Important Year-End Tax Tips + Reminders

The year's end is drawing near, and with it comes the obligation to give some thought to one's tax situation. Are you ready for this? Here are some helpful hints and reminders to assist you through tax season without a hitch so that you can avoid any penalties. Keep in mind that these are only general principles; if you have specific questions or need additional help, make sure to talk with a tax specialist.

It is essential to set aside some time to consider your taxes as the end of the year draws ever closer. There are a variety of things you can take care of right now that will go a long way towards reducing the amount of anxiety you feel during tax season. This blog post will give you with some essential year-end tax advice and recommendations that you should keep in mind. Continue reading this article if you feel like you're ready to get started on your taxes!

The end-of-year tax tips and reminders may seem like an overwhelming burden, but the process can be made significantly simpler by following a few straightforward procedures. This article on the site will give you with some useful information that will assist in making the upcoming tax season go as efficiently as possible. Whether you have filed taxes before or this is your first time, it is important that you take the time to go through our helpful advice.

End-of-Year Activities for You

Because of the effects of COVID-19, this year has likely been the most challenging one for business owners than any other year in history. Because of this, tax planning for 2020 and taking critical steps before the 30th of June are more important this year than they were for any other year in the past.

As the owner of a company, you have a number of responsibilities that you need to give some thought to and carry out between now and the 30th of June. You can reduce the amount of tax you owe by using some of these strategies. Your risk of being audited by the ATO will be reduced thanks to others. In order to be of assistance to you, we have outlined the following action items below.

Please give this material great consideration and get in touch with us as soon as possible if you have any questions that we can answer or if there is anything else that we can do to help you.

There Are No Tax Deductions Available To You If You Do Not Fulfil Your Tax Obligations

Taxpayers will no longer be able to deduct certain amounts from their income starting on July 1, 2019, if they don't comply with their PAYG reporting and withholding responsibilities to the ATO:

• compensation received by an employee in the form of salary, wages, commissions, bonuses, or allowances
• fees paid to the Directors;
• to a person who actively practises religion;
• as part of a labor-hire agreement; or
• manufactured for use in situations in which the supplier does not supply an ABN.

A deduction might still be available if you make a mistake and voluntarily fix it before the ATO launches a review or audit, although penalties for failing to withhold the appropriate amount of tax might still be imposed.

Payments To Contractors

By the 28th of August in 2020, payments made to contractors working in particular industries are required to be disclosed to the ATO.

This Taxable Payment Report is required for:

• Services related to building and construction
• Providers of cleaning services
• Delivery through courier services
• Transportation of goods via roadways
• Services related to information technology (IT)
• Services related to security, investigations, or surveillance
• Mixed services (providing one or more of the services listed above)

Superannuation Guarantee Amnesty

The Superannuation Guarantee (SG) amnesty provides a one-time opportunity to declare prior non-compliance with the superannuation guarantee rules and pay unpaid superannuation guarantee charge amounts. This opportunity is only available during the period of the amnesty.

The SG amnesty will end for employers on September 7, 2020, which is also the last day they can take advantage of it.

This only applies to disclosures that are made voluntarily.

In order for businesses to be eligible for the amnesty, they are need to report any unpaid social security taxes to the Tax Commissioner. The next step is to either pay the total amount that is owed to the ATO or negotiate a payment plan with the organisation if the company is unable to pay the total amount. If you agree to a payment plan but then fail to make the instalments as scheduled, the amnesty will no longer apply to you.

Single Touch Payroll – Update

Small firms with 19 employees or fewer and that employed family members were scheduled to start reporting these employees (known as "closely held") through Single Touch Payroll (STP) on July 1, 2020. These businesses fall under the category of "closely held."

On the other hand, because of COVID-19, the date that this will begin has been pushed back to July 1, 2020. As a result, it is possible for your small business to begin voluntarily use STP sooner than this date.

The STP should now be used to report information about all other employees.

Reportable Fringe Benefits

You are required to report the FBT grossed-up amount in situations where you have provided your employees with fringe benefits worth more than $2,000 in total. This is an amount that is referred to as a "Reportable Fringe Benefit Amount," and it is required to be adjusted for each employee as part of the Single Touch Payroll finalisation procedure for the year 2020.

Stocktake

Businesses that buy and sell stock typically need to do a stocktake at the conclusion of each fiscal year because the rise or fall in a stock's value is taken into account when determining your company's taxable revenue.

Use the streamlined trading stock rules if your company's total annual revenue is less than $10 million. According to these regulations, if the difference between the opening value of your trading stock and a reasonable estimate of its closing value at the end of the income year is less than $5,000, you may decide not to conduct a stocktake for tax purposes. You must keep a record of your methodology for arriving at the trading stock's current value.

