Man carrying heavy bag on his back with words Year End Tax Planning Tips

Year End Tax Planning Tips for 2020

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30 June is fast approaching, and most of us are starting to think about our tax returns. Of course, no one likes to pay more tax than they have to. So, we’ve put together some year end tax planning tips that will help you keep more of your money at tax time.

Year End Tax Planning Tips for 2020

Prepay Business Expenses

Prepaying some of your expenses for the coming financial year while you’re still in this financial year can save you money. This can be things like your rent, insurance, subscriptions to any professional associations and even interest on bank loans (where your terms allow). You can deduct a full year’s worth of the coming year’s expenses this year.

This is definitely something to consider if you’re a business who anticipates a larger than normal tax bill for this year.

Consider Personal Deductible Super Contributions

Consider topping up your super contributions. You can contribute up to $25,000 in deductible super contributions each year, and it’s a great way to both save, and save on taxable income.

To  claim a deduction for personal superannuation contributions you need to complete an  intention to claim with your superannuation fund and receive a letter back confirming the tax-deductible amount. You’ll need to provide a copy of this letter at the time of lodging your tax return in order to claim a deduction.

Super Contributions Timing

If you’re thinking about taking advantage of super contributions, don’t leave it too late. The tax office doesn’t consider a contribution to be made until the amount is actually credited to a super fund’s bank account. So, an electronic transfer to another bank account on 30 June is not necessarily considered paid. Make sure you do these two weeks or so before the year end to be safe.

Make Donations

Donations are a great way to save some money at tax time. But in order for your donations to be tax deductible, it must meet a few requirements.

  1. It must be made to Deductible Gift Recipients;
  2. It needs to be $2 or more;
  3. You cannot receive a material benefit in exchange for the donation;
  4. It must meet any applicable conditions; and
  5. You must keep a record.

Read more about how to meet those requirements here.

Purchase Plant and Equipment

Take advantage of the $150,000 instant asset write-off. It will allow you to deduct business assets (new and used) purchased from your assessable tax.

Write Off Bad Debts

Review bad debts for any that are absolutely unrecoverable. Writing these off before 30 June will enable you to claim them as a deduction.

Home Office and Working from Home Expenses

The ATO has always encouraged employees who spend some time working from home to claim certain work-related expenses as a tax deduction. These expenses can include electricity, cleaning costs, phone and internet, computer consumables (that means printer paper and printer ink, for example), home office equipment, home office furnishings and the costs of repairs to work equipment or spaces.

Since COVID-19, the ATO is now offering a simplified working from home allowance. They’re also still permitting you to claim under the old methods as well. You can read about each method, their benefits and which will work best for you here.

Do A Stocktake

Now is a great time to review your stock and write off any that is damaged or obsolete.

Consider Income Protection

Income protection insurance can be claimed as a tax deduction. It can also provide you peace of mind that your family will be taken care of in the event of something happening to you.

Take Advantage of Depreciation

Write off any obsolete items on your depreciation schedule.

Make and document any trust resolutions

If you’re trading under a trust structure make sure you prepare your trustee distribution resolution minutes prior to 30 June 2020. These resolutions document how the income from the trust is distributed to its beneficiaries, and if it isn’t executed by this date, any default beneficiaries become entitled to the trust’s income and are subject to tax.

Government Subsidies

If you’ve received the Cashflow Boost or JobKeeper payments, they have special rules for tax purposes.

Cashflow Boost

The Cashflow Boost is a ‘non-assessable non-exempt’ income for tax purposes and not reportable on the BAS. So, you need to make sure you don’t include it in your taxable income.

JobKeeper Payments

JobKeeper payments, on the other hand, are assessable income for tax purposes but don’t attract GST. So, for these, you need to ensure you don’t include them at item 1B of the BAS.

Talk to Your Accountant

At the end of the day, the best year end tax planning tips are the ones that work best for you. Talk to your accountant if you have any other questions about strategic tax planning.

We’re here to help if you need any additional information or advice based on your specific situation.

Contact us for your free consultation

JobKeeper Guides

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The JobKeeper payment scheme is a great initiative for Australian businesses. It can help you get through the tough economy brought on by COVID-19. But it’s not always easy to understand. Many people want to know, am I eligible? How do I enrol? Who can I speak to if I’m still not sure? So, we’ve put together easy-to-understand JobKeeper Guides that answer just those questions.

The JobKeeper Guides below provide high-level customised information about JobKeeper payments for each specific entity. They will help you understand your eligibility and give you information on how to enrol so you don’t have to dig through complicated layers of information to find out what applies to you.

JobKeeper Guides

JobKeeper Guide for Employers and Employees

For businesses that have employees.

JobKeeper Guide for Sole Traders

For sole traders without employees.

JobKeeper Guide for Partnerships

For partnerships without employees.

JobKeeper Guide for Trusts

For trusts without employees.

