When Should I think about End of Year Tax Planning?

End of year tax planning – when should I think about this?

 

There is always a rush at the end of the financial year for businesses to book in to speak to us about their end of year tax planning options.

Rather than rushing around in June to implement strategies to optimise your tax position, you should regularly review the financial performance of your business and plan for upcoming tax liabilities.  Set aside specific time on a regular basis (eg. at the end of each month or each quarter when you are preparing your BAS) and use this time to review how your business is performing.

When you are reviewing your business for tax, think about:

  • What profit has your business made?
  • What is your estimated tax liability on your profit?
  • Are you paying tax instalments to the ATO towards this tax liability?  If not, have you made provisions for this tax liability within your cashflow forecasting?
  • Are there proactive steps you can take throughout the year to optimise your tax position?

While we sit down with business clients in May/June to review their results and plan for year end tax, there are things that you can do throughout the year to get a better tax outcome, for example:

  • If you want to purchase a new vehicle and can claim a deduction for the vehicle – it needs to be ready for business use prior to 30 June (this may mean ordering the vehicle now so it is here in time).
  • If you want to put more money into super, you may need to build this into your cashflow forecasts (or put the money in on a regular basis) so it is not a large cash drain in June.
  • If you want to pay directors an appropriate salary for their services, this should be recorded and paid throughout the year and reported via single touch payroll to the ATO.  If this is left to June, there will be a significant cashflow burden for the withholding tax and super liability.

These are just some of the examples of things you can do throughout the year to help your tax position.

So while we may refer to it as “end of year” tax planning, it is better to think of it as year round tax planning. 

We are happy to sit down with you on a regular basis to help you review your business performance, cashflow and tax planning – just give us a call to discuss.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Working from Home – Tax Deductions

Working from Home – Tax Deductions

On 16 February 2023, the ATO released Practical Compliance Guideline PCG 2023/1 outlining the requirements that need to be met in order to claim a deduction for working from home.  There are some changes with regards to the amount that can be claimed and the records that you need to keep.  These changes will apply to deductions claimed for the 2022-23 financial year onwards.

What do you need to know?

From 1 July 2022, the Revised Fixed-Rate Method allows you to claim a deduction of $0.67 per hour for the time you have worked from home (this will not cover depreciation, which can be claimed separately).

If you want to claim a deduction for working from home anytime after 1 July 2022, you will need the following:

  1. A record of the hours you have worked from home:
    • Between 1 July 2022 and 28 February 2023, you will need a record that is a representation of the total hours worked from home.
    • From 1 March 2023, you will need an exact record of the number of hours you worked from home – eg. timesheet, roster, diary, time-tracking app records.
  2. Evidence of the additional costs you have incurred as a result of working from home (eg. electricity bills, telephone bills, internet bills).
  3. Invoices for any office furniture or plant and equipment purchased.
  4. A 4 week diary showing the personal and income-producing use of any office furniture or plant and equipment purchased.

We will be requesting the above information when preparing your 2023 tax return.  Without this information, we will not be able to claim a deduction for working from home.

PCG 2023/1 in Detail

2022 Financial Year and Earlier

If you are claiming a deduction for working from home prior to 1 July 2022, you can choose to use one of the following methods:

  • The Temporary Shortcut Method – available from 1 March 2020 to 30 June 2022 (a flat rate of $0.80 per hour during COVID to cover electricity, internet, mobile and home phone, stationery and computer consumables, depreciation of home office furniture and equipment, cleaning)
  • The Fixed-Rate method – available from 1 July 1998 to 30 June 2022 (a flat rate of $0.52 per hour to cover electricity, depreciation of office furniture, cleaning)
  • The Actual Expenses Method – this is a claim for the actual expenses incurred as a result of working from home.

From 1 July 2022

From 1 July 2022, you can claim a deduction for working from home using either of the following methods:

  • Revised Fixed-Rate Method – available from 1 July 2022 (a flat rate of $0.67 per hour to cover electricity, internet, mobile and home phone, stationery and computer consumables)
  • Actual Expenses Method – as noted above, this is a claim for the actual expenses incurred as a result of working from home.

Revised Fixed-Rate Method

To claim a deduction using the Revised Fixed-Rate Method, you need to satisfy three criteria:

  1. You must be working from home (minimal tasks such as checking emails and taking some calls at home will not qualify)
  2. You must incur additional running costs (you must incur the costs and not be reimbursed these from your employer)
  3. You must keep and retain the relevant records.

