Tax & Insurance

Tax Saving & Superannuation Opportunities For the End of the Financial Year

The following tax saving opportunities for 2020 has been prepared by one of our accountants, we hope you find it useful.

It contains some great tips about Superannuation for employers and employees.

If your accountant hasn’t provider similar advice or you are in the market for a new accountant, check out our recommended accountants article below

As the year end is approaching there are few tax strategies that we would like to draw to your attention to minimise the tax liabilities for your business:

Prepay Expenses

Prepay some of your expenses prior to 30 June 2020, eg

  1. Insurance
  2. Rent
  3. Subscriptions
  4. A deduction for prepaid expenses will generally be allowed where the payment is made before 30 June 2020 for the services to be rendered within a 12 month period.
  5. Incurring business expenses in June 2020 could save you some tax for the year ended 30 June 2020 and provided cash flow permits makes good business sense.

Take advantage of the instant asset write-off

As part of the Government’s stimulus package, a business with less than $500 million turnover will be able to claim an immediate tax deduction for asset purchases less than $150,000 (excluding GST) purchased after 12 March 2020 until 31 December 2020. Small Business Entity pool balances under $150,000 will be written off.

For asset purchases greater than $150,000 or first installed and ready for use after 31 December 2020, a 50% deduction is available in the year of installation with the remainder of the asset’s cost depreciated under the usual depreciation rules. However, excludes capital works, water facilities, horticultural plant, fodder storage and fencing.

For motor vehicles used in the business however there is a limit of $57,581 (2019/20) and restricted to business use

Sales invoicing defer to July 2020

Review your sales invoicing and postpone them for July 2020 for work not yet carried out, so that the sales is taxed in the next financial year.

Employee Superannuation payment before 30 June 2020

If you are in business you can PAY the employees super prior to 30 June 2020.

A word of caution is that the superannuation fund must receive the funds by 30 June 2020 for it to be tax deductible

Personal Deductible Concessional Contributions payment to reach the Superfund before 30 June 2020

You can make up to $25,000 concessional superannuation contributions each year.

This can be either as employee or personal contributions

If you don’t use the full amount of your concessional contribution cap and your superannuation balance is less than $500,000 ($25,000 in 2019/2020), you can carry-forward the unused amount and take advantage of it up to five years later.

If any personal contributions are made don’t forget to give your superfund a notice of intent to claim and also make sure your superfund has acknowledged this.

Write of bad debts

Businesses which account on an accruals basis should review debtors and write off any bad debts before 30 June. Also, write off any obsolete or slow moving stocks.

Job Keeper Payments

Please remember that Job keeper Payments received from the ATO are assessable income to Businesses and any individuals who receive the payment. GST is not applicable

Cash flow boost

The cash flow boost is not taxable income. GST is not applicable.

Super Guarantee Amnesty

Amnesty on unpaid superannuation guarantee. A number of incentives are available for employers to pay any unpaid Superannuation Guarantee (SG) amounts relating to the period 1 July, 1992 to 31 March, 2018.

Normally, where the employer has not paid the SG for employees the employer will be assessed the Superannuation Guarantee Charge (SGC) which is not tax deductible. The charge includes the SG not paid, interest on the SG shortfalls and an administration fee (usually $20 per employee per quarter).

The incentives to pay any SG shortfall and the charge apply until 6 September 2020, and include:

  • The SGC will be tax deductible – consider paying before 30 June 2020.
  • The administration fee will waived.
  • No penalties will be applied for failing to lodge an SGC statement.

Changes to vacant land tax deductions

A new law has been introduced that will generally deny individuals tax deductions for costs incurred on holding vacant land.

Previously, you could only deduct for costs incurred for producing assessable income or carrying on a business. However, because it is difficult to determine exactly what purpose vacant land is being held for, the new law will generally deny tax deductions for costs incurred on holding vacant land from 1 July 2019, regardless of when the land was initially acquired.

Examples of such holding costs that may be denied under this new law and may instead be included in the cost base of the land for CGT purposes include:

  • Interest or any other ongoing costs of borrowing to acquire the land.
  • Land taxes.
  • Council rates.
  • Maintenance costs.

