What accountants need to know about the new minimum tax, the fixed-distribution election and the planning decisions ahead.
The election that saves tax on income is the one that costs the small business CGT concessions on exit.
Treasury's draft legislation is out. Three Bills, seven documents, and two measures nobody was expecting. Ninety minutes on what was released, what it means, and what to advise.
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The minimum tax itself is manageable for most clients. The election that lets a trust avoid it is where the damage will be done, and it is an easy election to make for all the right reasons on the income figures.
The election requires the capital share to equal the income share. Nominate a company at 39% to get retained profits taxed at 25%, and you have also committed 39% of every future capital receipt to that company, including the exempt amount under the small business CGT concessions. On a $5 million goodwill sale that is a seven figure amount sitting in a company, extractable only at the top marginal rate. There is one election window in the 2028-29 year, and it can never be remade.
Peter gives a direct read on each measure, the provision it rests on, and what to do about it before the deadlines close.
What the minimum tax actually costs a client, why the floor stops applying above $45,000 of beneficiary income, and why the headline figure is smaller than the coverage suggests.
The capital follows income rule worked through on a real sale, so you can see exactly where the small business CGT concession money ends up and what it costs to get it out.
Four destinations for a client's trust, what decides which one, and what has to happen before 1 July 2027 and 1 July 2028.
Nine areas, in the order you will need them when a client calls and asks what to do now.
Three Bills, seven documents, and two measures nobody was expecting. An electable regime, and a new definition of fixed trust that applies across the entire tax law.
It is a 30% floor. Above $45,000 of beneficiary income there is no floor to hit. The exposure is capped at a little over $8,000 per beneficiary per year, and for many clients it is close to nothing.
Nominate a company for the income benefit and you commit the same percentage of every future capital receipt, including small business CGT concession amounts, to a company that cannot pass them to individuals.
Dividend access shares and alphabet shares are out. The share register freezes on nomination, permanently, with death and Family Law orders the only exits.
One resolution inconsistent with the nomination and the trustee is assessed on 100% of net income at the top rate plus Medicare. Every entitlement for the year is deemed never to have existed, and the election can never be remade.
PCG 2016/16 legislated, applying across the whole tax law. The genuine good news in this package, and it reaches well beyond the minimum tax.
Duty is payable, the 50% active asset reduction is stranded, and there is still no exposure draft for the provisions.
Do nothing, convert to a company, elect with a corporate nomination, or license the business out of the trust. What decides which, for which client.
What has to happen before 1 July 2027, and what has to exist before 1 July 2028 or it can never be used.
Anyone who will be asked "so what do we do now" between today and 2028, and would rather have the answer ready than work it out on the call.
Feedback from accountants who have attended previous Advisers Digest sessions.
"Simple and practical solution. Peter focuses on a simple practical solution without trying to sell any over the top software for small practitioners."
"The slides were very clear and informative and easy to follow. Will be a great resource to refer back to in the future."
"Pete is easy to listen to and delivers in a way that doesn't overwhelm or panic you."
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Ninety minutes with Peter Johnson on what Treasury actually released, where the election costs more than it saves, and what has to be in place before 1 July 2028.
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