Peter Bembrick

The Federal Government decision to exempt small businesses from the CGT changes announced in the Federal Budget is welcome, but it also needs to revisit the $6 million maximum net asset value (MNAV) threshold which has not changed since 2007, says Peter Bembrick, tax partner at HLB Mann Judd Sydney.

Late last week, the Government announced that it will retain all four existing Division 152 concessions, which allow eligible businesses to reduce capital gains tax on the sale of business assets, and increase the turnover threshold for the 50 per cent active asset reduction from $2 million to $10 million.

“The Government’s announcement last week is positive for small businesses but the bigger issue for many business owners is what has not changed: the $6 million MNAV threshold remains in place,” says Bembrick.

“This is threshold at which small business owners are eligible for CGT concessions on the sale of their business or a business asset, and it currently is not indexed for inflation. Indeed it was last increased from $5 million to $6 million as part of the 2007 small business tax changes, which means it has remained broadly unchanged for nearly 20 years.

“A threshold that has barely moved in almost two decades is no longer a good fit for many genuine small business owners and for those considering a business sale, especially share sales, this unchanged asset threshold may still be the real barrier.

“A lift to something like $10 million or $12 million would be a reasonable update and would help many more owner-managed businesses access concessions that were designed for them,” Bembrick says.

He also says small business owners need greater clarification on how the small business CGT exemptions will work.

“It remains unclear whether the higher turnover threshold for the 50 per cent active asset reduction, from $2 million to $10 million, will apply only to that particular tax concession, or whether it will also extend to the 15-year exemption, retirement exemption and rollover.

“At the moment, it appears the higher $10 million threshold is tied specifically to the 50 per cent active asset reduction, and that leaves real uncertainty around the other three concessions.”

Mr Bembrick said the announcement may ultimately be more helpful for asset sales than share sales.

“This is because additional eligibility conditions apply where the asset being sold is a share or trust interest, and the MNAV test often remains the key gateway in those cases.

“Until the draft legislation is released, business owners planning a sale, succession event or restructure should avoid assuming the headline announcement will automatically open up the full suite of Div 152 concessions.”

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Peter Bembrick

Many business owners are potentially missing out on valuable tax concessions by failing to review their existing business structure, according to HLB Mann Judd Sydney tax partner, Peter Bembrick.

Mr Bembrick said the economic climate is reinforcing the need for business owners to evaluate the current business structure and determine whether it’s appropriate for their circumstances and future exit plans.

“What’s a good structure and how do I get there? How can I restructure if needed? These are questions that too few business owners ask themselves.

“However, if you identify the right structure early enough, the tax savings can be substantial and business owners are also better positioned for a possible exit,” he said.

According to Mr Bembrick, many business owners are unaware of the tax concessions they can take advantage of when restructuring, including capital gains tax (CGT) measures which can be particularly valuable in boosting superannuation balances.

“Unfortunately, it would be quite a low proportion of business owners who are sufficiently aware of these concessions. Under the CGT concessions, SME business owners can direct CGT savings into their super, proving advantageous for those nearing retirement, in particular,” he said.

Mr Bembrick cites the 15-year CGT exemption as the “holy grail” of concessions for small business owners. The concession applies to businesses that have continuously owned an “active” asset for 15 years, and the business owner is aged 55 or over and are retiring or permanently incapacitated.

“Not only does this concession provide a complete tax exemption, it also allows a business owner to exit and contribute more into superannuation on top of the standard contribution limits – remembering that super is a very tax effective place to have your money.

“The issue for some is they are aware of the concession but fail to realise it can be linked to super,” he said.

Across all four small business CGT concessions, generally the most critical step in terms of eligibility is meeting the maximum net asset value test. This is the total net asset value of the business owner and connected entities, and is currently capped at $6 million or less, with two notable carve-outs being the family home and existing super balances.

According to Mr Bembrick, it is yet another example of small business owners not utilising available tax concessions.

“If you know what concessions exist and whether you’re eligible, you can take advantage of them. Sometimes you can do a restructure and use the concession to ensure the restructure is tax-free, although it is of course important to remember that there are a wide range of financial and commercial reasons for undertaking a restructure, which should not be purely tax driven.

“Doing a restructure while the value of the business is below the limit can be quite tax effective, but it’s a case of use it or lose it – don’t wait until the final sale of the business to seek out available concessions as the value of the business may exceed the threshold,” he said.

