While planning of any kind has been challenging over the past 12 months, tax time remains a certainty for all businesses and individuals who are working from despite the easing of Covid-19 restrictions.
Tax planning should be a key element of your business and Individual tax affairs.
Over the past year, many businesses have had to review the way they operate. For many, this has resulted in better, more profitable and streamlined businesses overall. If you aren’t already taking advantage of tax planning, this is another key strategy that can help you make the most of the ATO’s provisions to mitigate tax impacts while making the most of other business opportunities.
Falling behind in your tax obligations is one of the major causes of failure for Australian businesses. In an increasingly complex tax environment, keeping up to date with taxation regulations is an absolute must for businesses of any size or industry. Our team of accountants will work with you, share their knowledge and expertise to help provide transparency when it comes to all things tax.
The time to act is now, as some strategies take time to implement, and your options will be limited once the calendar ticks over to 30 June. Your commitments will be set, and you’ll have little choice but to pay whatever tax is necessary to meet your obligations.
COVID -19 Tax Benefits | Businesses
Among this year’s considerations is the Government’s enhanced depreciation measures. The instant asset write-off has been extended to 30 June 2022, with significantly increased thresholds and widened eligibility. The threshold amount for each asset is now $150,000 (up from $30,000) for eligible assets and applies to businesses with an aggregated turnover of less than $500 million (up from $50 million).
If your business has been making use of small business pool deductions, you could also stand to benefit from the new measures, even if you haven’t purchased new assets. The small business pool deduction rule is a smart strategy that allows business owners to depreciate the value of their assets at an accelerated rate. Under the new provisions, eligible businesses can now deduct the entire balance of the small business pool from 6 October 2020 to 30 June 2022.
Being aware of these rules and provisions, may mean that you can take advantage of other opportunities, such as bringing forward capital purchases that will increase production or create greater efficiencies.
Additional Tips for your 2021 Tax Plan
- Write off bad debts before 30 June to claim as tax deductions,
- Document any accrued staff entitlements (deductible when incurred rather than when paid),
- Pay super before the end of the financial year to ensure it is deductible,
- Top up personal voluntary super contributions (deductible up to $25,000 per year),
- Consider deferring recognition of accrued income to the next financial year,
- Pre-pay some expenses and claim a deduction in this year (up to 12 months of the coming year for businesses with group turnover under $10 million),
- Declare dividends and reconcile shareholder or director loans,
- Make trustee income distribution resolutions by 30 June (earlier if required by trust deed), and
- Review your compliance and reporting obligations including:
- Motor vehicle logbooks,
- Single Touch Payroll including annual finalisation and reconciliations,
- Taxable Payments Annual Report (TPAR), and
- JobKeeper reporting obligations.
An effective tax plan should also involve a review of your business structure to ensure you’re achieving the best possible tax outcomes. This should consider factors such as tax efficiency, governance, asset protection, flexibility for change and ease of administration. If you feel your business could be leveraging a more appropriate business structure, we can advise on a restructure that maximises the benefits available to you. This may include the current small business CGT concessions.
We have prepared a Tax Planning Guide for Businesses. You can download your copy here:
We encourage all our clients and readers of The Pulse, to prepare your receipts and expense documentation as soon as you can and call our office to book in for your tax return discussion and preparation.
General Advice Warning
The material on this page and on this website has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained on this page and on this website is General Advice and does not take into account any person’s particular investment objectives, financial situation and particular needs.
Before making an investment decision based on this advice you should consider, with or without the assistance of a securities adviser, whether it is appropriate to your particular investment needs, objectives and financial circumstances. In addition, the examples provided on this page and on this website are for illustrative purposes only.
Although every effort has been made to verify the accuracy of the information contained on this page and on this website, Chan & Naylor, its officers, representatives, employees, and agents disclaim all liability [except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this website or any loss or damage suffered by any person directly or indirectly through relying on this information.
Chan & Naylor is Australia’s leading property, business, tax-accounting & wealth advisory group with offices nationwide.