Updated: Jun 2, 2021
It’s that time of the year again! If you haven’t started tidying up your financial affairs before the end of the financial year, you’d better get cracking. Here are some tips to help you get started.
Instant Asset Write Off
From 7.30pm AEDT on 6 October 2020 until 30 June 2022, you are able to claim a full tax deduction for business assets purchased where:
the business turnover is <$5B for brand new assets only
the business turnover is <$50M for both brand new and second hand assets
the asset is installed and ready for use by 30 June, not just a deposit paid
this concession does not apply to non-trading businesses and investment properties
Normal depreciation cost limit applies for cars designed to carry less than one tonne, or fewer than nine passengers ($59,136 for FY21)
Vehicles must be registered in the business name before 30 June
Small Business Pool Balance Write Off
Your business is able to claim a deduction for the balance of your small business asset pool if your business turnover is <$10M. This is a handy and unexpected tax deduction for FY21, but means that unless new business assets are purchased in FY22, there will be no depreciation to be claimed in FY22.
Also important to note that the proceeds from any asset sold that has been fully depreciated are taxable profit to your business (watch car sales or trade ins).
Company Tax Loss Carry Back Concession
Consider accessing this new concession if you had company tax losses in FY20, FY21 or FY22, and you had paid company tax in FY19, FY20 or FY21 (talk to us about this, there are specific rules to follow).
Pay all employee super before 30 June 2021, including June 2021 quarterly contributions. As tax deductions are only allowed when the payment is made, pay well before 30 June so you can claim a tax deduction in this financial year. Remember, all SGC contributions are due no later than 28 days after the end of each quarter, but you only get a tax deduction when paid.
The cap for concessional super contributions is $25,000 for everyone up to 75 years of age. This cap includes the 9.5% compulsory contributions as well as salary sacrifice contributions, and includes contributions made to ALL funds if you have more than one.
However if you are aged 67-74, you must meet the work test of 40 hours or more in any 30-day period in a financial year to be eligible to make a super contribution.
Employees can claim a tax deduction for personal contributions up to the $25,000 cap inclusive of employer contributions if you are <75 years and pass the work test.
Investors and self-employed can claim a tax deduction on personal super contributions up to the $25,000 cap if you are <75 years and pass the work test.
Payments must be made to your fund no later than 30 June 2021. Don’t leave it until the last minute, because if your fund receives it on 1 July, it will count towards next year’s contributions cap. Allow for timing delays in receipt of funds.
Make sure any contributions you make before end of financial year are within the contribution caps, so you don’t pay excess contributions tax.
The limit for non-concessional contributions (NCC) is $100,000 per annum, with the ability to bring forward two years contributions if you are under age 67 years. If you are aged between 67 and 75 years, you can only make a $100,000 per annum contribution if you satisfy the ‘work test’. You are not allowed to contribute any NCCs if your member balance is >$1.6M.
Pension payments from your Super Fund are reduced to 50% of age based requirements, up to 30 June 2021. These revert to pre COVID rates from 1 July 2021.
Superannuation contribution caps rise from 1 July 2021 to $27,500 for concessional contributions and $110,000 for non-concessional contributions (or $330,000 if you utilise the 3 year bring forward concession).
The above is general information, and you should seek specific advice before making super contributions.
Write off any bad debts before 30 June. This means going through your debtors list and either collecting payment, taking action or writing it off. Debts should be written off when there is no chance it will be recovered. The debtor must be removed from your accounts receivable list to be eligible for a deduction.
If you account for GST on an accruals basis, you can make a GST adjustment when the debt is written off and claim back the amount of GST previously paid on the invoice.
Do any spending you would need to do anyway, such as buying stationery, servicing vehicles, repairing equipment, printing, advertising and company uniforms and claim a tax deduction this year.
Consider paying bonuses to your team for their hard work.
Pay for any business expenses in advance such as subscriptions and insurance if you are a business with turnover <$50M.
If you are a property investor you are eligible for a tax deduction if you prepay expenses such as interest, strata levies and insurance.
Identify any deposits you have received for work yet to be completed as it’s not taxable in this financial year.
If you have receivables that are more than 12 months old and you report GST on an accruals basis, you can claim the GST back on your BAS, even though you have not written the debt off as bad.
If you have creditors that are more than 12 months old, you must repay the GST previously claimed.
It’s a good time to review the structure you’re working under, to make sure it’s the best option for asset protection and flexibility for the distribution of profits, in the most tax-effective manner.
If you need some help with your tax planning before the end of financial year, we’re here to help. Contact us online or call 02 9526 1211.