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As a small or medium-sized business owner, you have a lot on your plate. Among the many complexities you face, understanding how dividends from your business are taxed can certainly rank as one worth dealing with!
With that in mind, we thought we’d give you some guidance below to help make the taxation of dividends a little more manageable.
Put simply, dividends are essentially a portion of a company's profits distributed to its shareholders. They serve as a way to return capital to the shareholders and reward their investment in the company. It is of course important to note here that in the eyes of the Australian TaxOffice, dividends are considered income to the shareholder and are, therefore, subject to income tax.
The tax treatment of dividends can vary based on several factors, including the size of the dividend, your other sources of income, and whether the dividends are fully franked or unfranked.
Fully franked dividends come with franking credits, also known as imputation credits.
These credits allow Australian companies to pass on the tax paid at the company level to their shareholders. When you receive fully franked dividends, the company has already paid tax on them. As a shareholder, you might be entitled to a tax offset, which helps avoid double taxation. If the franking credit exceeds your personal tax payable, you may even be eligible fora refund. However, if the franking credit is less than your personal tax payable, you will be liable for the shortfall.
On the other hand, unfranked dividends have not had any tax paid at the company level. As a result, these dividends are fully taxable to you as the shareholder.
Dividends can be a valuable income stream for you or your business, but understanding how they are taxed is crucial for effective tax planning. If you need help understanding how dividends from your business are taxed or have a complex tax situation with regards to dividends, our team atAttune Advisory will provide a comprehensive analysis of your specific situation, answer your questions, and guide you towards the best strategies for your financial success.
Make your financial situation your priority by booking an appointment via email or by giving us a call us on 1300 866 113.
Are you a business owner feeling the weight of high marginal tax rates despite running a profitable enterprise? If so, it's time to consider incorporating your business and we can help ... Incorporation can provide significant tax benefits by allowing you to leave profits within the company, which are then taxed at a more moderate corporate tax rate of 25%.
The 25% corporate tax rate applies to businesses with an annual aggregated turnover below $50 million, as long as their passive income(such as rents, interests, dividends, etc.) does not exceed 80% of their assessable income. By incorporating your business, you can take advantage of this lower tax rate, allowing you to retain more of your hard-earned profits.
However, it's important to understand that incorporating your business involves navigating certain rules and regulations. The PersonalServices Income (PSI) rules, in particular, may impact how income is attributed to you as the business owner. If your company provides personal services and does not meet the required results, 80%, unrelated clients, business premises, and/or employment tests, the income of the company could be attributed to you personally.
To ensure a smooth and successful incorporation process, it's crucial to work with experienced professionals like the team at AttuneAdvisory. Our experts have in-depth knowledge of the tax landscape and can guide you through the complexities of incorporation, ensuring that you maximise the tax benefits available to your business.
By incorporating your business, you not only unlock the potential for lower tax rates but also gain access to a range of other advantages. These include increased credibility and professionalism, limited liability protection, potential access to more favourable financing options, and enhanced opportunities for business growth and expansion.
At Attune Advisory, we pride ourselves on providing strategic, tailored solutions that meet the unique needs of each business we work with. Our team will carefully analyse your situation, taking into account factors such as your business structure, industry, and growth plans. We'll then develop a comprehensive incorporation strategy that aligns with your goals, ensuring you reap the maximum tax benefits while remaining compliant with relevant regulations.
As you contemplate the advantages of incorporating your business, we recommend consulting the Australian Taxation Office (ATO) website for additional information. The ATO website provides valuable resources on individual income tax rates, including details on the 25% corporate tax rate and the conditions that must be met to qualify for this rate.
Don't let high marginal tax rates hinder the growth and profitability of your business. Take the first step towards tax optimisation and financial success by incorporating your business with Attune Advisory. Our team of seasoned professionals is here to guide you through the process, ensuring you unlock the tax benefits you deserve. Call the team today on 1300 866 113 or send us an email to schedule a consultation and let us help you navigate the path to amore tax-efficient future for your business.
Are you a business owner looking to sell your business and embark on a new chapter? The process of selling a business can be complex and overwhelming, but with the right guidance, you can set yourself up for a successful sale.
Below, we'll explore the essential steps to prepare for selling your business, including where and when to sell, how to navigate joint ownership, the key steps in the business sale process, and how your accountant can support you throughout the journey.
Before putting your business on the market, it's crucial to determine its value. However, valuing a business and this can be a challenge for many. To arrive at a fair valuation, it's recommended to employ forecasting models informed by external economic data, conduct due diligence, and emphasise current cash flow. Working with the Attune team’s specialists can ensure that you reach an accurate and realistic valuation that attracts potential buyers.
When it comes to selling your business, you have options.One approach is to engage a business broker who will act on your behalf, working to secure the best price, ensure legal compliance, and make the selling process as smooth as possible. While brokers typically charge an upfront fee and take a commission, their expertise and industry-specific knowledge can be invaluable.
