The end of financial year is almost here 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 instalment 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:
- New LMITO ( Low- and Middle-Income Tax offset)
Most taxpayers with an income between $48,000 to $90,000 will be eligible to receive a tax offset of $530. Those earning below and above this will receive a lesser offset.
- Most small businesses can get an immediate deduction for each individual business asset ( including cars) costing up to $30,000 purchased before 30.06.2019.
- From 1 July 2021, ABN holders will be stripped of their ABNs if they fail to lodge their income tax returns.
Small Business Concessions
The $20,000 instant asset write-off has changed during the year; there are 2 key changes:
- Firstly, the write-off has been extended to medium sized businesses, where it previously only applied to small business entities.
- Secondly, the instant asset write-off threshold is to increase to $30,000. The threshold applies on a per asset basis, so eligible businesses can instantly write off multiple assets.
The threshold increase will apply from 2 April 2019 to 30 June 2020 for businesses with an aggregated turnover from $10 million to less than $50 million. Other assets (above $30,000) will be added to the general small business pool and depreciated at 15% in the first year and 30% thereafter; this will only apply for small business entities.
The purchase date is critical. The concession will only apply to assets acquired after 2 April 2019 by medium sized businesses (as they have previously not had access to the instant asset write-off) up to 30 June 2020.
Medium sized businesses do not have access to the small business pooling rules and will instead continue to depreciate assets costing $30,000 or more (which cannot be immediately deducted) in accordance with the existing depreciating asset provisions of the tax law.
The tax rate for small companies (aggregated annual turnover of less than $50m) will be 27.5%.
Instant asset write-off thresholds
|Assets first used or installed ready for use on or before 28 January 2019||Assets first used or installed ready for use between 29 January 2019 and prior to 7:30pm (AEDT) 2 April 2019||Assets first used or installed ready for use from 7:30pm (AEDT) 2 April 2019 to 30 June 2020|
|Small business (aggregated annual turnover of less than $10 million)||$20,000||$25,000||$30,000|
|Medium business (aggregated annual turnover of $10 million to less than $50 million)||–||–||$30,000*|
*Note: a medium business asset must also be purchased after 7:30pm (AEDT) 2 April 2019 to qualify for the concession
Making Superannuation Payments for employees
To claim a tax deduction in the 2019 financial year, you need to ensure that your employee superannuation payments have reached the employee’s super fund bank account by 30 June 2019.
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 21nd June 2019. 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 2019.
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 2019.
Where practical, defer issuing further invoices and/or receiving cash/debtor payments until after 30 June 2019. 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 2019. These include stationery, printing, office and computer supplies. Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2019.
Maximise your deductions
Review of debtors and writing off any that are not recoverable, review inventory and assets schedules for disposal, obsolete items and broken items. Pay professional fees or other employment or business-related deductions prior to 30 June 2019.
Motor Vehicle Logbook
Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2019. You should make a record of your odometer reading as at 30 June 2019 and keep all receipts/invoices for motor vehicle expenses. The same logbook 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 2019. 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 2019 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/schedule 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 2019. 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.
R&D Research and development tax incentive amendments
On 8 May 2018, the government announced it would reform the research and development (R&D) tax incentive to encourage additional investment in R&D while ensuring the integrity and fiscal affordability of the incentive. These changes are expected to apply for income years commencing on or after 1 July 2018.
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 2019. 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.
Ensure that Trustee Resolutions distributing income are prepared and signed before 30 June 2019 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. If a member makes a downsizer contribution and it is reported in the year it is made. The member will need to provide a Downsizer contribution into super form, either before or when they make their contribution.
Downsizer contributions should be made within 90 days of the change of ownership of the dwelling (usually the date of settlement). An extension of time may be granted where there is a delay but will not be granted to allow the member to meet the age requirement.
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 2019 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 2019 tax year.
To find out how much you contributed into your super fund to ensure you don’t go over the caps, contact your superfund or call the ATO on 13 10 20.
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 2019, 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 2019 tax return can be lodged.
Inactive low-balance Super Accounts
From 1 July 2019 a new law requires super funds to report and pay inactive low-balance super accounts to the ATO. To protect accounts from fee erosion, where possible, the ATO will proactively consolidate the inactive low-balance accounts into active super funds on your behalf. Please make sure you have an eligible active superannuation account the ATO can use to consolidate all your missing super. An eligible active super account is a super account that:
- is open
- in accumulation phase
- accepts Government rollovers
- has received a contribution in the current or previous financial year, and
- the balance of the active super account after the ATO initiated transfer of certain types of ATO-held super is equal to or greater than $6,000.
