Planning to purchase

20th March 2017 5:30 PM
Image of business partners handshaking over business objects on workplace Image of business partners handshaking over business objects on workplace Thinkstock

WHEN your business looks to purchase or sell an asset, planning can save you money. 

Amongst many other considerations direct tax, duty and land tax can play a large role in that planning. Timing alone can save. 

For example, the $20 000 instant asset write-off is a notable tax incentive for small business (aggregated turnover of less than $2 million) to buy machinery or equipment. 

The sunset date is June 30, 2017, so qualifying businesses can secure the incentive by bringing forward any planned asset investments into the next few months. 

That also makes sense in the current low interest-rate environment.

When timing the sale of a capital gains tax (CGT) asset, be aware of the 50% discount on any capital gain in relation to an asset held for twelve months or more. 

Note the discount for superannuation funds is 33%, while companies are not eligible for this discount. 

So, if the discount may be available, to delay the sale for a few weeks to fall outside the twelve months is an important planning tool from a tax perspective.

The twelve months are measured from the day that of signature of the contract to dispose of the asset (not the date of settlement).

Where there is no contract, the 12 months are measured from when the change of ownership occurs.

Sometimes a decision must be made whether to suffer one form of tax in order to get the benefit of a saving of some other form of tax. 

So, to purchase land into a company can prevent that land from being aggregated with individual land holdings for land tax, but would forfeit the 50% CGT discount (because companies are not eligible for it). 

However, be careful, if the company purchases as trustee of say a special trust, the benefit of the land tax threshold is lost, which can be a most unwelcome impost in the circumstances.

This is yet another instance where even non-business purchases that are not carefully planned out can have rather unforgiving results, say where a company purchaser of residential land acts as trustee of a special trust, so is ineligible for the 50% CGT discount and the land tax threshold.

For more information about the Chamber please visit coffschamber.com.au or to ask how the Coffs Harbour Chamber of Commerce assists our members to be part of a network of advisors who can help you with the best planning for your next purchase call the Chamber Office on 6651 4101.