Record of Hours Worked

For the 2023-24 and later income years, you must keep a record for the entire year of the number of hours that you worked from home.  An estimate is not acceptable.

A record of your hours can be kept in any form.  For example, it may be one of the following:

  • Timesheets
  • Rosters
  • Logs of time spent accessing employer systems or online business systems
  • Time-tracking apps
  • A diary

For the 2022-23 income year, you only need to keep a record which is representative of the total hours worked from 1 July 2022 to 28 February 2022 and then a record of the actual hours worked from 1 March 2023 to 30 June 2023.

Documents for Costs

For electricity, mobile and home phone and internet expenses, you must keep one monthly or quarterly bill as evidence of the additional running expenses you have incurred.  For stationery and computer consumables, you must keep a receipt for the item purchased. 

If you do not keep a record of the total hours you worked from home and evidence of the running costs incurred, you cannot use the revised fixed-rate method for claiming a deduction for working from home during the 2023 (and later) financial years.

Depreciation

The revised fixed rate method covers your costs for electricity, internet, mobile and home telephone and stationery and computer consumables.  This means you cannot claim a separate deduction for these items.  It does not cover depreciation for home office furniture or equipment (for which you can claim a separate deduction).

To claim a deduction for depreciation of your home office furniture or equipment, you must keep a purchase invoice which shows:

  • the name or business name of the supplier;
  • the cost of the asset to you;
  • the nature of the asset;
  • the day you acquired it; and
  • the day the record was made out.

You must also keep records which demonstrate your work-related use of the asset.  This can be evidenced by a 4-week period showing the personal use and income-producing use of the asset.

Home Office Occupancy Costs (rent, mortgage interest, rates, land tax)

 We note that the above only relates to deductions for home office running costs.  It does not provide guidelines for home office occupancy costs (like rent, mortgage interest, property insurance and land tax).   More information is provided here in relation to home occupancy costs.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Business Basics Grant – Round 4

Small Business – $5,000 Business Basics Grant – Round 4

The Queensland Government have recently announced the fourth round of the Business Basics Grant to help Queensland small businesses continue to recover and grow.

The Business Basics Grant provides up to $5,000 to help businesses increase core skills and adopt best practice. 

Activities financed:

The grant will fund activities from one of the following priorities:

  1. Training and coaching (including business development, marketing, HR or business planning topics)
  2. Website build or upgrades (including developing new website content, adding e-commerce)
  3. Professional business advice (including business plans)
  4. Strategic marketing advice (including search engine optimisation advice)
  5. Business continuity and succession planning (including cyber-safety training and tools)

The grant will not fund the following:

  • Activities bought using cryptocurrencies, barter, or services in-kind;
  • General operating expenses;
  • Real estate/property, hire, lease or rental fees;
  • Goods, services or fees from related parties;
  • Travel;
  • Franchise fees;
  • Purchase of stock;
  • GST, registration and fees;
  • Maintenance of existing digital technologies;
  • Computer hardware;
  • Other hardware/devices/equipment (eg. televisions, EFTPOS, card and chip readers);
  • Activities purchased through direct selling (eg. by party plan or network marketing);
  • Delivery, credit card and transaction fees;
  • Memberships and joining fees;
  • Salaries;
  • Website Hosting;
  • Implementation of marketing tactics such as advertising, direct marketing (eg. telemarketing) or campaign delivery (eg. Google AdWords, Facebook advertising or similar expense).

Eligibility:

To be eligible for the grant, your businesses must:

  • not have been approved for funding under Round 1, 2 or 3 of this Grant;
  • have fewer than 20 employees at the time of applying for the grant (by headcount);
  • have an active ABN and be registered for GST;
  • have a Queensland headquarters;
  • have a turnover of $300,000 or less in the current financial year;
  • not be insolvent or have owners/directors that are an undischarged bankrupt.

Your business must also maintain this eligibility for the duration of the grant funded activity.

Application process:

Grants will be awarded through a two-stage process (which is different to the previous rounds of the grant).  Businesses can register their interest to apply by completing an online form (which collects basic business information).  Businesses will then be selected by a ballot to submit a full application.  This will ensure that all small businesses have equal and fair opportunity to register their interest at any time once registrations open.

