The end of financial year is coming and if you haven’t done so already, it’s time to start thinking about tax planning.
You should be seeking to understand your likely tax position so that you can plan for any tax payments and/or determine if you need to vary your PAYG installment obligations. The next step is to then look at what opportunities there may be, to achieve a better tax outcome
If you need assistance with your tax planning, have any questions about your individual circumstances, or would like to know how we can assist you to legally minimise your tax, please do not hesitate to call us on:
Small Business Concessions
Taxpayers can make prepayments (up to 12 months) on expenses (e.g. Loan Interest, Rent, subscriptions) before 30 June 2018 and obtain a full tax deduction in the 2018 financial year.
The $20,000 instant asset write-off has been extended for another 12 months for businesses with an aggregated turnover of $10,000,000 or less; it will expire on 30 June 2019. Other assets (above $20,000) will be added to the general small business pool and depreciated at 15% in the first year and 30% thereafter.
The tax rate for small companies (aggregated annual turnover of less than $10m) will be 27.5%.
Making Superannuation Payments for employees
To claim a tax deduction in the 2018 financial year, you need to ensure that your employee superannuation payments have reached the employee’s super fund bank account by 30 June 2018.
As most clearing houses may take up to five business days to pass on funds to the employee’s superfund we strongly advise that you make your super payment no later than 6:00pm (AEST) Friday 22nd June 2018. For any last – minute superannuation payments, we recommend that you arrange for a bank cheque made payable to your employee super fund prior to 30 June 2018.
Superannuation Guarantee Amnesty
On 24 May 2018, Minister for Revenue and Financial Services announced the commencement of a 12-month Superannuation Guarantee Amnesty (the Amnesty). The Amnesty is a one-off opportunity for employers to self-correct past super guarantee (SG) non-compliance without penalty. Subject to the passage of legislation, the Amnesty will be available from 24 May 2018 to 23 May 2019.
Employers who voluntarily disclose previously undeclared SG shortfalls during the Amnesty and before the commencement of an audit of their SG will:
- not be liable for the administration component and penalties that may otherwise apply to late SG payments, and
- be able to claim a deduction for catch-up payments made in the 12-month period.
Employers will still be required to pay all employee entitlements. This includes the unpaid SG amounts owed to employees and the nominal interest, as well as any associated general interest charge (GIC).
The Amnesty applies to previously undeclared SG shortfalls for any period from 1 July 1992 up to 31 March 2018. It is important to note that the Amnesty does not apply to the period starting on 1 April 2018 or subsequent periods.
Employers who are not up-to-date with their SG payment obligations to their employees and who don’t come forward during the Amnesty may face higher penalties in the future.
Accessing the Amnesty is a simple process. If you are able to pay the full SG shortfall amount directly to your employees’ super fund or (funds), then complete a payment form and submit it to us electronically through the business portal.
If you are unable to pay the full SG shortfall amount directly to your employees’ super fund or (funds), then complete and lodge a payment form and we will contact you to arrange a payment plan. If you chose to, you can start payment before we contact you. This will reduce the GIC you would otherwise have to pay.
For more information go to https://www.ato.gov.au/Tax-professionals/Newsroom/Superannuation/Superannuation-Guarantee-Amnesty/
FBT Exempt Items / Tools of Trade
The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit. Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital Cameras, Briefcases, Protective Clothing, GPS navigation receivers and Mobile Phones.
If structured correctly, the Employer will be entitled to a full tax deduction for the reimbursement payment to the employee (for the equipment cost), and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased. You should buy these items before 30 June 2018.
Defer Income
Where practical, defer issuing further invoices and/or receiving cash/debtor payments until after 30 June 2018. Please note that ATO will generally require you to pay tax on income that you have either received or become entitled to due to the completion of work.
Bring Forward Expenses
Purchase consumable items before 30 June 2018. These include stationery, printing, office and computer supplies. Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2018.
Motor Vehicle Log Book
Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2018. You should make a record of your odometer reading as at 30 June 2018 and keep all receipts/invoices for motor vehicle expenses. The same log book can be used for 5 years.
Defer Investment Income & Capital Gains
If practical, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2018.
Capital Gains are determined by the date on which a contract is entered into. If you are considering selling shares, business, or property, you may wish to delay signing the contract until the new financial year (depending upon your level of taxable income in the year to 30 June 2018 and projected taxable income for the next year).
Investment Property Depreciation
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
Since 1 July 2017 the Government has disallowed deductions for travel expenses relating to inspecting, maintaining, or collecting rent for a residential rental property. It has also limited ‘plant and equipment’ depreciation deductions to new outlays by investors in residential real estate properties.
Private Company (“Division 7A”) Loans
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2018. Loans must either be paid back to the company or have a Division 7A loan agreement entered into before the lodgement date or risk having it counted as an unfranked dividend in the return of the individual.
Year End Stock Take / Work in Progress
If applicable, you need to prepare a detailed Stock Take and/or Work in Progress listing as at 30 June 2018. Review your listing and write-off any obsolete or worthless stock items.
Rules applicable for selling property
A reminder regarding the rules applying to sales of taxable Australian real property with a market value of $750,000 or more. A 12.5% non-final withholding tax will be incurred for all contracts entered into on or after 1 July 2017, unless a clearance certificate or variation certificate is obtained.
If you are selling real property with a market value of $750,000 or more and are:
- an Australian resident vendor, you can avoid the 12.5% withholding by providing a clearance certificate to the purchaser prior to settlement
- a foreign resident vendor, you may apply for a variation of the withholding rate.
