Tax Tips for EOFY
- Published: June 11, 2020
- Author: Asparq
30 June Is Fast Approaching
It’s been a big start to 2020 with COVID-19 changing the way a lot of us work and do business. Below is a guide with some EOFY tax tips for you to consider. This is general information only, so don’t act on anything without talking to your accountant and/or financial planner first. Our Accountants live and breathe tax so they would be very happy to whip up a strategy just for you.
COVID-19 Support Packages & Tax
Instant Asset Write Off
Between 12 March until 30 June the instant asset write-off threshold for each asset is $150,000 (up from $30,000). Businesses with an aggregated turnover of less than $500 million are now eligible (up from $50 million).
COVID-19 Cash Flow Boost & Tax
The Cash Flow Boost available as part of the COVID-19 relief package is treated as ‘non-assessable non-exempt’ income for tax purposes and is not reportable on the BAS. It is treated as other income not included in assessable income for companies. As these payments may create retained earnings, they may need to be declared as a non-franked dividend in the future.
How Are Job Keeper Payments Treated?
JobKeeper payments count as assessable income of the business and therefore your effective tax rate will apply. Normal tax rules in relation to payments to your employees apply. Additional payments are now exempt from payroll tax.
2019-20 payroll tax has been waived for businesses with annual Victorian taxable wages up to $3m.
Landlords can apply for a 25% reduction in tax payable and to defer their Land Tax payments. This applies to residential and commercial landlords that meet certain criteria, visit the State Revenue Office website for more information.
Update your vehicle logbook/s
Update your vehicle log books to accurately capture all your kilometres for the financial year. Also include your odometer readings and receipts when specifying your work-related vehicle use.
Take advantage of depreciation
Review your businesses depreciation schedule to assess wear and tear on business assets. According to the ATO “From 12 March 2020 until 30 June 2021 the Backing business investment measure provides a time-limited (15-month) investment incentive to support business investment and economic growth, by accelerating depreciation deductions.”
Pre-pay your expenses
You may be able to pre-pay some of next year’s expenses such as rent, insurance, subscriptions. The usual rule is that the service e.g. your rent or insurance premium will conclude in the next income year.
Make and document any trust resolutions
Trustees of discretionary trusts are required to make and document resolutions on how trust income should be distributed for that financial year by 30 June. According to the CPA “ If a valid resolution is not executed by 30 June, any default beneficiaries under the deed will become presently entitled to trust income and subject to tax (even where they do not receive any cash distribution), or the trustee will be assessed at the highest marginal tax rate on any taxable income derived but not distributed by the trust.”
Claim Deductions for Professional Advice When Starting A Business
If you have started a business in the last financial year, firstly congratulations! If you have used an accountant or lawyer to help you then you might be able to claim some of their fees on your tax return.
Write Off Bad Debts
At this time of year, it is a good time to decide if any balances owing to you are bad debts (unlikely to ever be paid) and write them off so they can be claimed as a deduction.
Do your Stocktake!
Stocktake is required for a large amount of businesses and is often seen as a chore. Your stocktake arms you with valuable data to make business decisions about what is working and what isn’t. Stocktake also allows you to have the most accurate income figure which affects the tax you pay.
Review Your Private Company Loans
A private company loan can be treated as an unfranked deemed dividend for a taxpayer unless an exemption applies. You could consider entering a loan agreement, declare a dividend, or pay the loan back. The rules around private company loans are very tricky so make sure you seek advice!
Make sure superannuation guarantee payments are up to date. Employers may also claim deductions for superannuation payments made on behalf of their employees in the year they are made. Do this sooner rather than later so the super fund gets them in time.
Ensure employee bonuses are documented (including their values) in a properly authorised resolution such as board minutes prior to 30 June. This is important if you want to claim the deduction this year and the bonus will be paid in the new financial year.
Consider if your business structure is right for you going forward
Each type of business structure has different tax liabilities. You might be paying more tax than you need to if you haven’t chosen the best structure for your needs. If not this financial year, this could be worth considering in the future.
Get your receipts in order
Think back over the financial year about any expenses you have made for work that you may be eligible to claim on tax and gather up receipts. The ATO has made it easier for those working from home during COVID-19 by introducing a shortcut claiming method.
Make your annual charitable donations
Any donation over $2 is tax deductible, so make your annual charitable donations before 30 June.
Making appropriate superannuation contributions can be an effective tax planning strategy. A superannuation fund records contributions when they are received (say July) even if the contributions relate to a different period (say June). Many people ending up paying excess tax because they left it too late to make a contribution.
Personal concessional (before tax) contributions
Depending on your age, you may able to contribute up to $25,000 to your superannuation in the year ended 30 June 2020. You can usually arrange with your employer to salary sacrifice some of your wage into super. A taxpayer over the age 75 will be excluded from making additional Concessional Contributions above the Super Guarantee.
In some instances you may be able to exceed the $25,000 cap by bringing forward unused Concessional Contributions from the previous financial year. Individuals with a super balance below $500,000 may be eligible to do this.
Individuals (depending on their income) are able to make a non-concessional contribution to super and have the government also contribute (up to $500).
If your spouse’s total assessable income was less than $40,000 and you contribute up to $3,000 to their superannuation fund, you may be eligible for an offset of $540.
Major changes occurred to superannuation rules back in 2017, make sure you are familiar with these rules.
If you are under 65 and your super balance is under 1.6 million you may be able to contribute up to $100,000 and use the “bring forward” arrangement if you were to receive a large sum of money suddenly. For example if you inherited $300,000 you may be able to contribute the full amount that year, however you will have used your limit for 3 years.
The first home saver scheme and any excess concessional contributions count towards this cap. Once you are over 65 it is a flat $100,000 (with no bring forward option) and you may be subject to a work test. Those 65 and older can make a downsizing contribution of $300,000 which doesn’t count towards the cap.
If you take out income protection you may be able to claim the cost of a premium you pay for insurance against the loss of your income. This applies to policies held outside your superannuation fund and not policies that compensate you for physical injury e.g. trauma, life insurance, critical care.
For all the above – Chat with your accountant and/or financial planner now!
Tax planning is something that should be done on a regular basis. However, the month of June is often a good time to assess your situation. If you would like to discuss any of the tips above, please get in touch.
The information contained herein is of a general nature only and is not intended to be relied upon nor is it a substitute for appropriate professional advice. Whilst all care has been taken in the preparation of the material, it is not guaranteed to be accurate.Individual circumstances are different and as such, require specific examination. Asparq cannot accept liability for any loss or damage of any kind arising out of the use of or reliance upon all or any part of this material. Additional information may be made available upon request.
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