Key details:

  • Funding available: up to $5,000
  • Registration of Interest (ROI) Opens: 24 November 2022 (closes 5 December 2022)
  • Full Applications Open: 12 December 2022 (selected ROI applicants only)

To apply (and for more details) go to: https://www.business.qld.gov.au/starting-business/advice-support/grants/business-basics-grant

Federal Budget 2022-23

On Tuesday night, 25 October 2022, Federal Treasurer Jim Chalmers handed down his first Federal Budget for the Labor Government. The economic outlook for Australia in this Budget is heavily influenced by the current inflation rate and the rising cost of living pressures.  According to the Budget papers, inflation is now expected to peak at 7.75% by the end of 2022 before starting to settle down next year.  While it is forecast that Australia will likely avoid a recession, the impact of large price increases in everyday staples like fuel, electricity and groceries have impacted on the framing of this budget.

Dr Chalmers has described his budget as:

  • Providing responsible cost of living relief that doesn’t put additional pressure on inflation;
  • Investing in a stronger and more resilient modern economy; and
  • Responsibly repairing the Budget.

We’ve outlined below some of the measures that were announced in the Budget that will impact on our clients.  As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government.  We will keep you updated on the status of any proposed measures.

Income Tax

The previously legislated stage 3 tax cuts for individuals starting 1 July 2024 remain untouched.

Cost of Living Relief

The budget has a five-point plan for cost-of-living relief:

  1. Cheaper child care;
  2. Expanding Paid Parental Leave;
  3. Cheaper medicines;
  4. More affordable housing;
  5. Getting wages moving again.

Cheaper Child Care

$4.6 billion will be provided to increase the maximum Child Care Subsidy (CCS) rate from 85% to 90% for families for their first child in care and to increase the CCS rate for all families earning less than $530,000 in household income.

Paid Parental Leave

Paid Parental Leave will also be expanded so that it will be available to families earning up to $350,000 per year.  Either parent will also be able to claim the payment and both birth parents and non-birth parents are allowed to receive the payment if they meet the eligibility criteria.  Parents can claim weeks of the payment concurrently so they can take leave at the same time.

From 1 July 2024, the Government will start expanding the scheme by two additional weeks a year until it reaches 26 weeks from 1 July 2026.

Cheaper Medicines

$787 million over four years will be committed to reducing the costs of medicines under the Pharmaceutical Benefits Scheme (PBS).  The maximum general co-payment for medicines on the PBS will be reduced fro $42.50 to $30.

More Affordable Housing

Housing Australia Future Fund: $10 billion will be invested into a newly created Housing Australia Future Fund.  The returns generated from this fund will be used to deliver 30,000 social and affordable homes over 5 years and allocate $330 million for acute housing needs (remote Indigenous communities, women and children fleeing domestic and family violence, homeless veterans).

Housing Accord: $350 million will be provided over 5 years from 2024-25 to support funding of an additional 10,000 affordable homes under a Housing Accord with state and territory governments.

Help To Buy Scheme: $324.6 million over 4 years from 2022-23 to establish a Help to Buy scheme to assist people on low to moderate incomes to purchase a new or existing home using an equity contribution from the Government.  This means more people will be able to buy a home with a smaller deposit and smaller mortgage.

Expanded ATO Compliance Programs

Funding is being provided to extend several ATO compliance programs. 

Personal Income Tax Compliance Program

$80.3 million will be provided to the ATO to extend the Personal Income Tax Compliance Program for 2 years from 1 July 2023.  This enables the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including over-claiming of deductions and incorrect reporting of income.  The compliance program is expected to generate additional tax revenue of $674.4 million.

Shadow Economy Program

The ATO Shadow Economy Program will be extended for a further 3 years from 1 July 2023.  It will enable the ATO to target shadow economy (dishonest and illegal) activity to protect revenue and level the playing field for businesses that are following the rules.  It is estimated that this program will generate additional tax revenue of $2.1 billion.

Tax Avoidance Taskforce

The ATO will receive an additional $200 million over 4 years from 1 July 2022 to help fund the Tax Avoidance Taskforce.  The Taskforce will also be extended for a further year from 1 July 2025.  The program is expected to generate additional tax receipts of $2.8 billion.