Purchasers must pay the amount withheld at settlement to the ATO.
Purchasers must pay the amount withheld at settlement to the ATO.
Trustee Resolutions
Ensure that Trustee Resolutions distributing income are prepared and signed before 30 June 2018 for Family (Discretionary) Trusts.
First Home Super Saver Scheme
The FHSS scheme allows you to save money for your first home inside your superannuation fund. This will help first home buyers save faster with the concessional tax treatment within super. From 1st July 2018 you can then apply to release your voluntary contributions, along with associated earnings, to help you purchase your first home. You must meet the eligibility requirements to apply for the release of these amounts.
Downsizer payments Superannuation
From 1 July 2018 over 65’s will be able to contribute part of the proceeds of the sale of their home towards their superannuation. This will be a non-concessional (not taxed in the superfund) contribution and eligible individuals can contribute up to $300,000.
Claiming Personal super contribution deductions
Taxpayers can claim a personal super contribution deduction this tax time due to the removal of the 10 per cent maximum earnings condition that came into effect from 1 July 2017. A contribution up to the cap of $25,000 in total can be made. Note: the cap includes any employer contributions.
Those who wish to claim a deduction need to:
- Make personal after-tax super contributions directly to their super fund before 30 June 2018, if they have not already contributed this financial year
- Provide their fund with a ‘notice of intent to claim or vary a deduction for personal super contributions’
- Obtain acknowledgement from their fund of their notice of intent before their 2018 tax return can be lodged.
Super contributions Caps
There are caps on the amount you can contribute to your super each financial year to be taxed at lower rates. If you contribute over these caps, you may have to pay extra tax.
The cap amount and how much extra tax you have to pay may depend on your age, which financial year your contributions relate to, and whether the contributions are:
Concessional (pre-tax)contributions to your super include:
- employer contributions (superannuation guarantee)
- any amount you salary sacrifice into super
- personal contributions you claim as a personal super contribution deduction
You can make superannuation contributions if you are under the contributions limits and eligible to claim a deduction. The concessional superannuation cap for 2018 is $25,000. It is advisable not to go over this limit as you will pay more tax. Note that employer super guarantee contributions are included in these caps. Where a contribution is made, that exceeds these limits, the excess is taxed to the fund member’s account at your marginal tax rate.
Non-concessional (after-tax) contributions include:
- personal contributions for which you do not claim an income tax deduction, and
- spouse contributions.
You can make non-concessional super contributions of up to $100,000 in the 2018 tax year.
To find out how much you contributed to your super fund to ensure you don’t go over the caps, contact your super fund or call the ATO on 13 10 20.
If you need assistance with your tax planning, have any questions, or would like to know how we can assist you to legally minimise your tax- please do not hesitate to call us on:
The Federal Budget was handed down on May 8th, 2018
For more information go to https://www.budget.gov.au/
Some areas of note include:
R&D tax incentive
Significant changes to the calculation of the R&D tax incentive will commence for income years beginning on or after 1 July 2018. Additionally, a maximum cash refund will also apply for some entities.
New Child Care Package to be implemented from 2nd July 2018
Reuniting your superannuation
The ATO will be given the capacity to actively reunite Australians with their lost and inactive superannuation, boosting their balances at retirement. This will prevent people with multiple accounts from having their savings excessively eroded by fees, which will particularly benefit holders of inactive low balance accounts. These are typically young members, low income earners and seasonal workers.
Individuals
A seven-year Personal Income Tax Plan will be implemented in three steps, to introduce a low and middle-income tax offset, to provide relief from bracket creep and to remove the 37 percent personal income tax bracket.
- The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2017-18 income year.
- The 2017-18 Federal Budget measure to increase the Medicare levy from 2 per cent to 2.5 per cent of taxable income from 1 July 2019 will not proceed.
- Supplementary amounts (such as pension supplement, rent assistance and remote area allowance) paid to a veteran, and full payments (including the supplementary component) made to the spouse or partner of a veteran who dies, are exempt from income tax from 1 May 2018.
- Schemes to license a person’s fame or image to another entity such as a related company or trust to avoid income tax will be curtailed.
- The ATO will be provided with $130.8 million from 1 July 2018 to increase compliance activities targeting individual taxpayers.
Black Economy Measures
The Government is committed to reforming the corporations and tax laws to deter and disrupt illegal phoenix activity and the black economy.
It is looking to create a single business register aimed at reducing the regulatory burden on businesses; by improving the way existing Companies Register, Australian Business Register and Business Names Register interact.
From 1 July 2019, the taxable payments reporting system (TPAR) is extended to include security services, road freight transport and computer system design industries.
From 1 July 2019 there will be a limit of $10,000 for cash payments made to businesses for goods and services. Transactions over the threshold will have to be made through an electronic payment system or cheque; unless payments are with financial institutions or consumer to consumer non-business transactions.
If you need assistance with your tax planning, have any questions, or would like to know how we can assist you to legally minimise your tax- please do not hesitate to call us on:
Disclaimer
The article in this email and the articles on our website are not a substitute for independent professional advice. We do not warrant the accuracy, completeness or adequacy of the information or material in this article. All information is subject to change without notice. We and each party providing material displayed on our website disclaim liability to all persons or organisations in relation to any action(s) taken on the basis of currency or accuracy of the information or material, or any loss or damage suffered in connection with that information or material. You should make your own enquiries before entering into any transaction on the basis of the information or material on this website. Please ensure you contact us to discuss your particular circumstances and how the information provided applies to your situation, our number is 02 8824 4277.
