Blog Page 203

Cutting down to the essentials

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Self-managed super funds (SMSFs) are an attractive option for those who want more control over their retirement savings. However, trustees who have run a fund for as long as SMSFs have been in existence (around 20 years) are likely to have accumulated a lot of paperwork, especially if they engaged in various super strategies throughout the years.

Since SMSFs have a statutory obligation to retain certain documents for certain lengths of time, it can be difficult to know what records trustees can afford to cull and continue to satisfy super rules. Another consideration is what information is necessary to provide the ATO so it can calculate any tax due when trustees die and the balance remaining in the fund is to be paid to beneficiaries.

For instance, when an SMSF trustee commences a pension, they are required to prepare trustee minutes which must be kept for ten years. The minutes must be signed and retained as they confirm the terms of the pension being paid to the member.

Records of the major investment decisions and any records that relate to the appointment of fund trustees also need to be kept for ten years. Appointing an enduring power of attorney is another long-term record that must be kept.

A good option for those wanting to cut back on storage requirements is to store documents electronically, as the ATO will accept electronic copies of many super documents. All trustees need to do is scan the papers and save them to a storage facility, like a USB thumb drive.

However, trustees should always keep a paper version for one key document; the fund’s trust deed. Trust deeds formally document the existence of a superannuation arrangement between fund trustees and members, as it outlines the rules particular to a super arrangement. Not having a properly executed copy of a trust deed may create some confusion over what rules apply to the super fund.

Super funds with a pension in place should retain a signed record of the commencement documentation. Other records of investments that are older than ten years old could be disposed of unless they are required to confirm the cost base of assets for capital gains purposes.

No tax penalty when restructuring your business

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Federal Parliament recently passed legislation that will allow small businesses to change the legal structure of their enterprise without incurring a capital gains tax (CGT) liability. Instead, the CGT liability can be deferred until eventual disposal.

The legislation, ‘Tax Laws Amendment (Small Business Restructure Roll-over) Bill 2016′, will apply from July 2016. It provides an optional rollover for small business owners who change the legal structure of their business when transferring assets from one entity to another.

The effect of the rollover is the tax cost of the transferred asset/s is rolled over from the transferor to the transferee, providing greater flexibility for the small business.

The rollover will apply to any gains and losses which occur from the transfer of active assets that are:

  • CGT assets

  • Depreciating assets

  • Trading stock

  • Revenue assets

Businesses that qualify for the rollover are ongoing businesses who transfer asset(s) as part of a genuine restructure.

Whether a restructure is “genuine” is determined by the facts and circumstances of the restructure, such as:

  • Whether a bona fide commercial arrangement is undertaken for the purpose of enhancing business efficiency

  • Whether the transferred assets will continue to be used in the business

  • Whether or not it is a preliminary step to facilitate the economic realisation of assets

To be eligible for the rollover, each party to the transfer must be either:

  • a “small business entity” with $2 million or more in turnover for the income year during which the transfer occurred;

  • an entity that has an “affiliate” that is a small business entity for that income year;

  • “connected” with an entity that is a small business entity for that income year; or

  • a partner in a partnership that is a small business entity for that income year.

Since the new rules are rather technical in nature, obtaining professional advice may be in a small business’s best interest to ensure they can take advantage of the restructure rollover.

Business challenges of 2016

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No matter where your business is in its lifecycle, there is no shortage of challenges that will affect its ability to grow. But there are ways owners can overcome these hurdles if they simply invest enough time and effort into planning for the future.

Here are three challenges 2016 so far that every business should consider if they want to achieve success:

Cash flow
One of the greatest concerns for many small businesses continues to be cash flow, with the most significant negative influence being the time it takes to receive payments which affects how well small businesses can meet their ongoing expenses.

Planning ahead and carefully management of cash flow can help ensure cash flow concerns don’t impact on a business’s long-term viability.

Digital strategy
The ever-growing digital world continues to reward small businesses with a comprehensive digital strategy. Last year saw the introduction of mobile friendliness as a ranking factor for websites, due to devices like tablets and smartphones becoming the devices of choice for consumers browsing the web.

Staying ahead of developments and trends, like making your business’s website is mobile friendly, will ensure your business will stay ahead of the competition.

Succession planning
Succession planning continues to be an issue for small businesses. Family businesses, in particular, usually struggle to plan for the future, particularly in relation to preparing for the next generation.

In 2016, small businesses need to spend time planning for the future in areas like succession and business continuity.

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