Older Australians

Expanded Downsizer Contribution

The Downsizer Contribution enables people to make a one-off post-tax contribution to their superannuation of up to $300,000 per person from the proceeds of selling their home.  Both members of a couple can contribute and contributions do not count towards their non-concessional cap.  The Government is proposing to reduce the minimum eligible age from 60 to 55 which will enable more people to access the concession. 

Work Incentives for Pensioners

Under the proposed budget, age and veteran pensioners will be able to earn up to $11,800 before their pension is reduced (this is currently $7,800).  This will support pensioners who want to work, or work more hours, to do so without losing their pension.

Seniors Health Card – Income Threshold Lifted

The income threshold for the Commonwealth Seniors Health Card will increase from $61,284 to $90,000 for singles and from $98,054 to $144,000 for couples.

Other measures of interest

Some other measures of interest include:

  • Digital Currencies
    • The budget has confirmed that digital currencies (for example, bitcoin) will not be taxed as foreign currency.  The current tax treatment of digital currencies will be maintained – including capital gains tax where the currency is held as an investment.
  • Support for Small Business Owners:
    • $15.1 million will be provided over 2 calendar years from 1 January 2023 to 31 December 2024 to extend the Small Business Debt Hotline and the New Access for Small Business Owners programs to support the financial and mental wellbeing of small business owners.
  • Depreciation of Intangible Assets
    • The Government will not proceed with a measure to allow taxpayers to self-assess the effective life of intangible assets.
  • Greater Penalties for Breaching Competition and Consumer Laws
    • Maximum penalties for corporations breaching competition and consumer laws will increase from $10 million to $50 million per breach and from 10% to 30% of turnover (whichever is greater).

We will keep you up-to-date with the progress of the implementation of these Budget measures.

If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Queensland Land Tax changes – updated 30/9/22

!! UPDATE – 30 SEP 22 !!

It is being reported today that Queensland Premier Annastacia Palaszczuk has decided to “shelve” the controversial land tax changes (outlined below).  We will provide more details as they come to hand. 

Queensland Land Tax Changes

From 30 June 2023, Queensland land tax will be calculated using the total of your Australian landholdings.

The total of your Australian landholdings will be used to determine:

  • whether the tax-free threshold has been exceeded;
  • the rate of land tax that will be applied to the Queensland proportion of the value of your landholdings.

The current tax-free thresholds are $600,000 for individuals (other than absentees) and $350,000 for companies, trustees and absentees.

You’ll only pay tax on the land you own in Queensland (ie. Queensland land tax is not being imposed on land outside of Queensland).

Queensland land only

If you only own land in Queensland, you will not be affected by this change.

Queensland and interstate land

If you own land in Queensland and in another state or territory, you will need to declare your interstate landholdings.

You will need to setup a QRO online account and complete the declaration (including land description, value and percentage of ownership).

From 30 June 2023, you will need to complete this declaration by the earlier of the following:

  • within 30 days of receiving a land tax assessment notice
  • on or before 31 October.

Calculation land tax with interstate land

The land tax rate that applies depends on what type of owner you are and the value of your land.  This rate (and surcharge, if applicable) is applied to the total value of your Australian land.  Then this figure is applied to the Queensland proportion to get the annual land tax liability.

You can use the interstate estimator to get an idea of how much land tax you may have to pay from 30 June 2023.

Exclusions

For land in Queensland, you may be eligible for a land tax exemption depending on the ownership and use of the land.  If your interstate land meets certain eligibility criteria requirements, you can apply to have its value excluded from the land tax calculation.

Exclusions available for Qld and interstate land

  • Home (principal place of residence)
  • Primary production
  • Supported accommodation
  • Moveable dwelling (caravan) park
  • Retirement village
  • Transitional home
  • Charitable institutions
  • Aged care

Exemptions available for Queensland land only

  • Government land
  • Port authority land
  • Societies, clubs and associations

Action to take

If you own land in Queensland and interstate, you need to:

  1. Review the total value of your landholdings;
  2. Setup a QRO online account and complete the declaration of your landholding.
  3. Calculate your potential land tax liability using the online calculator to ensure you budget for the new liability.

 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Skills and Training Boost – Draft Legislation

Small Business Skills and Training Boost – Draft Legislation

The Federal Government has recently released Exposure Draft Legislation for the Small Business Skills and Training Boost.  The Boost is a temporary measure to incentivise small businesses to upskill their employees or train new employees.  Under the Boost, businesses will be able to claim a 120% deduction for eligible expenditure.