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The JobKeeper Payment will provide a wage subsidy to businesses impacted by Coronavirus, with the Government to provide eligible employers with $1,500 per fortnight per employee to help them retain workers throughout this period.

“This financial support will make a huge difference to many businesses, as well as to employees, and should help them to carry on during the lock-down period.

“It will also provide invaluable assistance in helping the economy get back on its feet once things return to a more normal situation,” Mr Bembrick says.

The JobKeeper Payment applies to sole traders and those who are self-employed, as well as larger businesses. It covers part time, full time, stood down employees and long-term casual workers (that is, those who have been with their employer on a regular and systematic basis for at least 12 months).

In order to be eligible for the JobKeeper Payment, eligible employers must pay eligible employees a minimum of $1,500 (before PAYG withholding) per fortnight (from 30 March 2020). If the employee has not been paid this minimum amount, a ‘top-up’ payment will be required.

If the eligible employee is paid more than $1,500 per fortnight (before PAYG withholding), the employer will only be reimbursed up to $1,500 per fortnight.

Mr Bembrick says the payment applies to employees ‘on the books’ as at 1 March 2020.

“Therefore, there is an opportunity for staff that had been terminated or stood down in the past weeks to be reinstated and become eligible. However, employees cannot be getting other benefits such as JobSeeker payments.”

He also points out that superannuation obligations need to be reviewed by employers. 

“Where an employee is usually paid more than $1,500 per fortnight and continues to be paid more than $1,500 per fortnight, the employer’s superannuation obligations will not change.

“However, if an employee’s wages are “topped-up” to meet the minimum payment requirement of $1,500 per fortnight, there is no additional superannuation obligation in respect of the “top-up” payment being made.”

Anyone intending to claim the payment must register their interest on the ATO website, and needs to consider the following:

• Businesses will be eligible if, at the time of applying, they estimate that their turnover has fallen (or will likely fall) by at least 30% as a result of the current restrictions / COVID-19 impact relative to a comparable period in 2019
• The period can be a month from March 2020 to September 2020 compared to the same month in 2019 or, where a quarterly period is chosen, businesses will compare projected turnover for either the June or September 2020 quarters to the same quarter in 2019
• Businesses whose “aggregated turnover” for income tax purposes is likely to exceed $1 billion must instead show a 50% reduction in turnover. For testing whether the 50% rate applies, the turnover of certain related entities (including foreign residents) is taken into account
• If the business was not in operation a year earlier, or the turnover a year earlier is not representative of their usual turnover (e.g. where it was impacted by the drought), the ATO has discretion to consider additional information to establish that they have been adversely impacted by COVID19, and apply an alternative methodology
• There is a “one-in-all-in” rule where participation must be offered to all eligible employees, but the employee is not required to accept the offer
• Payments will be available for a period of 6 months from 30 March 2020
• Employers will need to report to the ATO on a monthly basis regarding the number of eligible employees
• Eligible employees must complete the JobKeeper Employee Nomination Form before 30 April 2020. The forms are to be submitted to the employers for their own records (not the ATO).

When calculating the reduction, turnover is defined to be “GST turnover” as reported on Business Activity Statements. It includes all Australian taxable supplies and GST free supplies but not input taxed supplies. There are adjustments for members of GST groups, where each employing entity is tested individually, and this will pose practical difficulties in some cases.

Further, if turnover has not yet declined but it is expected to do so, a business can start claiming from a future period, although payments will not be backdated.

Consistent with GST law, it includes only Australian-based sales, so a decline in overseas operations will not be counted in the turnover test.

Sole traders

Mr Bembrick says businesses without employees, such as the self-employed, can also register their interest in applying for JobKeeper payments from 30 March 2020.

Sole traders will need to have had an ABN on or before 12 March 2020 and have either:

• Reported an amount of assessable income in their 2019 tax return, if lodged prior to 12 March 2020; or
• Made a supply between 1 July 2018 and 12 March 2020 and provided this information to the ATO prior to 12 March 2020.

Sole traders will need to provide an ABN and nominate an individual to receive the payment and provide that individual’s Tax File Number as well as provide a declaration as to recent business activity.

Other “self-employment” entities

Other entities carrying on a business may be able to receive the JobKeeper Payment for one (but only one) “owner” who is working in the business but not receiving their remuneration as an employee:

• One partner in an eligible partnership can be nominated
• One individual beneficiary can be nominated
• One director in an eligible company can be nominated
• One shareholder in an eligible company, receiving their remuneration for labour by way of dividends, may be nominated.

