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End of Financial Year - Checklist

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.


by John Wojtowicz (Director - Law Central Legal)

It’s that time again. The end of financial year (EOFY) is fast approaching and now is the time to ensure that you have checked off all of your outstanding accounting and tax matters for the 2016/2017 financial year. We’ve put together a list of issues for you to consider.

You can also ensure that you are in tip top (legal) shape going into the new financial year by taking our free Legal Business Health Check.

Read on for our tips to assist you in your EOFY planning...

Self Managed Superannuation Funds

There are important changes to the superannuation law which will commence on 1 July 2017.

For detailed information on how this will affect you, see our Bulletins:

  1. Issue: 508 $1.6 Million Pension Transfer Balance Cap for SMSFs;
  2. Issue: 511 Things to Consider For The $1.6 Million Transfer Balance Cap; and
  3. Issue: 515 Top 10 Hints for SMSF Trustees Before 30 June 2017.

We also have a recording of a one hour Webinar by Monica Rule – Understanding the 2017 Superannuation Changes in which Monica addresses the superannuation changes as they relate to:

If your Self Managed Superannuation Fund (SMSF) owns residential property and you need to have it valued, Law Central is offering 2 types of valuation services through LMW, a national property valuation and property consultancy firm:

  1. Full Valuation; and
  2. Kerbside Assessment.

A full valuation will result in a more comprehensive report, which LMW recommends every 3-5 years and which some SMSF auditors may require upon the acquisition or transfer of a property by an SMSF. The kerbside assessment is a shorter report, generally used to support the on-going book value of the property in your SMSF accounts and may be more appropriate to be done annually, in-between the full valuations.

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”.

Family Trusts

When did you last look at your Trust Deed? Older Family Trusts do not accommodate changes to the law 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.

Platinum Members, click here to view content

If your Family Trust Deed has not been updated to take advantage of these recent changes, then our “Family Trust – Streaming & Bamford Update” can assist you by updating the relevant clauses.

Trust Distribution Minutes Library - Revised Format for 2016/17

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 consequences involved in this. This year’s minutes differ from previous years in that the minutes have greater flexibility to make distributions by either fixed amounts or percentages across a number of income categories. The Trust Distribution Minutes Library covers a range of scenarios that you are likely to encounter in making your trust distributions.You can purchase minutes for a single trust here or if you are an accounting firm that needs to use the minutes for multiple trust deeds for your clients, purchase our Mulit-Use minutes here.

Family Trust – Update to Exclude Foreign Persons

This document provides for an amendment to your family Trust Deed to exclude a “foreign person” from being a beneficiary and receiving a benefit from the family trust.

The purpose of this document is to address the issues relating to the payment of a foreign duty surcharge and land tax surcharge under the following legislation:

This document should only be used where the Trust Deed has a sufficiently wide variation or amendment clause in the trust deed enabling the trustee to vary the trust to exclude a foreign person from being a beneficiary and receiving a benefit from the trust. Legal advice should be sought on this issue.

See our Bulletin 510 – Family Trusts Hit With Tax and Duty Surcharge for more information.

Are you the Trustee of your Family Trust?

One of the great things about Family Trusts is their asset protection characteristics. Having a corporate trustee in place can greatly enhance the asset protection capabilities of a Family Trust. For more information on why corporate trustees are a good idea, see our Bulletin 491 - Family Trust - Corporate Trustee Versus Individual Trustee. You can set up your corporate trustee in a matter of minutes with our Build A Company (ELodgement) document and update your Trustee using our Change Trustee Of Family Trust document

Beneficiary Loan Accounts

If your Trust’s beneficiaries have loaned back unpaid distributions (and the Trust accounts have treated it as a beneficiary loan), you can now remove these from the accounts by having the Beneficiary “forgive” the loan using our Forgiveness Of Debt document. If the Trust accounts have treated the distribution as an unpaid present entitlement or Sub-Trust, you can use our Release Of Unpaid Trust Entitlement document. A word of warning. Forgiving a debt or releasing an unpaid trust entitlement may have certain tax and stamp duty/transfer duty consequences. Always seek advice from your accountant or tax lawyer before using these documents. For more information, you can purchase (free for Platinum Members) our White Paper on the tax effects of debt forgiveness/release of unpaid trust entitlement here.

Shutting down unwanted structures

Avoid paying for another year’s tax returns for dormant and empty 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 and the purpose for which they were created no longer exists. If the entity is no longer required then it may be more economical to simply close it down.

Avoid the temptation to keep the structure going for some potential future purpose. 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.

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.

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.

Platinum Members, click here to view content

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 many reasons why your Will may need to be updated. Just a few include:

Disclaimer: The content of this Bulletin is general information only. It is not legal advice. Law Central Legal recommends you seek professional advice before taking any action based on the content of this Bulletin.

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