30 June Wrap
25 June 2020
30 June is just around the corner, which means the start of another financial year. 2020 has been a whirlwind but it is time to start preparing to finalise the 2020 financial year to complete budgets and scenario modelling for the new financial year.
Effective tax planning reduces tax payable and that is so important in these times as it puts more money in the bank to help your business survive & grow.
What's changing in terms of legislation this year?
The Federal Budget has been delayed this year until 6th October amid COVID-19. .
The Company Tax Rate reduces to 26% starting on the 1st July 2020. This is for Companies with a turnover of less than $50m. This is down from 27.5% in this current year and will reduce to 25% on 1st July 2021.
Single Touch Payroll
Since the implementation of STP employers will no longer need to send employees their payment summary/group certificate for the financial year. Instead they will receive their payment summaries now known as an ‘Income Statement’ directly from the ATO via their MyGov account.
For employers you will need to lodge a finalisation for the financial year in your accounting software via the STP channel by the 14th July 2020. Please note this process will differ for each accounting program.
Reporting payments to contractors
If you are in the building & construction, cleaning, courier, road freight, IT, security or investigation services you need to report to the ATO each year the payments you have made to contractors. This is knows as a Taxable Payment Summary. We need to report to the ATO all payments made to these contractors along with their ABN, address and GST amounts. Some software products allow for this to be reported electronically via SBR. Alternatively, you can lodge the file on the business portal or complete a paper form.
$150,000 Instant Asset Write-Off
As part of the COVID measures any assets purchased between 12 March and 30th June that cost less than $150,000 are able to be claimed as a tax deduction in full at the time of purchase. Please note, it must be installed and ready for use before 30 June 2020 to be claimed in this financial year and the cost base will include freight and any installation costs.
This is now being extended to the 31st December. It's important to remember this isn't cash back, it's simply a reduction of your taxable income, therefore a reduction in the tax you have to pay.
Claiming Tax Deductible Expenses while working from home due to COVID-19
The ATO recently announced a new method for claiming expenses when working from home during COVID-19. The general rules to claim deductions still apply but the new shortcut method means employees can claim 80 cents for each hour worked at home.
Unused Concessional Cap Carry Forward
If you have a superannuation balance of less than $500,000, the 2020 financial year is the first year you are entitled to carry forward unused amounts of your cap (for a maximum of five years).
Due Dates & Action Items
Stocktake - 30th June - Includes livestock counts and on farm stock take of items such as grain on hand or chemical on hand.
Update Employees Pay Rates - Don't forget you need to ensure any employees on award wages have their pay rates updated. Increases to awards will start on 3 different dates for different groups of awards. Click here to view the new dates.
STP Finalisation - Due 14th July.
Taxable Payment Summaries - Due 28th August.
Quarterly BAS - Due 25th August.
JobKeeper - Due 14th of every month
Be Prepared For The New Financial Year
Organised recordkeeping is essential and Tax law requires that records be kept for five years, and they should include:
- sales receipts
- expense invoices
- credit card statements
- bank statements
- employee records (wages, super, tax declarations, contracts)
- vehicle records
- lists of debtors and creditors
- asset purchases.
Records can be kept on paper or electronically, but should be easily retrieved.
Organise a meeting with your accountant early in the new tax year to do some structured, longer term planning for the year ahead.
Assess your business and personal financial goals for the year and understand what you can do to meet those needs. Whether that includes growing your business, improving productivity or planning for an exit, you need time and good advice to put the plans in place that will enable you to meet your goals.
For more information please contact your local Boyce accountant.