* Please note, that the Boost has only been released as Exposure Draft Legislation and will not be law until the relevant legislation has been passed by Parliament.  We will keep you updated on the status of the proposed measures.

Who is eligible?

Businesses with an aggregated turnover of less than $50 million are eligible for the bonus deduction.

As discussed in more detail below, sole traders, partners in a partnership and independent contractors are not eligible for the bonus deduction.

What can be claimed?

The bonus deduction applies to expenditure incurred for in-person or online training for your employees.  The training must be provided by a registered training organisation.  The services provided must be within the scope of the registered provider’s registration (which can be checked at www.training.gov.au).

The training cannot be provided by an associate of the employer.  In-house training or on-the-job training is also not eligible. 

Only the amount charged by the registered training organisation is eligible for the bonus deduction.  If there are incidental costs to the training (eg. books or equipment), it will only be eligible for the bonus deduction if the training provider charges your business for these.

There is no cap on the amount claimed.

When does it apply?

It applies to expenditure incurred from 7:30pm on 29 March 2022 to 30 June 2024.

Any expenditure incurred between 29 March 2022 and 30 June 2022 will be claimed in the 2023 tax return.

What is excluded?

Sole traders, partners, independent contractors

As the draft legislation currently stands, the bonus deduction is only available for spending on external training for employees.  The explanatory memorandum for the draft legislation specifically states that the bonus deduction is not available for sole traders, partners in a partnership and independent contractors (as they are not “employees” of the business).

Incidental costs

As noted above, incidental costs (like books or equipment) cannot be claimed unless the registered trainer charges for these.

Action to take

  1. Review all expenditure incurred from 29 March 2022 to 30 June 2022 to identify whether your business has incurred any costs eligible for the bonus deduction.  Document these costs and have them ready for your 2023 tax return.  If you are one of our business clients, please feel free to email the invoices for these costs through to us and we will retain these on file for your 2023 tax return.
  2. Setup a separate expense account in your chart of accounts to track eligible training expenses for the 2023 and 2024 year (to make it easier to identify and claim at year end).
  3. For all eligible expenditure, ensure you have an appropriate invoice from the registered training organisation (and that the services provided come within their scope of their registration).  If you are using accounting software like Xero, you can attach these invoices to the relevant expense entry (making it easier at year end for your accountant to review the eligibility of the expense).
  4. For all eligible expenditure, ensure it has been incurred for employees (ie. that the relevant employee is recorded on the payroll of the business and that appropriate payroll data has been lodged via Single Touch Payroll for the employee).
  5. Review your current training programs for your staff and consider whether additional training is required.  If so, ensure the training is undertaken prior to 30 June 2024 to be eligible to the bonus deduction.

 

 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Technology Investment Boost – Draft Legislation

Small Business Technology Investment Boost – Draft Legislation

The Federal Government has recently released Exposure Draft Legislation for the Small Business Technology Investment Boost provides businesses with a 120% deduction for expenditure to support their digital technologies. 

* Please note, that the Boost has only been released as Exposure Draft Legislation and will not be law until the relevant legislation has been passed by Parliament. We will keep you updated on the status of the proposed measures.

Who is eligible?

Businesses with an aggregated turnover of less than $50 million are eligible for the bonus deduction.

What can be claimed?

Eligible businesses can claim a bonus 20% deduction on expenditure to support digital operations.  The expenditure must be incurred wholly or substantially for the purposes of a business’ digital operations or digitising the entity’s operations.  This may include:

  • Digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks
  • Digital media and marketing – audio visual content that can be created, accessed, stored or viewed on digital devices; and
  • e-commerce – supporting digitally ordered or platform enabled online transactions.

It only applies to expenditure up to $100,000 per income year (which would give the business an maximum additional $20,000 deduction per income year).

When does it apply?

It applies to expenditure incurred from 7:30pm on 29 March 2022 to 30 June 2023.

Any expenditure incurred between 29 March 2022 and 30 June 2022 will be claimed in the 2023 tax return.

What is excluded?

A bonus deduction cannot be claimed on the following costs:

  • Salary and wages
  • Capital works claimable under Division 43 (building depreciation)
  • Financing costs
  • Training and education (see the Small Business Skills and Training Boost)
  • Spending associated with training stock.

