2012 financial planning tax checklist

Although clients’ tax issues are the main focus for financial advisers at this time of year, as business owners and employers they also need to ensure enough time is set aside to tidy up the practice’s paperwork and tax affairs.

After a difficult year for many financial planning firms, BDO’s Trevor Bridger believes advisers should be reviewing the overall position of their business. This includes preparing updated financial statements and cashflows with comparisons to previous years to enable a clear picture to emerge of how the business has performed.

Preparation of the budget for the upcoming financial year is also an important task, Bridger says. “Advisers need to discuss and prepare their budget, salaries and financial arrangements for the coming year.”

He believes current market conditions mean these budgets need to be thought through carefully. “It is important not to expect miracles over the next year, so you need to do your budgeting conservatively,” Bridger notes.

“While the financial costs of opt-in will not apply for many advisers, there are likely to be some costs involved in the increasing level of disclosure required, and this needs to be included in the budget.”

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Planned expenditure such as IT upgrades to meet additional reporting requirements also needs to be factored in, according to Count Financial's Kim Guest.

“Where the adviser is an employer, they need to think about the new requirements for payslips to report super contributions and when they will be paid. They need to get their systems ready,” she notes.

Under the proposed rules, employers will be required to report an ‘expected payment on or before’ date for contributions on an employee’s payslip from 1 July 2012. From 1 July 2013, the reporting requirement is expected to be extended to reporting of the fund name and actual contributions paid.

For some firms, this can also be a good time to start discussing succession planning. “A succession plan is quite material for the ageing group of financial planners and now is an appropriate time to do something about it,” Bridger says.

“If you are looking at succession in one to two years time, you need to set the process in motion and year-end is a good time to get started and begin making appropriate financial plans.”

Other details that need to be checked before 30 June include:

• Record keeping – ensure all business records are updated and retained for five years (special requirements apply to CGT and substantiation). Ensure records itemising travel expenses, fringe benefits, motor vehicles, work related and other expenses are current.
• Asset registers – review the practice’s asset register and write-off any unwanted or obsolete plant and equipment prior to 30 June.
• Bad debts – review debtors and write-off any that are unlikely to be recovered. Ensure a refund is claimed for any GST paid to the Australian Taxation Office on the sale (if reporting income on an accrual basis).
• Bonuses – consider whether bonuses will be paid. (These are only deductible when actually incurred and the business is committed to paying them and they are non-discretionary.)
• Company loans – ensure private loans are either repaid or documented and made subject to minimum interest and repayment terms before lodging the company tax return. Ensure interest repayments are made prior to 30 June for any prior year loans.
• Capital gains tax – check if any assets have been sold during the year and whether capital gains can be matched to any capital losses.
• Dividends – check whether sufficient franking credits exist or will exist by 30 June if dividends are to be paid.
• Entrepreneur tax offset – consider whether this offset can be used prior to its abolition on 30 June.
• Odometer readings – take a year-end odometer reading if claiming motor vehicle expenses under the old statutory fraction rate rules.
• Prepay business expenses – consider whether prepaying business expenses is appropriate and if adequate cashflow is available.
• Salary packaging and fringe benefits – review staff salary packaging arrangements (including salary sacrifice agreements, which need to be made prospectively for next year).
• Superannuation contributions – to receive a deduction, ensure all employee superannuation entitlements are received by the relevant super fund by 30 June. Check employees’ concessional contribution levels, particularly if they are salary sacrificing.
• Trust distributions – trustees of discretionary trusts need to consider if beneficiaries will be entitled to income or capital on or before 30 June and need to make a resolution in accordance with the trust deed.
• Write-off assets – small businesses can write-off assets costing less than $1,000 (set to increase to $5,000 for 2012/13).