JobKeeper Guide for Companies

For companies without employees.

Enrolments are open now.

We’re here to help if you need any additional information or advice based on your specific situation. The ATO is also willing to work with you. So, even if you don’t think you fit any of these categories, there may be some help available to you.

Contact us for your free consultation

Open sign on business
JobKeeper Payment: Here’s Everything You Need to Know
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The JobKeeper payment has been set up to help employers and the self-employed keep their doors open and employees to keep working. Are you eligible?

The JobKeeper payment is the new scheme on the minds of employers, employees and the self-employed throughout Australia. They’re wondering, ‘Am I eligible?’ ‘How do I register?’ And, ‘How much is the payment?’

We’ll answer all those questions (and more!) for you here.

What is the JobKeeper payment?

As part of their response to the coronavirus pandemic, the Australian government has passed legislation for a $1,500 per fortnight wage subsidy for eligible entities. This payment is designed to help keep Australians working, whether they’re employees or self-employed, despite the economic impacts of coronavirus. It’s different to the JobSeeker payment which is an $1,100 supplement for those that are out of work.

The government believes that six million Australian workers will benefit from this subsidy before the end of the pandemic.

Who is eligible for the JobKeeper payment?

The government has aimed the JobKeeper payment at all types of Australian workers. This includes the typical employer/employee business, the self-employed and sole traders, charities, not-for-profits, partnerships, trusts and companies with shareholders.

The Employer/Employee Business

If you are part of a business with employees or a not-for-profit or a charity, there is a dual test you must meet in order the access the JobKeeper scheme. In that situation both the employer and the individual employee must be eligible in order for the employees to receive a JobKeeper payment.

Eligible Employers

Eligible employers must meet the following eligibility requirements:

  1. Have a turnover of less than $1 billion and have lost more than 30% of their revenue (when compared to the same period a year ago); OR
  2. Have a turnover of more than $1 billion and have lost more than 50% of their revenue (when compared to the same period a year ago).
  3. If you’re a charity, the revenue loss just needs to be 15%.

Some organisations (and therefore their employees) are just not eligible regardless of whether or not they meet the criteria. This includes the big banks and public sector employers like local government bodies.

Eligible Employees

Even if an employer is eligible, not every one of their employees will be. Employees also have to meet the following eligibility requirements:

  • Were employed as of 1 March 2020;
  • Are at least 16 years old;
  • Are an Australian citizen, or have certain specified types of visas, including permanent and New Zealand 444; and
  • If they’re sole traders, full-time, part-time or long-term casuals, they’ve been employed on a regular basis for longer than 12 months as of 1 March 2020.

If you believe you meet the eligibility requirements (or even if you’re not sure, but want to know if you do), you should take the following steps:

  • First, contact your employer and let them know you want them to claim the JobKeeper payment for you. If you have more than one job, you must choose only one employer to claim the payment for you (if one is a permanent employer, choose that one) and let your other employers know who you have nominated.
  • Second, complete the JobKeeper employee nomination notice and return it to your employer.
  • Third, you can’t get the JobKeeper payment if you receive certain other types of payments. For example, if you are also applying for a Services Australia income support payment (like the JobSeeker payment), contact Services Australia. You must let them know that your employer is applying for the JobKeeper payment or you could find yourself in a situation where you owe the government money.

What if I’ve been fired or stood down?

If your employer continues to pay you $1,500 per fortnight before tax, then they may receive the JobKeeper payment. This means that businesses that shut down because of COVID-19 restrictions, like cafes, cinemas and pubs, can re-engage their eligible employees and keep them ‘on the books’ and being paid even while they aren’t working.

How Will You Receive Your Payment?

The JobKeeper payment goes directly to the employer. The employee continues to receive their normal wages from their employer, and the employer is then reimbursed up to $1,500 for those payments.

If an employee is earning less than $1,500 per fortnight, but they’re eligible for the payment, the employer must pay them at least $1,500 in order to receive the JobKeeper payment from the government. That means that in some situations, employees may actually receive more income than their regular pay.

If an employee earns more than $1,500 per fortnight, the JobKeeper payment will subsidise their income up $1,500. The remainder will be paid by their employer as usual.

It’s important to note that employees aren’t receiving a cash payment under this scheme. Instead, it’s a way for the government to help employers to keep their workers on the job despite the hard economic times.

Sole Traders, Partnerships, Trusts and Companies

Sole traders, partnerships, trusts and companies may also be entitled to receive JobKeeper payments. To be eligible, the entity must:

  1. Have carried on a business in Australia on 1 March 2020;
  2. Had an ABN on 12 March;
  3. Lodged a 2018–19 income tax return, or an activity statement or GST return for any period that started after 1 July 2018 and ended before 12 March 2020 on or before on or before 12 March;
  4. Met the 30% business revenue reduction test; and
  5. Have someone actively engaged in the business of the entity (this is called the ‘eligible business participant’) who is not an employee of the entity.