The boost is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises and the cost of goods and services that the business sells.

Action to take

  1. Review all expenditure incurred from 29 March 2022 to 30 June 2022 to identify whether your business has incurred any costs eligible for the bonus deduction.  Document these costs and have them ready for your 2023 tax return.
  2. Setup a separate expense account in your chart of accounts to track these expenses for the 2023 year (making it easier to identify and claim at year end).
  3. For all eligible expenditure, ensure you have appropriate invoices to support the cost.  If you are using accounting software like Xero, you can attach these invoices to the relevant expense entry (making it eaiser at year end for your accountant to review the eligibility of the expense).
  4. Consider whether your business needs to make further investments to support their digital operations.  If so, ensure these costs are incurred before 30 June 2023.

 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

2022 End of Year Tax Planning

Now is the time for you to review your 2022 estimated tax position to see what action can be taken prior to 30 June to minimise your tax liability.

There are quite a few new issues to consider for the 2022 financial year.  We have outlined some of the key 2022 tax planning ideas for you below.

There are also some significant changes taking effect from 1 July 2022.  We have also outlined these changes here.

Depreciation of assets

For businesses with a turnover under $50 million, up to 30 June 2022 you can claim a deduction for the acquisition of any eligible depreciating assets (there is no limit for most assets).

For small businesses (turnover under $10 million) that use simplified depreciation rules, the balance of your small business pool can be written off at the end of the income year.

We note that there is still a cost limit on certain assets – for example, you can only claim a maximum deduction of $60,733 for a passenger vehicle during the 2022 financial year.  A passenger vehicle is a vehicle that is designed to carry a load less than one tonne and fewer than 9 passengers.

EOFY Tax tip: If you are looking to acquire capital assets for your business, we recommend doing so prior to 30 June to get the deduction in the current financial year.  If the deduction puts your company in a loss position – consider the loss carry-back provisions below.

Business tip: While you get the benefit of deducting the full cost of the asset in the current financial year, this means that you will not receive any depreciation on this asset in future years.  It also means that when you sell the asset, any income from the sale will be subject to income tax.

Business tip: The tax depreciation deduction is only available once the asset is installed and ready for use.  Getting assets installed and ready for use by 30 June might be difficult for some businesses given the current lack of supply for equipment and vehicles.

Company loss carry-back

Companies that make a loss in the 2020 to 2023 financial years, can carry this loss back to reduce taxable profits made on or after the 2019 financial year.  The company can then elect to receive a refund of the tax paid in that year when lodging the later year tax return.

EOFY Tax tip: Your company may be able to take advantage of the asset depreciation rules to write off the full value of new assets purchased.  If the depreciation puts your company into a loss, this loss may be applied against the taxable profits from 2019, 2020 or 2021.  You may then receive a refund of tax paid in those financial years.

Employee superannuation guarantee

The June quarter superannuation guarantee liability is required to be paid by 28 July.  However, a business can only claim a tax deduction for employees’ superannuation when it is actually paid.  As such, to ensure you get a deduction in the current year, you need to pay your employees’ June superannuation guarantee liability prior to 30 June (cashflow permitting).  We recommend that the payment be made by 14 June (to ensure it is processed by the recipient superfund). 

EOFY Tax tip: Pay your employee June quarter superannuation by 14 June 2022 to get a deduction in the current financial year.

Business tip: The ATO are currently allocating considerable resources to reviewing employer compliance with paying employees’ superannuation guarantee.  There are significant penalties that can be incurred if you pay your employee superannuation late. 

Business tip: The payment of your June quarter superannuation liability does not impact on your profit and loss position (as the superannuation liability has already been recorded in your profit and loss).  The payment before 30 June simply brings the tax deductibility of the payment forward to the current financial year.  If you make the payment after 1 July (and before the 28 July cut-off), the payment will be deductible next financial year.

Business tip: From 1 July 2022, the superannuation guarantee rate increases to 10.5%.  This will continue to increase by 0.5% per year until it reaches 12%.  This will have flow-on implications for payroll tax, workcover etc.  The $450 minimum threshold for the payment of the superannuation guarantee will also be abolished from 1 July 2022, meaning that superannuation is payable on the first $1 of your employee’s wages. 

Personal superannuation

You may also want to make personal contributions to super.  For the 2021/22 financial year, the maximum concessional (deducted) contribution is $27,500.

