With the agricultural industry experiencing plenty of positivity with increases in profit in many sectors as well as high rural property sales, the impact of 'tax time' may sneak up quickly if planning isn't discussed well in advance.
Self managed superannuation funds are one strategy where many agricultural businesses are finding solutions to their challenges. SMSFs are a low tax environment, where the most tax paid is 15 per cent.
Recent changes to SMSFs include membership increases where you can now have six members in a SMSF, up from four.
This means larger family groups can have one fund, allowing you to pool your super together to buy assets, including property which is used in your business.
July 1, 2021 sees the ability to contribute more to your super. Plus, if you sell your home, you may be able to contribute money from the sale into superannuation.
You need to be 65 and over to do this, but the government has announced it intends to reduce this to 60 years and over.
Please be aware that you must contribute this money within 90 days of settlement, so time is of the essence.
From July 1, 2022 the government has also announced its intention to remove the current work test which you must currently pass if you are between the age of 67-74 years to be able to contribute to super.
The work test requires you to work at least 40 hours over 30 consecutive days before a contribution be made.
All of these rule changes are very positive, but there is a twist.
The government has also been reminding SMSFs to make sure transactions between related parties (your business) are done at 'arm's length'.
Would your SMSF have offered the same deal to someone you did not know? If the answer is no, you could be up for tax of 45pc. Ouch!
SMSFs are a financial product, and advice must be given by a licensed professional. If you have any questions about these changes, contact your licensed professional.
- Craig Wilkes is a director in a Central Queensland Chartered Accountant firm. This article offers general information only. You should consult your personal adviser to seek advice relevant to your personal circumstances before taking action.