider if there are any opportunities to reduce compliance under the provisions by making certain elections before year-end. Sections 11Y and 4L Notes Review notes taken in relation to the section. Section 11Z 22 Year-end tax planning toolkit 2015/16

23 Superannuation, GST and state taxes This section considers a number of year-end considerations for superannuation, GST and state taxes. Deductions for contributions You may be able to claim a deduction for superannuation contributions by paying the amounts to the fund (i.e. received by the super fund) before year-end. Section 12A Superannuation guarantee Ensure that you have complied with the superannuation guarantee ( SG ) requirements, especially for bonuses paid and payments made to contractors, consultants or members of the board who are not paid via the payroll. Section 12B Concessional contribution cap Make sure you have complied with the annual concessional contribution cap. Section 12C Non-concessional contribution caps Please note that the Government has announced that a lifetime limit of $500,000 for non-concessional contributions will apply from 3 May Section 12D [NEW ITEMS FOR 2016] Personal superannuation contributions Consider whether the individual is eligible to make a deductible concessional contribution before 30 June 2016 and ensure notice requirements are met within time. Section 12E Low income superannuation contribution If you are a low income earner, consider making a contribution to your superannuation fund before 30 June Section 12F Low income spouse superannuation contribution If you have a spouse with a low income, consider whether contributions made to their superannuation account will be eligible for the tax offset. Section 12G Cap on superannuation transfers into retirement products If you are in retirement phase, or about to enter retirement phase, consider the impact of the introduction of the $1.6 million transfer balance cap on your superannuation account balances, and whether you will need to maintain excess amounts in an accumulation phase account. Section 12H [NEW ITEMS FOR 2016] Excess contributions When reviewing your superannuation strategy for year-end, carefully consider whether payments are within your contributions cap. Section 12I Increase in contributions tax for higher income earners The contributions tax increases from 15% to 30% for individuals who have income of more than $300,000. Individuals should consider this when making contributions for the 2016 year. Section 12J [NEW ITEMS FOR 2016] Employment termination payments If you have received an ETP during the 30 June 2016 income year, you should review the concessional taxation treatment of such payments. Section 12K Legal settlements on employee termination Consider whether amounts received in respect of legal costs incurred in disputes concerning the termination of employment can be treated as an eligible termination payment ( ETP ) (which may be subject to concessional treatment). Section 12L Year-end tax planning toolkit 2015/16 23

24 This section considers a number of year-end considerations for superannuation, GST and state taxes. GST adjustments for bad debts written off If you write off a bad debt during the year, you may need to make a GST adjustment in the relevant BAS. Section 12M Accounting for GST on a cash or accruals basis If you currently account for GST on a cash basis you should consider whether you still satisfy the eligibility requirements for cash basis accounting. Section 12N Financial acquisitions threshold If you make financial supplies, you should consider whether you have exceeded the financial acquisitions threshold ( FAT ) and whether you can claim full input tax credits. Section 12O GST adjustments for change in use If you have changed the extent to which an acquisition or importation is used for a creditable purpose, you should consider whether a change in use adjustment is required in the BAS for the period ended 30 June. Section 12P Reporting requirements for construction If you are in the building and construction industry, you need to consider the reporting requirements for payments made to contractors before 30 June. Pitcher Partners has software that enables direct upload for ATO reporting. Section 12Q Stamp duty surcharge for foreign purchasers of property From 1 July 2016, the stamp duty surcharge that is applicable to foreign purchasers of residential property in Victoria (for post-1 July 2015 arrangements) will more than double from 3% to 7%. The duty surcharge can be triggered on a change in the proposed use of the property. An opportunity may exist between now and 30 June 2016 to save 4% duty by bringing forward any change of intention. Section 12R [NEW ITEMS FOR 2016] Notes Review notes taken in relation to the section. Section 12S Integrity measures This section considers a number of integrity measures that should be considered with your year-end planning. Taxpayer alerts Taxpayer alerts are specific areas that the ATO are targeting. They typically involve anti-avoidance measures and are high risk items. You should consider whether any of the issues identified in the recent taxpayer alerts apply to your tax affairs or to any tax planning opportunities that you or are considering. Section 13A General anti avoidance (Part IVA) You should consider Part IVA in relation to any material tax planning strategy that may be implemented for the 30 June 2016 income year. Section 13B Promoted schemes at year-end Be careful of schemes that are promoted to taxpayers to reduce their taxable income for the income year. Consider the ATO guidance on what to look out for. Section 13C 24 Year-end tax planning toolkit 2015/16