However, if your superannuation balance was less than $500,000 as at 30 June 2021, it may also be possible for you to contribute more super by taking advantage of the unused concessional cap carry forward rules. 

EOFY Tax tip: If you have unusually high income during the 2022 financial year, consider whether making additional deductible superannuation contributions fits within your personal financial plan.  We recommend speaking with your financial adviser with regards to your superannuation contributions.

Trade debtors

You should review your trade debtors as at 30 June.  You must ensure that any debts that are uncollectible are written off prior to 30 June in order to claim a tax deduction for the write-off in the current financial year.  This is particularly important given the on-going effect of COVID-19 on many businesses.

EOFY Tax tip: To write off a bad debt – you must have made reasonable and commercial attempts to recover the debt and have now determined it is uncollectible.  You then need to make a decision in writing to write off the bad debt (eg. you have removed the debt from the customer’s account and have recognised a bad debt expense).

Prepay or bring forward your expenses

Make sure you review all of your expenses and bring forward any expenses to June (where possible).  For example, stock up on stationery and office consumables, prepay your insurance and interest (if applicable) and look at any other expenses you may be able to pay in June.  By bringing these expenses forward to June, you are obtaining a tax deduction in the current financial year which will reduce your overall tax bill for the 2022 year.

EOFY Tax tip: If your business is in a loss position, it may not be advantageous to bring forward expenses to the current financial year.  Please contact us to discuss whether this strategy is appropriate for you.

Defer assessable income

Consider whether it is possible to defer your assessable income (being mindful of cashflow implications) to next financial year. 

Motor vehicles

If you are using a vehicle for a high percentage of work-related travel, make sure you keep a logbook.  Without a logbook, an individual is limited to claiming a maximum of 5,000km at $0.72 (or $3,600) in the 2022 financial year.  If you keep a logbook, you can claim the business percentage of the operating costs of the vehicle (petrol, registration, servicing, depreciation, interest etc).

EOFY Tax tip: A logbook started prior to 30 June can be used to support a logbook claim even if the logbook isn’t completed until after 30 June.

Working from home

If you worked from home during the 2022 financial year, you may be able to claim a deduction for a percentage of the running costs of your home.  There are a few different methods you can use to calculate your deduction:

(1) Shortcut method ($0.80 per hour) – available until 30 June 2022 and covers all home office running expenses including telephone, electricity, depreciation, internet, computer consumables

(2) Fixed rate method ($0.52 per hour) – this claim only covers depreciation of office furniture and furnishings, electricity and repairs (so you can claim telephone, internet, equipment depreciation and computer consumables separately)

(3) Actual cost method – you can calculate and claim the work-related portion of your actual expenses provided you have kept appropriate records

EOFY Tax tip: The ATO have calculators that may assist you to calculate your working from home deduction shortcut method calculator and fixed rate method calculator

EOFY Tax tip: The ATO have announced that work-related expenses and working from home deductions will be a specific area of review for the 2022 tax returns. 

Trust minutes

Prior to 30 June, make sure the trustees of your discretionary trusts decide how they are going to distribute their income and capital.  This decision must be documented in a trust minute before 30 June.  It is important that you review your trust income for the 2022 financial year to ensure that the trust minute accurately reflects the trustee’s intention.  There have been recent announcements from the ATO with regards to the distribution of income to adult children and other tax advantaged beneficiaries.  It is important that you get tax advice for your end of year tax minutes.

EOFY Tax tip: Your trust minutes must be prepared prior to 30 June to evidence the trustees decision regarding the distribution.  Keep this minute with your tax records.

Rental properties

For your rental properties, if you have any expenses coming up in the next few months, try to pay these prior to 30 June – this will bring the deduction into the current tax year and will help you to reduce your 2022 tax bill.

EOFY Tax tip: Consider getting a depreciation report for your rental property.  You may be able to claim additional tax deductions for the the cost of the building and potential its fixtures and fittings.

EOFY Tax tip: Consider undertaking repairs to your property prior to 30 June.

Cryptocurrency

The ATO have specifically announced that they will be reviewing cryptocurrency transactions in the 2022 tax returns.  It is important to ensure you include all cryptocurency transactions on your tax return.  If you have had any cryptocurrency gains in the current financial year, you may wish to consider some additional tax planning measures before 30 June to reduce any tax liability.

