Vet Practice - June 2015

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    15-Aug-2015

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<ol><li> 1. YOUR BUSINESS 26 Its not something you normally highlight on your calendar.Unlike birthdays,the end of the tax year doesnt involve the exchanging of gifts,but financial expertsargue that getting your fiscal affairs in order can be worthy of celebration.Tracey Porter reports The numbers game </li><li> 2. 27 FOR NEARLY 30 YEARS, GRAHAM Middleton has rifled through mountains of paper receipts and unformulated Excelspreadsheets to help leading veterinary practices stay on side with thetax man. But Middleton, the founding partner of Victorian accountancy firm Synstrat and author of several tomes including 50 Rules for Financial Success as a Veterinary Surgeon, says the problem withend of financial year (EOFY) advice from a veterinarians perspective is that it usually arrives too late to be of any use. If [vets] havent structured their businesses to share income with spouses when purchasing or starting a practice, it is too late to contemplate it prior to a 30 June year-end, particularly as restructuring often triggers capital gains tax considerations. If they havent structured their practices to enable retention of some earnings in order that personal taxable income can be smoothed over several years, its not going to be practical to achieve several years later at short notice. However, he says, there are still plenty of things veterinarians can do to get their finances up to speed ahead of the 2014- 15 EOFYnot least of which involves planning for thedays ahead. SUPERANNUATION Experts agree that raising superannuation contributions up to the permitted tax-deductible limit is a great way tosavecosts. RSM Bird Cameron director Pat Flanagan, whose area of specialty includes succession planning for veterinary practices, says currently theminimum superannuation businessowners must pay is 9.5 per centof an employees ordinary time earnings. However, business owners can generally claim a tax deduction forsuperannuation contributions that arepaid on time. Recently, the contribution limits for superannuation were raised up to $30,000 and $35,000 for those aged under 50 and over 50 respectively. Flanagan says vets should always consider contributing the maximum levels of both concessional and non- concessional superannuation as superannuation is, generally speaking, themost tax-efficient vehicle available. TRUSTS John Rowe, the owner of Sydney brokerage firm Vet Finance, says tax concessions varydepending on whether the entity is setup as a sole trader, partnership, company or trust. While there may be some common benefits in tax planning, he says its important to remember some entities may also have limitations on what they can claim or carryforward depending on turn over. However, Flanagan says that savings can also be made by vets who operate their business via a trust, providing trustees decide how the profit will be distributed prior to 30 June. He says its important this decision is recorded and signed off before the end of the financial year as vet practice owners can find any profit is taxed at the top marginal rate of 47 percent if appropriate steps are not taken prior to the EOFY. By being proactive, you can ensure that you know of the obstacles that lay on the road ahead and you can even take steps to ensure these obstacles are less significant and easier to navigate past. HEALTH COVER Most small- to medium-sized enterprise (SME) owners know that if they have ataxable income of $90,000 (single) or $180,000 (joint) and are without health insurance, they will be required to pay the Medicare levy surcharge. However, Middleton notes, it is a little-known fact that an individual is not required to have extras cover as basic hospital cover will suffice. He says those in the vet sector should be aware that whereas hospital cover pays out 96 per cent of private hospital costs on average, this falls to 52per cent of costs rebated against extrasexpenditure such asdental, opticalor physiotherapy. Middleton suggests vets consider reviewing their health insurance regularly and if it includes extras cover then consider the actual claims made over its duration. The fact is that on average, funds skim off 22 per cent of the fees paid for ancillary cover. If paying a fund 22 cents in the Superannuation is, generally speaking, the most tax-efficient vehicle available. Pat Flanagan,RSM Bird Cameron Tax time tips in brief 1. Keep in regular contact with your accountant who will review and be across your financial situation. 2. Pre-pay interest on investment properties or lease agreements on equipment and cars. Pre-pay expenses where possible. 3. Maximise superannuation contributions for yourself before 30 June and pay staff entitlements. Contributions must be receipted by your super fund, not just paid; otherwise the tax deductibility of the contribution may be disallowed for that year and fall into the next financial year. 4. Review your bad debts before 30June and write off any you areunlikely to recover. 5. Watch stock levelsobsolete/out- of-date stock may be able to be writtenoff. </li><li> 3. dollar to recycle 78 cents of benefit to you sounds like a pretty poor deal for most, then its true. Most poker machines have ahigher payout percentage. SUCCESSION PLANNING Rowe, who has been in the financial services industry since 1981, says many vets are working to get out of their business but struggle to find a way to plan for it. He says a good succession plan creates a smooth transition from the old owner to the new with minimal disruption to the business and clients. It is generally better to sell ones practice to an internal vet as opposed to bringing in a new purchaser, Rowe says. A run-down practice will not realise ones full capital gains [but] working hard for the last five years of your working life, expanding and developing your business ismore likely to maximise your return. AREAS TO AVOID Never buy an investment asset such as arental unit just because an agent or aproperty spruiker talked up the tax benefit, says Middleton. There are always better financial options available to vets than buying investment unitsor houses. He saysthat thesame is true of hobbyfarms. You may like to watch the cattle or sheep grazing in the meadows, or enjoy the smell of freshly baled hay but, financially speaking, hobby farms are black holes into which health professionals pour their profits. Flanagan says that where tax optimisation is the goal, its best to invest in the areas of the business that will provide prompt tax deductions. Therefore the areas of spending to avoid would be capital expenditure or pre-payments where the deduction will be delayed to later years. Capital expenditure such as asset purchases or renovations will be treated as assets of the business and a deduction will only be claimed as the asset depreciates in value. Where pre-paid expenses extend beyond the next year, or for larger purchases, part or all of the tax deduction YOUR BUSINESS NVC_VetPractice_halfpage_185x127_v2.indd 1 28/01/15 2:10 PM will be deferred, he says. Rowe says many business owners tend to panic towards the EOFY and commonly look for as many tax deductions as possible. But this does not always work inthe vets best interests, he says. The buying/financing of cars and equipment in June is not necessarily goingto obtain those tax deductions oneislooking for given there is little, if any, interest or depreciation. The real benefit is therefore obtained in the following tax year. The best advice for taxplanning is to start early and be in regular contact with your accountant and finance broker. Proper planning willprovide better results. Avoid making panic purchases. </li></ol>