The payment process

Mr Bembrick says businesses must have paid their employees before they are entitled to receive the JobKeeper Payment.

“Employers will be reimbursed by the ATO monthly in arrears starting from 1 May 2020, backdated to 30 March 2020. The payments to employees should be made through an employer’s payroll system and reported to the ATO via Single Touch Payroll.

“The JobKeeper Payment will generally be made by the ATO directly to the employer and will not be used to offset other tax liabilities.”

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Peter Bembrick

The fast-approaching Christmas holiday season is a good time for property investors to reassess their capital gains tax (CGT) obligations and associated cost base – and in particular, whether a holiday house is a wise investment at all, according to HLB Mann Judd Sydney tax partner, Peter Bembrick.

“While holiday homes are very popular at this time of year, families shouldn’t be naïve in overstating their place as a worthwhile investment.

“Holiday homes should be viewed as a lifestyle asset and not one that investors are likely to make a return on in the same way as other investments, such as equities,” he said.

However, he said if investors are intent on purchasing a holiday house, or already own one, CGT considerations are critical and need to be considered right from the moment of purchase.

“One of the most appropriate ways of reducing the amount of CGT incurred is for investors to record non-deductible property costs that can be added to a cost base in reducing the overall CGT.

“On the basis that no expenditure has been claimed as an income tax deduction and that appropriate receipts have been maintained, the cost base of a property is made up of items ranging from the total of any money you have paid to acquire the asset, incidental costs incurred in acquiring or selling the asset, and non-capital costs of ownership (including cleaning, gardening, repairs, insurance, rates, strata levies and land tax),” he said.

Other cost base elements can include capital expenditure incurred by purchasing items intended to increase or preserve the asset’s value or that relates to installing or moving the asset, including capital improvements which may or may not be reflected in the current state of the property, as well as any costs incurred to establish, preserve or defend the owner’s title to the asset.

“All these items should be collectively assessed in determining the best means of mitigating CGT.  If property investors are smart, over the Christmas break when people are using holiday or secondary homes, they should start to think about whether any of these factors could be applied as part of their financial and tax planning strategies, and speak to their professional adviser accordingly,” said Mr Bembrick.

He believes the incidental costs incurred in acquiring or selling the asset, in particular, is an area often overlooked by investors.

“Clients will often be across stamp duty and the costs of transfer, but areas such as advertising or marketing to find a seller or buyer, search fees relating to a CGT asset, conveyancing kits, borrowing expenses and termination fees should all be cited and factored into lowering your overall level of CGT.

“Even professional services sought, both when buying and selling, in the form of surveyors, valuers, auctioneers, accountants, brokers, agents, consultants or legal advisors can all help reduce CGT incurred,” he said.

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Peter Bembrick

Australian taxpayers need to be preparing for the upcoming End of Financial Year period now if they are to maximise their tax planning strategies and receive an optimal tax refund in the 2019/20 financial year.

Lodging a tax return sooner rather than later not only ensures any refund is received sooner, but also reduces any ongoing quarterly tax instalment payments.

According to HLB Mann Judd Sydney tax partner, Peter Bembrick, too many taxpayers leave their tax planning until the start of the new financial year and, as a consequence, potentially miss out on utilising tax strategies that could make a material difference to their bottom line.

“Late in the current financial year is when people really need to start thinking about their tax obligations and what they can do to minimise any tax incurred,” he said.

One area that typically attracts confusion among taxpayers is tax deductible expenses, with the Australia Taxation Office maintaining a strong focus on the type and amount of expenses claimed.

“The $300 limit for claiming work-related expenses without receipts continues to be misunderstood, yet it’s such a key area of focus for the ATO. It doesn’t mean an automatic deduction of $300 – taxpayers must still spend the money and detail the amounts and nature of the expenses; it just means you don’t need the receipts,” he said.Mr Bembrick recommends taxpayers – in conjunction with a qualified professional accountant – assess the following areas of tax planning in advance of June 30:

• Bring forward and maximise tax-deductible expenses – pay any tax-deductible expenses now where possible, so the deductions can be made this year to reduce taxable income, and put off non-deductible costs until after 30 June.   Deductible expenses can generally be pre-paid for up to 12 months and claimed up-front.
• New superannuation rules – changes to the superannuation rules, effective from 1 July 2017, mean that PAYG earners can now claim a tax deduction for their personal superannuation contributions. Because it was new, this opportunity was commonly overlooked in the 2018 tax year, but should become standard practice for PAYG earners going forward.
  