EOFY Tax tip: Make sure you have all of your documentation available for all cryptocurrency transactions.  Noting that changing your investment from one cryptocurrency to another constitutes a transaction which may result in a tax liability.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Employers…changes are coming

Below we have outlined some upcoming changes to employee superannuation obligations and employee data reporting.  It is important to check that your payroll software is updated to take into account these changes.  Some of these changes will increase your overall employee costs and will need to be taken into account when you are setting your budget for the 2023 financial year.

Superannuation guarantee rate increasing to 10.5%

The superannuation guarantee (SG) rate will increase to 10.5% from 1 July 2022 and will continue to increase by 0.5% each financial year until it reaches 12% on 1 July 2025.

Business impact

The increase in the SG rate can have the following impacts on your business:

  1. An increase in your superannuation expense – if your employees are paid their super on top of their hourly rate or salary, then an increase in the SG rate will increase your overall superannuation liability.
  2. An increase in your workcover cost – workcover is calculated on the wages and superannuation that you pay to your employees so an increase in the superannuation rate will increase the total wages declared to workcover.
  3. A liability to payroll tax – if your business is near the payroll tax threshold, an increase in your superannuation expense may result in you becoming liable to payroll tax.
  4. An increase to your existing payroll tax liability – if your business is already liable for payroll tax, an increase to your superannuation expense will increase your overall payroll tax liability.

Action to take

To ensure your business takes into account the implications of the increase in the SG rate, we recommend that you:

  1. Review your employee contracts or awards to determine if their wages include or exclude superannuation;
  2. Calculate your increased liability for superannuation, workcover and payroll tax and factor this into your business’ budget and cashflow forecasts;
  3. Review your method of recording and reporting employee superannuation and ensure that the increased rate will be reflected in your reporting system (most online accounting software – Xero, Reckon, MYOB etc – should be automatically updated to take into account the increased rate);
  4. Ensure you pay your employee superannuation by the relevant due dates (28 July, 28 October, 28 January, 28 April) to avoid a potential 200% penalty for late payment.

$450 monthly wages threshold for superannuation guarantee removed

Prior to 1 July 2022, employers only had to pay super once an employee’s monthly wage exceed $450.  From 1 July 2022 employers will be required to make superannuation guarantee contributions to their employee’s super fund regardless of how much the employee is paid. 

Single Touch Payroll Phase 2 

Single Touch Payroll Phase 2 is an extension to the original Single Touch Payroll reporting system introduced on 1 July 2018.  Phase 2 is intended to reduce the reporting burden for employers who need to report information about their employees to multiple government agencies (like Services Australia).

The mandatory start date for Phase 2 reporting is 1 January 2022.  However, the ATO is offering a flexible approach to transition by allowing employers who were reporting by 1 March 2022 to be deemed compliance at 1 January 2022.

Digital Service Providers also have the option to apply for a deferred start date.  This deferred start date then automatically applies to customers of that provider.  For example, Xero has a deferred start date of 31 December 2022 for its customers. 

Action to take

Check with your digital service provider to determine their status with regards to the implementation of Single Touch Payroll Phase 2.  Please contact us if you employ staff and you are unsure of whether your software is compliant.

 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent.

Business Basics Grant

The Queensland Government have recently announced the third round of the Business Basics Grant to help Queensland small businesses continue to recover and grow.

Small Business – Business Basics Grant – $5,000

The Business Basics grant provides up to $5,000 to help businesses increase core skills and adopt best practice. 

Activities financed:

The grant will fund activities from one of the following priorities:

  1. Training and coaching
  2. Website build or upgrades
  3. Professional business advice
  4. Strategic marketing advice
  5. Business continuity and succession planning.

Eligibility:

To be eligible for the grant, your businesses must:

  • not have been approved for funding under Round 1 or 2 of this Grant;
  • have fewer than 20 employees at the time of applying for the grant (by headcount);
  • have an active ABN and be registered for GST;
  • have a Queensland headquarters;
  • have a turnover of $300,000 or less in the current financial year;
  • not be insolvent or have owners/directors that are an undischarged bankrupt.

Key details:

  • Funding available: up to $5,000
  • Opens: 4 May 2022
  • Closes: When funds are exhausted

To apply (and for more details) go to: https://www.business.qld.gov.au/starting-business/advice-support/grants/business-basics-grant