Tax Life Cycle of a Medical Professional - Part 2

Speaker:

The Tax Life Cycle of a Medical Professional – Part 2

Brett BeaverAssociate PartnerGooding Partners Chartered Accountants

PLEASE SWITCH MOBILE PHONES OFF OR SILENT

FRIENDLY REMINDER:

Disclosure Statement

The information presented in this presentation is for general guidance only. It is essential to take professional advice on

specific issues and their impact on any individual or entity. No liability can be accepted for any errors or omission or for any

person acting or refraining from acting on the information provided in this presentation.

Outline of the session:

General business management considerations.

Maximising business value for sale.

Minimising capital gains tax and income tax on sale.

Your operational…

Business management phase(a slight diversion from tax!)

General business considerations

Budgeting and cash flow analysis;

Maintaining accurate and timely management accounts;

Maintaining adequate insurance cover;

Financing or refinancing – speak to your advisor!

Be mindful of tax elections such as Family Trust Elections and Interposed Entity Elections;

Continue to review your asset protection strategies.

Embracing the twilight years…

Maximising business value for sale

Matters to consider prior to sale

Speak to your advisor and plan;

Get your “house in order”;

Consider your opportunities to increase value;

Do it now and don’t wait!

What are you selling?

Selling your business?

Selling your equity in a business structure?

This will determine how your Practice is packaged and sold.

Each option can result in varying tax consequences.

Sales contract considerations

I am not a lawyer… Have your lawyer provide legal opinion on the

contract; Your tax advisor should also review to flesh out tax

consequences of sale; Consider your opportunities to increase value; Practical contract considerations.

Minimising capital gains taxand income tax on sale

Stock, Consumables and P&E

Allocation of the sale price;

Non-capital assets will generally include stock, consumables and Plant and Equipment;

Generally subject to income tax;

Must deal at arm’s length.

Capital Gains Tax – brief overview

20 September 1985;

Assets acquired pre-20 Sept. 1985 may retain pre Capital Gains Tax (CGT) status;

A capital gain is generally the difference between the sale price received and the amount you paid for the asset.

General CGT Discount

Available to individuals, trusts and superannuation funds;

50% General CGT Discount for individuals and trusts;

1/3rd General CGT Discount for superannuation funds.

Small Business: $2m Test

A small business entity is an individual, partnership, company or trust that:

Is carrying on a business; and Has less than $2m aggregated turnover

Methods to calculate turnover;

Planning point.

Small Business: Maximum $6m Asset Test

Assets of the business and related entities must be less than $6m;

Asset definition is wide, but consider liabilities, including provisions;

Excluded assets;

Planning point.

Small Business: other basic requirements

The “basic conditions” of the small business concessions are: You are a small business (i.e. meet the $2m

Turnover or Maximum $6m Asset tests) A Capital Gains Tax Event must occur There must be a capital gain The asset being sold must be an “Active Asset”

Additional requirements if the asset is a share in a Company or unit in a Trust.

Small Business: 15-Year Exemption

This concession allows you to completely disregard the gain;

Various conditions to qualify for the retirement concession;

Under 55 – must be paid into your Super;

Over 55 – you keep the proceeds;

Planning point.

Small Business: 50% Small Business Reduction

This concession allows you to further reduce the net capital gain by 50%;

To qualify, you only need to meet the “basic conditions”;

Essentially reduces the taxable capital gain by 75%.

Small Business: Small Business Retirement Exemption

No retirement necessary!

Various conditions to qualify for the retirement concession;

Lifetime cap of $500,000 per person;

Planning point.

Small Business: Small Business Rollover Relief

Does not reduce a capital gain, simply defers it to a later date;

Only the “basic conditions” to be satisfied, along with the acquisition of a replacement asset within the “replacement period”;

Replacement asset to be an active asset; Planning opportunity.

Summary

Be prepared and plan for sale;

Seek appropriate legal and accounting/tax advice;

Deal at arm’s length;

Be aware of the tax consequences on sale of your practice.

Any Questions?