The countdown is on, 30 June is fast approaching.
Yes, there is a lot to organise during tax season! And yes, it can be a really busy and stressful time. But take it from us, the clock doesn’t stop and it pays to stay alert at this time of the financial year!
Read on for our tips and strategies to help you achieve a great tax result.
Changes to government policy. What do they mean for your business this tax season?
Company tax rates
The company tax rate has been cut from 30% to 27.5% for companies with a turnover of less than $25 million. In 2019, the cut will be extended to companies with a turnover of less than $50 million, creating more opportunity for businesses to grow.
Instant asset write-offs
Want more good news? The instant asset write-off has been expanded to now cover assets up to $30,000 (if purchased after April 2). The tax break is also now available to companies with a turnover of less than $50 million.
The scheme means you can instantly start depreciating your work-related purchases (if less than $30,000), rather than claiming smaller deductions every year. A greater deduction right now means a boost for your business when you need it!
Prior to April 2, businesses with turnover of less than $10 million are still eligible to the instant asset write off of either $20,000 or even $25,000 depending on when the asset was purchased between 1 July 2018 and 1 April 2019. Harvey Norman… watch out!
Single touch payroll
Single Touch Payroll is mandatory for all businesses from 1 July 2019. This means that businesses will send payroll information, such as tax and super, electronically to the ATO each time payroll has been processed (using payroll software like Xero). This means no longer needing to lodge payroll via paper or manual submissions!
Stay on top of your tax compliance this EOFY
The 2019 budget allocated $1 billion to the ATO to expand their Tax Avoidance Taskforce.
This year, the ATO has announced that they’ll be focusing on ‘addressing common issues...when small business lodge their returns and reinforcing our message around recordkeeping and claiming of expenses’.
This means they’ll be paying close attention to your business’s expense claims. What should you be careful of?
- Claiming private expenses in your business
- Misunderstanding your business structure’s tax obligations
- Omitting your business’s income
- Not providing the right records for substantiating your expense claims
When claiming expenses for your business, it’s really important to make sure that the expense has only been incurred by your business. If the expense covers both business and personal use, make sure you're only claiming the business portion. And be sure you’re keeping accurate records of your expenses to substantiate your claim.
Tax planning strategies to save your business money
They say nothing is certain but death and taxes.
That might be true, but it doesn't mean you should be paying more tax than necessary. There are legitimate and legal ways you can reduce your business’s tax liability. It’s all about reducing income, increasing deductions and tapping into lower tax rates.
Some common strategies include:
1.Paying your staff a bonus
There’s no better feeling than rewarding your staff for their hard work for the financial year. Did you know that you can calculate and book your bonus payments prior to 30 June and claim a tax deduction, even if you don’t expect to pay the bonus until the next financial year payrun? Everyone wins!
2. Writing off your bad debts
Here’s one silver lining of never getting paid. Your business is entitled to a deduction for bad debts. So an easy way to increase your deductions is to review and write off any bad debts for the year. If, however, this debt is later recovered, it must be included in your assessable income.
3. Reviewing your inventory
It’s stocktake time! An easy way to identify further deductions it to review your inventory at the end of the financial year. If you have damaged, obsolete or slow-moving stock, you could write it off and claim the deduction instead of valuing it at its full price.
4. Making super contributions
You know what’s really super? That you can claim tax deductions for super payments you make on behalf of your employees. Under the super guarantee charge, the rate for super contributions is 9.5%. Tax deductions for super contributions will only be available in the 2019 tax year if the contribution is received by the fund by June 30, 2019, so get cracking to make those payments in time.
Key EOFY lodgment dates for small business
Make sure you’re compliant this season by staying on top of these key dates for your business:
- June 30: Wrap up your books for the FY18/19 year
- July 1: Single Touch payroll is required for all businesses
- July 7: Employee Share Scheme statement sent to your employees
- July 14: Employers must issue PAYG withholding statement summaries to employees
- August 14: PAYG withholding payment summary annual report due
- August 14: Employee Share Scheme annual report
- August 28: Taxable payments annual report due
How to get the best possible tax return for your business this financial year
It’s a good idea to be across the common tax planning strategies available to your business so can take advantage of the quick wins this tax season. It’s also really important to make sure you're complying with your tax obligations so you don’t risk hefty penalties from the ATO.
But we’ve only just scratched the surface. If you need advice on how to reduce your tax liability this EOFY, get in touch with your BlueRock Advisor. We can help you stay on top of your compliance and get the best possible tax return this EOFY. Bring it on!