Knight 2021 Tax Planning Guide – Businesses

Businesses

  • Ensure any eligible bad debts are written off correctly through your accounting software or the decision to write them off is documented correctly in a director’s resolution.
  • Consider purchase of new assets. Assets purchased and ready for use between 1 July and 30 June 2023 will be eligible for an immediate write off. Applies to businesses with aggregated turnover of less than $50mil and regardless of asset cost, subject to the luxury car limit.
  • Ensure a full stock take is carried out, including scrapping obsolete stock.
  • Review your WIP to include only legally recoverable / billable amounts.
  • Ensure any JobKeeper Payments, Cashflow Boost Payments or Government Grants are recorded correctly in your accounting software for preparing accurate year end taxable income estimates.
  • Pay employee super by 23 June if not already done to get the deduction this year (to be cleared to superfund by 30 June)
  • If intending to claim for eligible R&D expenditure, total expenditure/deductions must exceed $20,000 in general. Registration with Government Department must be within 10 months of end of income year and prior to lodgement of tax return.

Other recent changes to legislation applicable to this financial year:-

  • FBT exemption for taxi travel extended to ride sharing (e.g. Uber) If you’ve lodged your 2020 FBT return without anticipating this legislative change, consider making an amended assessment request to take advantage of the extension of the S.58Z exemption. If Knight prepares your FBT returns please get in touch with us, if this change is applicable to your business
  • Businesses with a turnover of up to $5 billion are now able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2023. However, Government will also allow businesses to opt out of temporary full expensing on an asset-by-asset basis, this option is only available to businesses not using simplified depreciation. This change will provide businesses with more flexibility in respect of these measures, removing a potential disincentive for them to take advantage of these incentives (e.g. where the automatic application of full expensing might cause the entity to make a loss). However, “the devil is in the detail” so please contact us to find out more
  • The Government will also temporarily allow companies with a turnover of up to $5 billion to offset tax losses against previous profits on which tax has been paid – this is known as the loss carry back rule. The company’s ability to pay a franked dividend may be impacted by any loss claims made, so this should be considered before submitting a claim.
  • Businesses with an aggregated annual turnover between $10 million and $50 million are considered to be small business from 1 July 2021 and will, for the first time, be able to access up to ten small business tax concessions.
  • JobMaker hiring credit is being administered by the ATO and provides a wage subsidy payment directly to employers as an incentive to employ additional job seekers aged 16 to 35 years.
  • Eligibility for the reduced corporate tax rate of 26% for base rate entity companies is set at aggregated turnover of $50m for the 2020/21 tax year (27.5% in FY2019). The corporate tax rate will drop to 25% from 1 July 2021.
  • In June 2020 the Federal Government passed legislation which introduced the requirement for all directors to acquire a unique Director Identification Number (DIN). The Australian Business Registry Services (ABRS) is now conducting testing by invite, which should conclude before 31 October 2021. Once testing is completed, existing Directors will have until 30 November 2022 to obtain a Director ID.
  • Single Touch Payroll – From 1 July 2021, small employers must report payments made to closely held payees through STP. A “closely held payee” is an individual who is directly related to the entity from which they receive payments, i.e. family member; director/shareholder and beneficiary of the trust. Please contact us for more information on your payment options.
  • Covid-19 and FBT savings for home-garaged cars – Normally if an employer provides a car to an employee a car fringe benefit will arise and FBT may be payable. However, we are currently living in unprecedented times and due to ‘lock down’ restrictions imposed in response to Covid-19 crisis, the ATO has introduced a concession which can allow employers to reduce their FBT exposure. Please contact us for further information on this exemption.
  • Taxable Payments Annual Report (TPAR) – Initially this was only required to be submitted by the building and construction, cleaning and courier services industries. The ATO has now extended this to various other services, such as information technology, security services and other various businesses. Many restaurants, cafes, grocery stores, pharmacies and retailers have started paying contractors to deliver their goods to their customers. If the total payments received for these deliveries or courier services are 10% or more of their total annual business income, these businesses will need to lodge a TPAR.
  • There has been no further information from the Government on the planned reform of the Division 7A rules, which broadly relate to loans and payments made by private companies.
  • The Government will remove the current $450 per month minimum income threshold, under which employees do not have to be paid the superannuation guarantee by their employer. This measure is expected to commence from 1 July 2022.

We welcome your call to discuss tax planning for you individually as well as your business.