Year End Tax Planning Considerations

We have outlined a few important tax related decisions to consider before the end of financial year 30 June 2020.

1. Superannuation contributions must be paid before 30 June 2020

2. Superannuation contribution catch-up rule from 1 July 2018

3. 100% write off deduction for new and used assets purchased before 30 June 2020

4. Accelerated depreciation from 1 July 2020 to 30 June 2021 for new assets

5. Trustee resolutions for discretionary trusts

6. Prepayments – paying for invoiced expenditure before 30 June 2020

7. STP End of Year Reporting

8. NSW Government Grant application extended to 30 June 2020

9. Future JobKeeper enrolments

1.     Superannuation Contributions for 2020 financial year

The concessional contributions cap for the 2020 financial year is $25,000.

The non-concessional contributions cap is $100,000 for the 2020 financial year. This will remain available to individuals between 67 (subject to legislation passing on 18 June) and 74 years old if they meet the work test and their total superannuation balance is below $1.6m at the end of June of the previous financial year.   Please speak to us if you are considering making any non-concessional contributions.

Please make sure your contributions are paid to the superannuation fund before 30 June 2020.  We recommend contributions to an industry or retail superannuation fund are paid before 25 June 2020 to ensure deductibility for the year ending 30 June 2020.

If you are an employer, please check you have paid 9.5% of your employee’s gross wages to their nominated superannuation fund.

If you are using the ATO Small Business Superannuation Clearing House (SBSCH) please make sure your contribution has been paid to the SBSCH before 30 June 2020.

CloudPayroll clients

If you wish to prepay superannuation before 30th June please contact help@cloudpayroll.com.au or call (02) 9042 2689 to arrange a form to be filled out, signed and returned to CloudPayroll ASAP. Payrolls with pay day up to and including 23rd June will be able to be sent prior. Anything after this date will be sent as part of the standard superannuation process. If the superannuation is to be paid prior to 30th June, there will be a $45.00 + GST fee applied.

2.     Superannuation contribution catch up from 1 July 2018

From 1 July 2018, if you have a total super balance of less than $500,000 on 30 June of the previous financial year, you will be able to carry forward your unused concessional contributions cap.

2018/19 was the first financial year you can carry forward unused cap amounts and these amounts can be used from 1 July 2019. Unused cap amounts can be carried forward for up to five years.

Please contact your adviser if you wish to discuss the superannuation catch-up further.

3.     Accelerated depreciation to 30 June 2020 for new and used assets

From 12 March 2020 until 30 June 2020 the instant asset write threshold amount for each asset is $150,000 (up from $30,000). The asset could be a car used for business travel, computers, medical equipment or office equipment or furniture.

Some worked examples are;

1. Car Purchased before 30.06.2020 (New and Used) Cost $50k @ 60% business use

   • GST Claim in the June 2020 BAS
     
     If your log book is 60% business use you will be entitled to claim a GST credit of $50,000/11 x 60% = $2,727

   • Depreciation claim in the 2020 FY tax return
     
     Your instant asset write off deduction for the year ended 30 June 2020 will be $50,000 less GST claimed of $2,727 x business use of 60% = tax deduction of $ 28,364

2. Car Purchased before 30.06.2020 (New and Used) Cost $120k @ 60% business use, subject to the depreciation cost limit of $57,581

   • GST Claim in the June 2020 BAS
     
     If your log book is 60% business use you will be entitled to claim a GST credit of $57,581/11 x 60% = $3,141

   • Depreciation claim in the 2020 FY tax return
     
     Your instant asset write off deduction for the year ended 30 June 2020 will be $57,581 x business use of 60% = tax deduction of $ 34,549

3. Installation of new computers and network at the surgery cost $25,000

   • GST claim in the June 2020 BAS of $2,273

   • Depreciation claim in the 2020 FY tax return.  Your accelerated depreciation for the year ended 30 June 2020 will be $22,727.