• Take advantage of income splitting – couples should consider making investments in the name of the lower earning spouse to minimise the tax payable on income distributions and capital gains.  Alternatively the family may use a discretionary trust as their main investment vehicle which provides maximum flexibility while allowing distributions to lower income family members, including children aged over 18 and/or their retired parents.
• Take advantage of negative gearing of investments, including but not limited to property, which generally works best when the highest earning spouse holds ownership, and can be owned separately from positively geared investments.  This can be a good opportunity to prepay expenses – e.g. in June 2019 pay the next 12 months’ interest on an investment loan and claim the deduction in the 2019 year.
• The benefits of negative gearing can also be maximised by taking out interest-only loans where it is feasible and prudent to do so, with any available funds applied first to repay the principal owing on non-deductible debt.
• Private health insurance – the Medicare levy surcharge applies an extra 1% tax for singles earning over $90,000, or couples earning over $180,000. This rises to 1.25% at higher income levels, and up to 1.5% for singles earning over $140,000 and couples earning over $280,000.

 Similarly, once the new financial year has commenced, there are a number of additional tax planning areas which should be addressed, depending on individual circumstances. This is especially the case for those running businesses. These include:

• Reviewing business structures and opportunities for restructuring – this can become especially important as a business grows, or where the business owner is nearing retirement and considering family succession or exit strategies.
  
• Small business instant asset write-off (turnover up to $10m) – this allows small businesses to claim an immediate deduction for the entire amount paid for any fixed assets such as plant and equipment costing less than $20,000 per item that were acquired up to 28 January 2019, less than $25,000 for acquisitions between 29 January 2019 and 7.30pm on 2 April 2019, and less than $30,000 for acquisitions between that time and 30 June 2020, after which the write-off threshold is due to revert to $1,000.
• Medium business instant asset write-off (turnover between $10m and $50m) – this allows medium businesses the same instant asset write-off for assets costing less than $30,000 acquired between 7.30pm on 2 April 2019 and 30 June 2020, after which businesses in this category would revert to having no instant asset write-off.

Mr Bembrick said taxpayers are wise to adopt a more prudent and careful approach in both the lead up to, and immediately following, the start of the new financial year.

“Tax and superannuation, in particular, are two areas of policy that generate a consistently high level of legislative change, so planning now only ensures a maximum refund, but also helps to ensure any new policy changes are adequately addressed,” he said.

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Peter Bembrick

Many Australians dream about living and working overseas, but before packing their bags people need to think about what steps to take to ensure they don’t end up with a big tax bill on their return home, says Peter Bembrick, tax partner at HLB Mann Judd Sydney.

“It may sound like a dream come true – you’ve been offered a fantastic job and the opportunity to live in, say, London or New York or Singapore for a few years.

“But it can easily turn into a nightmare if people don’t think about what arrangements they need to make back in Australia, before heading off.  For instance, there may be a significant tax bill waiting on your return home if proper plans and arrangements aren’t put in place.”

Mr Bembrick says a good example is the recent proposed changes to capital gains tax (CGT) and the family home.

“The changes mean that anyone who moves overseas and rents out their family home, and then decides to sell the home back in Australia while they stay on overseas, will need to pay CGT on the proceeds of the sale. While these changes haven’t yet been passed into law, they have the support of both parties and should be considered as inevitable.

“This is a significant change from the previous legislation where there was a “six year absence” rule, which meant that if the home was sold within six years of moving overseas, it would be exempt from CGT.  The new rules are expected to apply from 1 July 2019.

“However, the tax-free status is still retained for those who move back to Australia and resume living in the property within six years, but only if their tax residency also reverts to Australia.  So people can’t just come back for a month, sell the property, and then immediately head back overseas again.”

Mr Bembrick says tax residency considerations should also be taken into account by anyone moving overseas for an extended period of time

“The ATO will determine whether a person’s tax residency status has changed based on their particular circumstances and arrangements. As a rule of thumb, anything longer than three years, and particularly with no fixed return date and a reasonable prospect of staying in the overseas country longer, makes it more likely that tax residency will change.

“However, an absence of less than two years is usually unlikely to be treated as a change in tax residency.

“Also, if you start out with the intention of moving around from country to country then you are more likely to remain an Australian tax resident.

“If you remain an Australian tax resident then you may not have issues with CGT, but it will mean that all of your foreign salary and investment income will be taxed in Australia, with a credit for any foreign tax paid on the income.”

Mr Bembrick says there are a number of other issues to consider.