Single Touch Payroll
Single Touch Payroll (STP) is a government initiative to streamline employer reporting obligations.
Using STP, employers can report their employees’ salaries and wages, pay as you go (PAYG) withholding and super information to the ATO from their payroll solution, at the same time they pay their employees.
STP reporting started on 1 July 2018 for employers with 20 or more employees. From 1 July 2019, STP reporting will include small employers (with 19 or less employees). If an employer reports through Single Touch Payroll they are not required to provide a payment summary to their employees.
Income statements will replace payment summaries. Employees can access their income statements through ATO online services via myGov, at any time. Employees will receive a notification from the ATO in their myGov inbox when their income statement is ‘Tax ready’, so they can complete their tax return.
Employees will be able to contact ATO for a copy of their income statement if they do not have access to myGov.
The Federal Budget was handed down on April 2nd, 2019
For more information go to https://www.budget.gov.au/
Some areas of note include:
The government has proposed a 7-year plan to make personal income tax lower, fairer and simpler. Tax reliefs continued for the middle- and lower-income individuals. An annual tax relief of AUD 200 is proposed for those earning up to AUD 37,000, which increases to AUD 530 for those earning between AUD 48,000 and AUD 90,000. The top threshold of the 32.5% tax bracket is set to increase from AUD 87,000 to AUD 90,000. In another relief to taxpayers, the Treasurer has decided not to proceed with the increase (from 2% to 2.5%) in the medical levy proposed last year.
Further favourable adjustments in the tax brackets are proposed for the coming years. The top threshold of the 19% tax bracket will increase from AUD 37,000 to AUD 41,000 and the top threshold of 32.5% bracket will rise further to AUD 120,000. As a major relief to higher-income individuals, the 37% tax bracket will be abolished in 2024-25.
Low- and Middle-Income Tax Offset (LAMITO or LMITO)
The Low- and Middle-Income Tax Offset is available to Australian resident individuals that have taxable income not exceeding $125,333 for an income year during the 2018/2019 to 2021/2022 income years. The Low- and Middle-Income Tax Offset will operate in addition to the LITO (already existing Low-Income Tax Offset) and taxpayers may be entitled to receive both offsets during the 2018/2019 to 2021/2022 income years.
- The amount of the offset will depend on the taxpayer’s relevant income levelTaxpayers may be eligible for an income tax offset if:
- they are an Australian resident for income tax purposes
- their taxable income is in the appropriate income range.
No action will be required by you. The offset can only reduce the amount of tax they pay to zero and it does not reduce their Medicare levy.
Increase to the Medicare levy for low-income thresholds
The Medicare levy low-income thresholds for singles, families, seniors and pensioners will be increased from the 2018-19 income year. For the 2018-19 income year, the Medicare levy low-income threshold for singles will be increased to $22,398 (up from $21,980 for 2017-18). For couples with no children, the family income threshold will be increased to $37,794 (up from $37,089 for 2017-18).
Private health insurance statements
From 1 July 2019, health insurers are no longer required to send private health insurance statements. Previously they were required to send statements by 15 July each year, it is now optional to send this information.
Private health insurance information will be available in the pre-fill report, usually by mid-August. If it is not populated by then, taxpayers may need to request a statement from their health insurer.
It is important to correctly report private health insurance information as it is used to calculate:
- private health insurance rebates taxpayers are entitled to
- the Medicare levy surcharge, if applicable.
Amendments to Division 7A deferred
It was reported in last year’s Budget update that a measure was announced to clarify the operation of the Division 7A integrity rule with effect from 1 July 2019.
Since then, the Government released a consultation paper seeking feedback from stakeholders. The feedback highlighted that Division 7A is a complex area of the tax law and raised implementation issues warranting further consideration.
On this basis, this year’s Budget announced that any amendments to Division 7A will be deferred until 1 July 2020 to allow for further consultation and to refine the Government’s approach to Division 7A.
The start date of amendments to Div. 7A will be delayed by 12 months to 1 July 2020.
For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
Tax integrity and black economy
From 1 July 2021, ABN holders will be stripped of their ABNs if they fail to lodge their income tax returns. In addition, from 1 July 2022, ABN holders will be required to annually confirm the accuracy of their details on the ABR
- Minor amendments will be made to the hybrid mismatch rules to clarify their operation from 2019.
- The ATO’s Tax Avoidance Taskforce will extend its operations and expand its activities, including increasing its scrutiny of specialist tax advisors and intermediaries that promote tax avoidance schemes.