You may still be able to deduct holding costs on vacant land if:

  • You are using the land (or your spouse, child, affiliate or connected entity) to carry on a business.
  • The land is vacant because of a natural disaster or exceptional circumstances.
  • The vacant land is being rented out by a primary producer.
  • The vacant land is being rented out and it is being used to carry on a business

Removal of main residence exemption for non-residents

If you were a non-resident for tax purposes at the time you sold your home (i.e. when you signed the sale contract), you will no longer qualify for the main residence exemption. This means you will be required to pay capital gains tax on gains made on the sale of your main residence.

Some non-residents will still qualify for the main residence exemption if:

  • They acquired the home on or before 9 May 2017 and sold the home on or before 30 June 2020; or
  • Regardless of when the home was acquired, the home was sold after 9 May 2017, and at the time of sale the individual had been a tax non-resident for a continuous period of six years or less and certain life events have happened (e.g. the individual’s spouse or child under 18 has a terminal medical condition or dies or there is an asset distribution because of a divorce or separation).

This change is particularly relevant for Australian expatriates or people who have gone overseas for a work-secondment. Note, if you were a resident for Australian tax purposes at the time you signed the sale contract, you will qualify for the main residence exemption.

Coronavirus simplified shortcut method for deducting working from home expenses

With many individuals working from home because of COVID-19 restrictions, from 1 March to 30 June 2020, you will be able to use a simplified method to claim your additional running expenses at a rate of 80 cents per work hour.

This simplified method covers all running expenses eg :

  • Electricity and cleaning expenses associated with an individual’s work area (e.g. cooling and lighting).
  • Phone and internet expenses and computer consumables (e.g. printer paper, ink and stationery).
  • Decline in value and repairs of capital items eg home office furniture

However, you can’t claim a deduction for mortgage interest, rent and rates or the cost of coffee, tea or milk that an employer would have otherwise provided for the employee at work.

If you use this simplified (80 cents per hour) method, you can’t claim any other expenses for working from home for that period

Coronavirus stimulus measures affecting an individual’s superannuation

Eligible individuals are able to withdraw up to $10,000 of their superannuation before 1 July 2020 and a further $10,000 from 1 July 2020 to 24 September 2020. This will apply to people who are:

  • Unemployed.
  • Eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance.
  • Had their work hours reduced by 20 percent or more after 1 January 2020.
  • If you were a sole trader, your business was suspended or there was a reduction in your turnover of 20% or more
  • Are citizens or permanent residents of Australia or New Zealand.

Temporary residents are only allowed one withdrawal option of $10,000 up to 30 June 2020.

You do not need to pay tax on any withdrawals released early from superannuation and these amounts do not need to be included in your tax return.

To help retirees to keep more money in their superannuation as a nest egg, the minimum draw-down requirements for account-based pensions have also been reduced by 50 percent for 2020 and 2021.

—-

If your accountant hasn’t provider similar advice or you are in the market for a new accountant, check out our recommended accountants article below.

You might also like our article on why re-financing debt to get the best deal is important.

General Advice Warning

Kind words from Aussies managing
their own self funded futures

  • SMSF Mate is a unique website because it has ideas about how to approach SMSFs, insurance and other financial topics that come straight from first hand experience. It's much more useful than what you find on all the other financial websites that just offer generic info that you could easily get on the ATO's website. It's also nice to know there's no financial incentive behind the information, it's legitimately there to help people understand self-managed super funds and how to get the most out of them, not to get an affiliate commission from a broker or other financial services provider. The investment product information is also incredibly useful, I've never seen this kind of functionality on any other website that let's you look at such a wide range of products, sort by what info is most interesting or important to you, and subscribe to updates for different funds and financial products all in one place. Definitely worth checking out if you own or are considering an SMSF!

    David G, Self-Employed, SMSF Owner
  • SMSF Mate provides a unique insight into superannuation and financial topics in a way that is easier to understand than conventional websites. The colloquial nature of the site makes it easy to understand and they often speak about complicated topics in lamens terms so I can wrap my head around them. The investment product information is a great way to research funds that I am interested in investing in with my SMSF and there is a lot of helpful information on the site for better structuring my investment portfolio. In comparison to other websites which offer similar information, SMSF Mate excels as the information is free to access whereas many other sites charge a subscription fee for the same thing. Overall, I think SMSF Mate is a great resource for SMSF trustees and is worth looking at for a variety of super-related topics. Thanks.

    Tim B, Business Owner, SMSF Trustee