Investment properties

While CGT will always apply to the sale of investment properties, the CGT discount is not available for any period after 8 May 2012 during which someone is a non-resident.

“For investment properties already owned at the time they left to move overseas, there will need to be an apportionment of the CGT discount for the relevant periods.  The same applies for periods between the date they return to Australia and a later property sale, “ Mr Bembrick says.

Note that the rental income and deductions must still be declared in an Australian tax return even while a non-resident, but a credit for foreign tax paid on the same income may be claimable.

Other investments

“If someone becomes a non-resident, investments such as shares in companies or units in managed funds are generally treated as having been sold at their market value, triggering deemed capital gains / losses. There would be no further Australian CGT implications if these assets are actually sold while a non-resident,” Mr Bembrick says.

“If the investments are still owned when Australian tax residency is resumed, they will be deemed to be re-acquired at that time for their current market value, so any future capital gains / losses on sale would relate only to the movement in value for the period of Australian tax residency.”

Non-resident withholding tax

This is payable on the receipt of unfranked dividends, interest and managed fund distributions, assuming the institution making the payments has been correctly notified that the taxpayer has become a non-resident.

However Mr Bembrick says any tax paid should be available to claim as a credit against the tax payable in the other country.

Superannuation

“One key concern is that when people are working overseas for an extended period, they will not be contributing to their Australian superannuation fund during this period.

“It is hard enough to build up a super balance sufficient to fund retirement, and after such a break it is not easy to make up for lost time, but some things can be done with the right advice and planning,” he says.

SMSFs

Mr Bembrick warns that if the members and trustees of an SMSF cease to be Australian residents – for instance, a couple who moves overseas for several years and loses their Australian tax residency status – then the Fund can become non-complying.

“Again, careful planning is required to anticipate and overcome the negative consequences that might otherwise arise,” he says.

Case study – Sally and Jim go to Singapore

Sally is a 38 year old marketing executive with a global consulting business and lives in Sydney with her 40 year old husband Jim, a software engineer, and their three children aged 3, 5 and 8.

Sally is offered a promotion to head up the APAC marketing team in the group’s Singapore office, starting in September 2018.  Jim has no problem finding a new position with a fast-growing software company based in Singapore, so they jump at the opportunity.

They plan to stay in Singapore for up to eight years, at which time their eldest daughter Michelle would be due to start year 11.

Sally and Jim bought their family home in northern Sydney for $600,000 in 2000, and in August 2018 it is valued at $2 million.

They have a jointly owned investment portfolio valued at $400,000, with unrealized capital growth of $100,000, and their current super balances are $350,000 for Sally and $250,000 for Jim.

Tax considerations

The first key consideration is tax residency, and while this depends on many factors, in this case the length of their intended absence should be sufficient for them to become non-residents, so the Singapore salaries of Sally and Jim should not be taxed in Australia.

The next thing to consider is the CGT main residence exemption.  Under the existing rules, they could have used the six year absence rule to claim the exemption up until September 2024, with some CGT payable if they sold the house after six years.

However under the proposed new rules, the main residence exemption would not be available at all to non-residents.  The recommendation for Sally and Jim is that they should aim at all costs to take up Australian tax residency again before selling, although they do not necessarily need to move back into the house.

Assume, for example, that the family relocates back to Australia in January 2027 but immediately decide to sell the house for $3.5 million and buy a larger one closer to the CBD for $4.5 million.

A total of 8.67 years has passed since they moved out, and under the six year absence rule the taxable portion of the gain is 2.67 / 8.67 = 30.8%.  The total gain is the increase in value since September 2018, i.e. $2 million, giving a capital gain of $1.5 million, a taxable portion of $462,000 and total CGT of up to $217,140, but most likely less since the family will move back partway through the tax year and part of the gain would be taxed at a lower rate.

Contrast this with selling the property while still overseas, however.  Not only will the 6 year exempt period be ignored, but so will be the 18 years that the family lived in the home before moving overseas.  The total gain will be calculated as $3.5 million – $600,000 = $2.9 million, with tax payable at the top marginal rate of 45% being more than $1.3 million – a terrible outcome.

An even better result in terms of CGT would arise if the family moved back to Australia and into the house no later than September 2024, i.e. within the six year exemption period.  In that case, as long as they continue living in the property, it will be treated as having always been their main residence, and on a later sale any capital gain will be entirely tax-free.