The entity must nominate the eligible business participant. This would be the partner in a partnership, the beneficiaries of a trust or the shareholders or directors of a company. However, the sole trader may be their own eligible business participant and may nominate themselves.

There is no wage condition attached to the JobKeeper payments to sole traders, trusts, companies or partnerships. In other words, there’s no requirement that these entities have paid $1,500 per fortnight to the eligible business participant. And the JobKeeper payments you receive do not have to be distributed to an eligible business participant. Instead the money becomes part of the taxable income of the entity to do with as they choose.

When Will JobKeeper Payments Be Made?

The subsidy will start on 30 March 2020, so payments will start being received in the first week of May. Businesses should register their interest and can enrol for the JobKeeper payment on or after 20 April 2020 on the ATO website.  

More Questions?

There are always situations that don’t completely fit into the categories set out above. But the ATO is keen to help as many businesses as possible. If you’re unsure whether you’re eligible, or if your situation is unique, give the ATO a call directly. They’re ready and taking calls now.

Of course, we’re happy to answer any questions here at Dart Accounting as well. The JobKeeper scheme seems complicated, but hopefully it will go some way to helping employees keep their jobs and employers keep their businesses afloat.

We’re happy to give you personalised advice about your eligibility for the JobKeeper payment. Get in touch for your free one hour initial consultation call.

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ATO’s Bushfire Relief and Tax Assistance

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ATO bushfire relief will help over 3.5 million Australians. See what you’re eligible for.

The 2019/2020 bushfires have had a profound effect on Australians. As of 14 January 2020, 18.6 million hectares of land has burned, 30 people and 1 billion animals have been killed and 5,900 buildings have been lost. For those directly affected, it is a tragedy beyond comprehension. The last thing those families and businesses want to be doing is worrying about their tax requirements.

The Australian Taxation Office (ATO) understands this and is offering tax relief and assistance to over three and a half million bushfire victims. This relief ranges from deferments on filing requirements to bespoke solutions and in most cases will apply automatically to those individuals, businesses and self-managed superannuation funds (SMSFs) located within fire affected postcodes.

If you are located in one of the indicated postcodes, or even if you’re not, here are the ATO bushfire relief measures on offer.

Automatic Deferments

The ATO is extending an automatic deferment to bushfire victims for any lodgements or payments due. Due dates are now pushed back until at least 28 May 2020 to lodge and pay business activity statements and income tax returns. This applies whether you manage your taxes yourself or have an agent do it.

You don’t have to do anything to get this deferment. If you’re in one of the indicated postcodes, it’s been extended automatically.

Fast Tracking Refunds

The ATO is also fast tracking refunds to those entities and individuals in the identified postcodes. If you’ve already lodged your return, your fast-tracked refund will happen automatically.

If you haven’t lodged your return yet, it might be worth trying to do it as soon as you can. Even though you don’t have to file, due to the automatic extension, new refunds will be fast tracked as well. And additional cash flow could be very helpful in dealing with your bush fire recovery.

Remittance of Interest and Penalties

If you’ve accrued any interest or penalties during the bush fires, the ATO is [forgiving] those charges. Again, this will happen automatically if you are in an impacted postcode. You don’t need to apply for this, even if you are tax agent.

Reissuance of Tax Documents

For those that have lost homes or places of business, it is likely that you’ve lost your tax documents as well. The ATO will reissue any tax documents that they have on hand.

Tax Debt or Outstanding Obligations

The ATO is putting a halt on commencing new debt recovery actions until 28 May 2020 (at least) for those in affected areas. You can also request a payment arrangement for outstanding debts if you aren’t automatically granted one.

The ATO is taking this a step further, as well, and will consider releasing bushfire victims from income tax and fringe benefits tax debts if they are ‘experiencing serious hardship’.

Tailored Help

The government knows that many who have been affected by the bushfire disaster aren’t necessarily located in one of the identified postcodes. If this is you, don’t let that stop you from seeking help. Ring the ATO’s Emergency Support Infoline on 1800 806 218 and speak to an ATO agent about your specific needs.

The ATO recognises that everyone’s situation is different and knows that there could be situations that warrant additional support or extensions beyond what they have currently offered. For example, there are many businesses whose trade has been significantly impacted by the bushfires, even though they may not have been directly impacted otherwise.

So, even if you don’t fall into one of the above categories, give the ATO a call. They’re standing by to work with you on a case-by-case basis. They’ve made it clear that they will be ‘flexible, reasonable and pragmatic when considering each request on its merits’.

Takeaway

At the end of the day, no one wants to run afoul of their tax and reporting obligations. Now is the time to be focusing on family and community, and the ATO knows that. The tax relief options are designed to help you do just that.

If you’d like more information about ATO bushfire relief, reach out. Our specialists are here to help.