If a stocktake is necessary, you can value trading stock using one of three techniques:

• The cost price takes into account all of the costs associated with the stock, such as freight, customs duty, and, if the stock is manufactured, labour and materials, in addition to a share of the constant and variable overhead costs associated with the factory, etc.
• The current value of the stock when it is sold in the ordinary course of business is referred to as its market selling value (but not at a reduced value when you are forced to sell it).
• Replacement value is defined as the cost of purchasing an item that is materially equivalent to the original in a typical market on the final day of the accounting year.
• It is possible to choose a different foundation for each class of stock as well as for individual things that fall under the purview of a given stock class. This is an opportunity to reduce the impact of the trading stock adjustment at the conclusion of the fiscal year. There is no need to utilise the same approach each year; rather, you can choose the option that will save you the most money on your taxes each time. The most obvious illustration of this phenomenon is when a share of stock can be sold at a price that is lower than its original purchase price due to adverse market conditions or damage that has been sustained by the stock. Even though the loss has not yet been incurred, this should nevertheless result in a deduction being taken.

Trust Distribution Resolutions

The trustees (or directors of a trustee business) have until the 30th of June, 2021 at the absolute latest to deliberate and make a decision regarding the distributions they intend to make. It is recommended that any decisions made by the trustees be put in writing and submitted no later than June 30, 2021.

Imagine that there are no legal resolutions in place by the 30th of June in 2021. In such a scenario, there is a possibility that the trust's taxable income will be taxed to either the trustee or a default beneficiary, depending on whether or not the trust deed stipulates that the beneficiary can be taxed in this manner (in which case the highest marginal rate of tax would normally apply).

Reporting Payments To Contractors

The following types of businesses are required to provide the ATO with a "Taxable Payments Annual Report" (TPAR) by the deadline of August 28, 2021:

• Services related to building and construction
• Providers of cleaning services
• Delivery through courier services
• Transportation of goods via roadways
• Services related to information technology (IT)
• Services related to security, investigations, or surveillance
• Mixed services (providing one or more of the services listed above)

This report contains a listing as well as a total of all payments and non-cash perks that were provided to contractors throughout the course of the year.

Payroll Tax

The payroll tax must be paid by any organisation that operates within Australia and has a payroll that is more than the thresholds set by the individual states.

It is important to keep in mind that, if payroll taxes are applicable, in addition to regular salaries and wages, the following items are typically also included as part of payroll expenses:

• fringe benefits calculated using the taxable value of fringe benefits after they have been grossly inflated;
• all payments made by employers to superannuation funds on behalf of staff members; and
• fees for contractors or subcontractors.

Workcover / Worksafe

At the close of each fiscal year, your WorkCover or WorkSafe insurer will send an annual reconciliation to all of the registered employers in your business.

In order to finish your annual reconciliation, you will need to include, in addition to regular salaries and earnings, the following items:

• fringe benefits calculated using the taxable value of fringe benefits after they have been grossly inflated;
• all payments made by employers to superannuation funds on behalf of staff members; and
• fees for contractors or subcontractors.

Please get in touch with our office so that we can provide you with more specific information regarding the components that should be included in the reconciliation statement.

Your WorkCover/WorkSafe insurer will provide you a final assessment or a refund once they have received and processed the reconciliation once it has been submitted. This will depend on the payments that you have paid during the year.

Goods And Services Tax (GST)

To ascertain whether GST was underpaid or overpaid in the 2021 tax year, a reconciliation of GST as of 30 June 2021 should be conducted. A future Business Activity Statement (BAS) can be adjusted to correct a mistake if one has occurred, but there are restrictions on the adjustments that can be made in this method.

Income reported on your BAS and income reported on your income tax returns should be compared. Please be aware that you must keep these records for a minimum of five years and that you are required by law to prove all Input Tax Credit claims with a compliant Tax Invoice.

ATO Audit Activity

Take notice that both the ATO and the State Revenue Office are continuously ramping up the number of audits they conduct. As a direct consequence of this, there has been a rise in the number of audits conducted on PAYG withholding, payroll tax, work compensation, the goods and services tax (GST), division 7A loan accounts from companies, and trust payouts from discretionary trusts.

If you are concerned about your organization's capacity to pass an audit, we are able to provide a review of your record-keeping methods as well as your records.

Strategies & Tricks For FY

In light of the fact that many business owners will be under pressure in the weeks leading up to the 30th of June in 2021, it is essential to keep in mind that there is one deadline that is never extended, and that is the end of the fiscal year (EOFY).

The 30th of June is a firm deadline, therefore in order to minimise your tax liability for the upcoming fiscal year 2021, here are some last-minute reminders, ideas, strategies, and methods.

Instant Deduction for Bought Assets

The instant asset write-off concession has become one of the most well-liked tax planning techniques in recent years, but with the COVID19 economic stimulus, the $150,000 threshold was eliminated [there is now no limit] and the entities eligible to "immediately deduct" the cost of assets has been greatly increased.