The next consideration is the investment portfolio, which does not include Australian real property.  The investments are treated as having been disposed of at their market values on the date that Sally and Jim changed their tax residency, triggering capital gains / losses as appropriate.   They could defer the tax until actual disposal, but usually this just increases the taxable capital gain, and also reduces the CGT discount percentage applied to the gain.

There is a net capital gain of $20,000 from investments held less than 12 months, and a net capital gain of $80,000 that is eligible for the 50% CGT discount, i.e. net taxable capital gains of $60,000, split equally between Sally and Jim and declared in their 2019 tax returns.

Any investments still held at the date that they return to Australia will be deemed to be reacquired at market value at that time.

There are also many issues to consider with superannuation.  While Sally and Jim do not have a SMSF to worry about, they should still keep an eye on the performance of their super fund while they are overseas and not let it become a case of “out of sight, out of mind”.

Assuming that they come back from Singapore in eight years as suggested above, Sally will be 46 and Jim will be 48, and they will be getting into the critical years for building up a superannuation balance sufficient to sustain their desired lifestyle in retirement.

This is where careful planning before they leave can allow them to start off their Singapore adventure with a strategy to keep their superannuation balance growing during this period, and help provide a springboard for their retirement planning on their return.

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It’s time to think about tax minimisation strategies.

Although there are just a few weeks to go before the end of the financial year, there are still steps that can be taken to minimise tax liabilities, said Peter Bembrick, tax partner with HLB Mann Judd Sydney.

“It’s not too late to take action to reduce your tax bill – after all, there’s no point in paying more tax than you absolutely need to.

“Some simple steps can still make a difference,” he said.

Five top tips include:

1. Make additional superannuation contributions

While there is still uncertainty around whether the superannuation changes proposed in the Federal Budget in May will come into effect, for most people it is still worth considering making additional tax deductible contributions to superannuation.

“If the Government has its way, the annual concessional contribution cap will be lowered to $25,000 for everyone from 1 July 2017. Therefore anyone who has the ability to do so, should consider making additional deductible contributions.

“Make sure that the contribution is sent to the superannuation fund well before 30 June, as the contribution is dated from when the fund receives it, not when it is sent,” Mr Bembrick said.

2. Review deductible versus non-deductible debt

“It’s a good idea to pay down non-deductible debt, such as a mortgage, wherever possible, as no tax deduction can be claimed on this debt,” Mr Bembrick said.

“However deductible debt, such as a loan on an investment property, can be claimed as a tax deduction. One strategy is to take out an interest-only loan for investment purposes, and then make all principal repayments against the home loan and any other non-deductible debt. This is a sensible strategy, and perfectly acceptable to the ATO when set up properly.

“However be careful about restructuring debt solely to avoid tax, as this could attract the attention of the ATO.”

3. Prepay deductible expenses at 30 June for up to 12 months

It can seem a minor thing, but it’s still worth doing – claim up to 12 months of prepaid expenses, for example, interest on investment loans and management fees.

“The idea is to make make any tax-deductible payments, such as donations, subscriptions and income protection insurance premiums, before 30 June to ensure that they make it into this year’s tax return.”

Mr Bembrick said that, as with super contributions, it’s important to make the payments well before year end.

“For instance, a donation to a charity is recorded as the date it is received, not the date it is sent, so any cheques or payment forms should be sent a week or two before 30 June to make sure they count in this financial year, not next.”

4. Consider tax advantaged investments

“From a tax point of view, an investment that returns discount capital gains or fully franked dividend income is a more effective option than an investment with the same return but without this tax advantage.

“While no investment should be entered into purely on the basis of its tax treatment, taking the tax outcome into account is important,” Mr Bembrick said.

Listed investment company dividends can be tax-effective for individuals, family trusts or super funds. They are usually fully franked and they also come with an associated tax deduction designed to give shareholders the benefit of the CGT discount for investment assets that the company has sold.

5. Review health insurance options

As with investment decisions, taking out private health insurance should not be driven by tax considerations, but it’s important to understand the impacts,” Mr Bembrick said.

The Medicare levy surcharge applies an extra 1 per cent tax for singles earning over $90,000, or couples earning over $180,000. This rises to 1.25 per cent at higher income levels, and up to 1.5 per cent for singles earning over $140,000 and couples earning over $280,000.

“The surcharge can be avoided if the family takes out the appropriate level of hospital cover with an approved health fund,” Mr Bembrick said.

HLB Mann Judd Sydney is a firm of accountants and business and financial advisers, and a member of the HLB Mann Judd Australasian Association.

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