Alternatively, you can choose to sell your business independently, leveraging technology and doing the legwork yourself. This option requires organising your financials, advertising online, handling enquiries, and arranging a contract of sale with the assistance of a lawyer and your accountant (that’s us!).
Timing plays a crucial role in maximising the sale of your business. Just as winter is the prime season to sell coats, every industry has its peaks and troughs. Consider variables such as seasonal trends, the local economy (including cash rate status), industry-specific events, competitor movement, and your cash flow and financial history. Understanding these factors will help you determine the optimal time to put your business on the market and attract potential buyers.
As part of our work with your business sale, we can provide some insights and guidance on timing the sale of your business.
If you co-own your business with someone else, selling adds an additional layer of complexity. Ideally, you will have a shareholder or partnership agreement in place that outlines the respective shares of each owner, processes for exiting the business, and dispute resolution mechanisms.However, if such an agreement doesn't exist, it's crucial to address questions like what happens if you want to sell but your partner doesn't. Working with a solicitor and the Attune team can help you navigate these complexities and ensure a fair and smooth sale.
Once you've defined your sales strategy, including the desired price and the approach you'll take, it's time to proceed with the business sale process. This involves advertising your business through appropriate channels, organising your paperwork (financial, loan, and tax statements), negotiating the sale price and terms, obtaining a professional contract of sale, communicating with your employees about the impact of the sale, exchanging funds on the settlement date, transferring lease agreements and assets, signing over directorship, and notifying relevant parties about the sale.
Even if you choose to handle the sale on your own, partnering with the Attune team is crucial for a smooth and successful transaction. Here's how we can support you:
Selling your business is a significant undertaking that requires careful planning, expert advice, and meticulous execution. By partnering with Attune Advisory, you can ensure that your sale is optimised for success. Our experienced team will work closely with you to guide you through the entire process. Set yourself up for a smooth and rewarding business sale by contacting Attune Advisory on 1300 866 113 – you won’t regret it.
As the end of the financial year approaches, it's crucial for individuals with a Self Managed Superannuation Fund (SMSF) to be prepared and proactive. This is true not only for the end of this financial year but also, planning for moving into the next.
With proper planning and guidance from trusted experts like the Attune Advisory team, you can optimise your SMSF's performance and ensure compliance with regulatory requirements. In this article, we'll explore key considerations and actions to take before EOFY to make the most of your SMSF.
It's important to note, even if you’ve left the following until now, it’s not too late, but a call to the Attune team (1300 866113) immediately is crucial if you find yourself staring at June 30 approaching with things left to do.
1. Addressing Prior Year Management Points:
To start off, it's essential to address any management points raised by your SMSF auditor from previous years. These points could include issues related to documentation, compliance, or internal controls. By resolving these matters, you can ensure a clean slate for your SMSF and avoid potential penalties or complications down the line.
2. Validating Unlisted Investments:
If your SMSF holds unlisted investments, such as properties, it's crucial to obtain sufficient and appropriate evidence to support the annual trustee assessment of their market value. The AustralianTaxation Office (ATO) emphasises the importance of multiple forms of evidence, rather than relying solely on one source like a real estate kerbside valuation.Consider seeking additional evidence such as comparable sales to strengthen the valuation process and ensure compliance.
3. Reviewing the SMSF's Investment Strategy:
Regularly reviewing and aligning your SMSF's investment strategy is vital to ensure it remains in line with your financial objectives. It is recommended to document this review in writing (minuted)annually, serving as evidence of the trustees' diligent oversight. AttuneAdvisory can assist you in conducting a comprehensive review of your SMSF's investment strategy to optimise its performance and mitigate potential risks.
4. Settling Property Trust Profit Distributions:
For SMSFs that have pending property trust profit distributions from the 2022 financial year, it's essential to ensure these distributions are paid before the end of the current financial year. Failing to settle these distributions can result in compliance issues and potential taxation implications. Engage with Attune Advisory to navigate this process smoothly and maintain compliance with regulatory requirements.
5. Complying with Event Based Reporting:
Event Based Reporting requirements by the ATO come into play in various instances, including commencing or stopping a pension and withdrawing specific lump sums. It's crucial to ensure your SMSF has been diligently adhering to these reporting obligations. By staying on top of event-based reporting, you can avoid penalties and maintain a transparent and compliant SMSF.
6. Updating Electronic Service Address (ESA):
Individuals receiving employer contributions into their SMSF need to be aware of changes regarding the Electronic Service Address(ESA). With the discontinuation of the Australia Post ESA, a new provider will need to be selected from 1 July 2023. Attune Advisory can provide the necessary assistance in updating your ESA to ensure uninterrupted communication and seamless employer contributions.
As the financial year comes to a close, taking proactive steps to maximise the potential of your Self Managed SuperannuationFund is vital – especially at this late stage. Attune Advisory is here to guide you through the process, ensuring compliance with regulatory requirements and optimising your SMSF's performance now and into the future.
If you’d like to discuss any part of your SMSF strategy, don’t hesitate to call us today on 1300 866 113 so we can ensure you’re all set for next financial year!