- The ATO will receive funding to increase activities to recover unpaid tax and superannuation liabilities with a focus on large businesses and high wealth individuals.
You can claim a deduction for the cost of buying and cleaning occupation-specific clothing, protective clothing and unique, distinctive uniforms.
To claim a deduction, you may need to have written evidence that you purchased the clothing and diary records or written evidence of your cleaning costs. Written evidence must be kept for a representative period of at least one month if both of the following apply:
- the amount you claim is greater than $150
- your total claim for work-related expenses exceeds $300.
If you received an allowance from your employer for clothing, uniforms, laundry or dry-cleaning, make sure you show the amount of the allowance on your tax return as it is assessable income. You can only claim a deduction for the amount you actually spent.
Home Office expenses
If you’re an employee who regularly works from home, you may be able to claim a deduction for expenses relating to that work. These are generally home office running expenses, and phone and internet expenses.
In limited circumstances you may also be able to claim occupancy expenses. One such circumstance is if your home is your principal place of business.
Motor Vehicle expenses
Motor vehicle expenses you can claim include:
- fuel and oil
- repairs and servicing
- interest on a motor vehicle loan
- lease payments
- depreciation (decline in value).Motor vehicle expenses you can’t claim include:
- the private use of the vehicle
- travelling between your home and your place of business
Motor vehicle records
The records you need to keep depend on how you calculate your claim. You will need to keep:
- loan or lease documents
- tax invoices
- registration papers
- details of how you calculated your claim.
When you work out your deduction, you can use the cents per kilometre method (up to 5,000 business kilometres per car) or the logbook method.
Under the cents per kilometre method:
- you can claim a maximum of 5,000 business kilometres per car (the rate is $0.68 per business km)
- you do not need written evidence to show how many kilometres you have travelled, but we may ask you to show how you worked out your business kilometres (such as, calendar or diary records)
- the rate covers your running expenses and depreciation – this means you can’t make a separate claim for depreciation of the car’s value.
For claims above 5,000 business kilometres you can use the logbook method or claim the actual costs.
If you use the logbook method, you can claim the business-use percentage of each car expense, based on the logbook records of your car’s usage.
The logbook (maintained for a 12-week period) must contain the following information:
- when the logbook period begins and ends
- the car’s odometer readings at the start and end of the logbook period
- the total number of kilometres the car travelled during the logbook period
- the business-use percentage for the logbook period
- the number of kilometres travelled for each journey) – you will need to record the
start and finishing dates of the journey
odometer readings at the start and end of the journey
reason for the journey (such as a description of the business reason)
- the odometer readings at the start and end of each income year you use the logbook method.
Note – if your circumstances change, such as a change in the type of work undertaken by your business, you may need a new logbook. The log is valid for 5 years.
If you’ve been paid an overtime meal allowance and have purchased food and drinks with the allowance, you can claim up to the reasonable limit as a deduction in your tax return (without receipts).
If you spend more than the reasonable allowance, you need to have written evidence for all of the expense.
If the allowance isn’t on your payment summary and wasn’t more than the reasonable allowance, you don’t have to include the amount in your tax return if you didn’t spend the full amount and don’t claim a deduction for the expense.
Travel allowances on your payment summary do not usually have tax taken out by your employer. If the allowance is less than the ATOs guidelines for a reasonable (daily) allowance, you can usually claim the full allowance as a deduction. Where tax has been taken out (as the allowance is above the ATOs reasonable rate) you can deduct the extra amount if you have receipts to prove the expenses.
You can claim education/training courses if:
- Upgrading current skills (e.g. Bachelor to Master’s degree)
- Improving specific skills (e.g. a course to operate more machines at work)
- Undertaking Traineeship courses
- You can show the course will likely lead to increased income.
Tools & Equipment
Tools and equipment bought to help earn income can be claimed in the year of income where the cost is below $300; Only the percentage used for work can be claimed. Items costing above $300 are depreciated over a number of years. Examples of items that may be claimed are: computers, desks, chairs, hand tools, technical instruments.
Mobile phone & internet
If you use your own phones or internet for work purposes, you may be able to claim a deduction if you:
- paid for these costs and
- have records to support your claims.
If you use your phone or internet for both work and private use, you will need to work out the percentage that reasonably relates to your work use. If you have a phone plan where you don’t receive an itemised bill, you determine your work use by keeping a record of all your calls over a four-week representative period and then calculate your claim using a reasonable basis.
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 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 9948 5521.