4.     Accelerated depreciation from 1 July 2019 to 30 June 2021 for new assets

From 12 March 2020 until 30 June 2021 the business investment measure provides a time-limited (15-month) investment incentive to support business investment by accelerating depreciation deductions.  The asset must be new, not used.  The measure allows the business to deduct 50% of the cost of the upfront and existing deprecation rules to the remaining balance of the depreciable asset.

Some worked examples are;

1. Car Purchased 01.07.2020 – 30.06.2021 (New only) Cost $50k @ 60% business use

   • GST Claim in the relevant BAS
     
     If your log book is 60% business use you will be entitled to claim a GST credit of $50,000/11 x 60% = $2,727

   • Depreciation claim in the 2021 FY tax return
     
     Your accelerated depreciation for the year ended 30 June 2021 will be $50,000 less GST claimed of $2,727 x business use of 60% x 50% = $14,182.
     
     You will continue to claim the balance $14,182 at normal depreciation rates

2. Car Purchased 01.07.2020 – 30.06.2021 (New only) Cost $120k @ 60% business use

   • GST Claim in the relevant BAS
     
     If your log book is 60% business use you will be entitled to claim a GST credit of $57,581/11 x 60% = $3,141

   • Depreciation claim in the 2021 FY tax return
     
     Your accelerated depreciation for the year ended 30 June 2021 will be $57,581 x business use of 60% x 50% = $17,274
     
     You will continue to claim the balance $17,274 at normal depreciation rates

3. Installation of new computers and network at the surgery cost $25,000

   • GST claim in the relevant BAS of $2,273

   • Depreciation claim in the 2021 FY tax return
     
     Your accelerated depreciation for the year ended 30 June 2021 will be $11,364.  You will continue to claim the balance $11,364 at normal depreciation rates

5.     Trustee Resolutions

If your business structure includes a discretionary trust ensure the Trustee makes a resolution regarding the distribution of net trust income before 30 June 2020. We will be sending the trustee resolutions in the next few weeks.

6.     Prepayments

Many clients have experienced a decline in income due to the effects of the government pandemic control measures. This year it may be a better tax result not to make prepayments of expenditure and pay for the expenditure after 30 June 2020 to claim the expense in the year ending 30 June 2021.

Should you want to make a prepayment the rules are:

Small Business Entities (SBE - Turnover <$10M)

SBE taxpayers making prepayments before 1 July 2020 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2021). 

The kinds of expenses that may be prepaid include:

1. Rent on business premises or equipment

2. Conference trips to be attended after 1 July 2020

3. Training courses to be conducted after 1 July 2020

4. Professional Association subscriptions

Individuals

Non-SBE taxpayers may generally claim the following prepayments in full:

• Expenditure under $1,000

• Expenditure made under a 'contract of service' or  

• Expenditure required to be incurred under law.

Individuals could consider prepaying self-education items before the end of the income year:

1. course fees (but not HELP repayments), student union fees, and tutorial fees; and

2. interest on borrowings used to pay for any deductible self-education expenses.

Also they could bring forward purchase of course materials or text books.

7.     STP End of Year Reporting

If you are STP enabled, you do NOT need to provide Payment Summaries to your employees or the Payment Summary Annual Report (PSAR) to the ATO.

If you started STP reporting in the 2019-2020 year, and you have 19 or fewer employees, you will need to process a final event for the tax year by 31^st July.

If you started STP reporting in a prior year, you will instead need to process a Final event for the tax year by 14^th July.

Employees can access their finalised Income Statements from their myGov account.

Cloud Payroll Clients

There is an end of financial year checklist with steps to assist with your reporting requirements.

https://support.cloudpayroll.com.au/hc/en-us/articles/360001010015-End-of-Financial-Year-EOFY-Checklist

8.     NSW Small Business Grant extension to 30 June 2020

The NSW government has extended the application close date for the small business grant of $10,000 to 30 June 2020.

9.     Future JobKeeper enrolments

The ATO has updated their JobKeeper key dates to allow employers who are enrolling for the first time after May, to enrol their business and identify their eligible employees and business participant by the end of the month they are claiming for.

The eligible employer will still need to make sure they have paid their eligible employees the minimum $1500 per fortnight being claimed.