It's a little unclear right now because there are two sets of regulations that apply to FY 2021:

temporary full expenses [immediate deduction]

• This promotion is valid for purchases made between October 6, 2020 (7:40 pm AEDT) and June 30, 2022.
• Relevant for businesses with annual revenues of less than $5 billion [I'm pretty confident that all of you reading this will fall below that criteria!]
• If your annual turnover is less than $50 million [on an aggregated basis with other businesses], you are only eligible to purchase used depreciable assets.
• To be eligible for a deduction in the 2021 fiscal year, the assets must have been first held and first used or installed ready for use by the 30th of June in 2021 [which means that there is no point in running out and getting anything on the 30th of June if it is not installed and ready to use].

instant asset write-off

• Relevant in the event that the provision for temporary full expensing is not applicable.
• Must be acquired no later than December 31, 2020, and either used for the first time or installed such that it is ready for use no later than June 30, 2021.
• Due to the fact that the temporary full expensing [described above] will only be applicable to assets purchased between July 1, 2020 and October 6, 2020 [7:30 pm AEDT], the majority of firms will find this provision to be of little use.
• There is a maximum of $150,000 for each individual asset or combination of assets.
• The total amount of your annual sales must be lower than $500 million for you to be considered eligible.
• The instant asset write-off is applicable to both newly purchased and previously owned assets that would otherwise be subject to depreciation.

Both provisions apply when:

• As long as the cost of each individual asset is less than the threshold, you are able to buy multiples of the same item, such as a group of desks or chairs.
• Your company makes use of the majority of the assets that it owns, including the buildings, equipment, and vehicles. However, in order to be eligible for a tax deduction for the financial year ending June 30, 2021, the item in question must have been installed and made ready for use by that date.
• Only the portion of the expense that was incurred for business purposes can be deducted [unless the expense would be subject to FBT, like a car].
• Buying a car, but the deduction is only available up to the luxury automobile cost limit, which is presently $59,136 [note that there may be potential FBT repercussions associated with this]
• Does not apply to costs associated with hard fit-outs such as walls, electrical, or plumbing; however, it does apply to costs associated with desks, air conditioning units, and computer systems.

You can deduct previously purchased assets if the value that was written down for tax purposes is less than $150,000

One of the knock-on effects of the raised threshold for the instant write-off of assets is that if you have chosen to apply the simplified depreciation rules for small businesses, you can now also write-off any accumulated balance of other depreciable assets as long as the balance of these assets is less than $150,000. This is one of the flow-on effects of the increased threshold for the instant write-off of assets. If your group's total annual revenue is less than $10 million, you are eligible to use the simplified depreciation guidelines.

Deductible Superannuation Contributions

To lower the amount of taxes that you or your company are required to pay, one frequent tactic is to increase the amount of money in your retirement account by making contributions that are deductible from your taxes.

The maximum amount of money that can be deducted from your taxes on an annual basis is set at $25,000 for the 2021 fiscal year, but that number will rise to $27,500 on July 1, 2021. This limit takes into account both the required contributions from employers as well as any voluntary contributions that may be made either through the company or in your own name.

The donation will result in a tax liability for the super fund of 15%. Therefore, the possible tax benefit for an individual who is subject to the highest marginal tax rate, which is 47%, is up to 32%. Individuals whose adjusted taxable income is greater than $250,000 and who are contributing to their superannuation at a rate that incurs an additional 15% surcharge will have their share of this benefit reduced.

If you have contribution levels from past years that have not been used, you could be allowed to contribute an amount that is greater than the $25,000 ceiling on concessional contributions. However, in order to qualify for this benefit, your superannuation amount must be lower than $500,000, and the process may be fairly difficult depending on the specifics of your circumstance. Before making any contributions, it is important to get counsel. By logging into your my.gov account, you will be able to view the amount of the threshold that was available in past years.

Superannuation For Employees 

When the payment is actually made, and only then, are you eligible to claim a tax deduction for contributions to your superannuation plan. This means that employers have until the 30th of June 2021 to pay their mandatory 9.5% employee super contributions in order to qualify for a tax reduction in the 2021 financial year.

Bad Debts 

If you have any debts that are highly unlikely to be collected, you should evaluate whether or not these should be written off as "bad" by the 30th of June, 2021, in order to qualify for a tax benefit. When a legitimate business decision has been made that a debt can no longer be recovered, the debt is regarded as being in bad standing. Spend some time going through your list of creditors to look for any debts that can be discharged in some way.

Ensure Correct Trust Distributions

It is essential for those of you who own businesses or interests that are held in trust structures to think about the method that will result in the least amount of tax liability when distributing any income. In general, this ought to be formalised in the form of a resolution prior to the 30th of June of each year.

If you own a company that is generating respectable profits, you might want to think about transferring some of those profits to a corporation so that you can take advantage of the lower tax rate that applies to corporations. This number will either be 26% or 30%, depending on the specifics of your situation.

If you are already paying taxes at the maximum rate of 47% in your own name, deferring some of those taxes via this method may be beneficial to you. Always keep in mind that this must be paid out by the corporation in the form of a dividend at some point in the future.