Trust Allocations

It is essential that your trustee decision designating or allocating income to beneficiaries is in force as of June 30 if your company structure is a trust. This means that trusts should start tax preparation as soon as feasible to make sure the resolution can be made with tax effectiveness in mind and finalized/documented by June 30. If these minutes and resolutions are not completed, the ATO can tax the trust’s revenue at the highest marginal rate.

Income Postponement

Consider postponing the receipt or derivation of income until the following fiscal year if cash flow and business realities permit. Try to postpone receiving cash if you are operating on a cash basis. If you are reporting your revenue on an accruals basis, try to postpone the income’s deduction by keeping your invoices until beyond June 30.

Poor credit

Make careful to write off any bad debts by June 30 if you use the accrual Accounting system, and prepare the minutes that authorise the write-off. Additionally, this will allow for any GST that was levied on the initial invoice to be adjusted.

Optimising permissible deductions

Before-year-end expenses have the potential to lower taxable revenue.

Think about future obligations and the benefit of acquiring them prior to the end of the year. Deductions that are permitted include:

remunerating directors and their bonuses; fixing machinery and property; pooling depreciating assets; and destroying non-utilized depreciating assets.

Subtract all office costs and asset purchases.

It is advisable to acquire any essential office supplies and costs prior to the conclusion of the fiscal year in order to be eligible for a deduction and perhaps take advantage of tax breaks on depreciating assets. Verify that you have saved the receipts for all of your purchases this year.

Depreciating assets that cost less than $150,000 (after March 12, 2020, and $30,000 before that) and were first utilised or installed in a ready-to-use state on or before December 31, 2020, are eligible for an instant deduction for small business companies.

Contributions of SGC

To be eligible for the deduction in current fiscal year, be sure that any superannuation payments are submitted by June 30 at the latest. The deadline for using the SBSCH is June 23, 2020.

For company personnel, mandatory super guarantee (SG) contributions must be made no later than 28 days following the end of the quarter in order for the contribution to be deductible and for there to be no SG fee that needs to be paid to the Australian Tax Office.

Ensure that the logbooks reflect the vehicle’s business use and are current.

Verify that all of your motor vehicle log books meet the substantiation criteria if you drive a car for work.

Make sure you have maintained a complete and accurate motor vehicle log book for a minimum of twelve weeks. The 12-week term must begin on June 30, 2020, or before. It is recommended that you document the reading on your odometer as of June 30, 2020, and preserve all of your vehicle-related records and invoices. A log book can usually be used for five years after it is prepared.

An alternative is to use the cents per km method to claim up to 5,000 business kilometres (based on a reasonable estimate) without the need for a log book.

Loans to shareholders

The Division 7A regulations may be applicable to you if you or your associates borrowed money, got a benefit, or had a debt erased from a private corporation during the year.

Taking Stock

At the end of the year, please make sure to physically count the stock you own. Stock shall be evaluated at market value less cost, if any.

Payroll by Single Touch (STP)

It is now mandatory for all employers to use Accounting and Payroll software that is Single Touch Payroll (STP) ready in order to process Payroll and pay employees. Employers with 19 or less workers are given a minor break: starting on July 1, 2021, “closely held” personnel (directors, family members, and beneficiaries, for example) will only need to report through STP-enabled software; all other employees must report through STP.

New deductions for working from home:

Quick technique Between March 1, 2020, and June 30, 2020, you may deduct 80 cents for every hour you work from home as long as you can demonstrate that you are performing your job duties from home, not just doing little things like answering the phone or checking emails once in a while, and that working from home has resulted in additional running costs.

You cannot deduct any other costs for working from home during that time if you employ this strategy.

Personal deductions for superannuation and salary sacrifice If you contribute a portion of your pre-tax income to your super fund, you will be subject to a special 15% tax rate. Because of the tax benefits associated with these payments, they are often referred to as “concessional contributions.” For every $1 you invest in your super, you can save 19.5 cents if you are in the average tax bracket of 34.5% (which includes the Medicare levy). If you are in a higher tax bracket, you may be able to save even more.

You can also make a personal superannuation contribution to your super fund and claim a tax deduction in your tax return if salary sacrificing is not an option for you. It is crucial that you have received an acknowledgement from your super fund, so please make sure to provide them the proper notice of your intention to claim. Make sure that throughout the income year, the combined amount of your employer’s contributions and your own contributions (for which you are qualified to claim a tax deduction) does not exceed $25,000.

However, donations are subject to a flat 30% tax if your annual income exceeds $250,000. Division 293 tax is the term for this. Though not as much, you can still lower your tax in this scenario by making exceptional contributions.

Rule of Carry Forward

You can use the carry-forward rule to obtain any concessional caps that were not used in prior fiscal years. On July 1, 2018, this rule went into effect. You can thus access the unused portion of the $25,000 concessional maximum this financial year if you did not fully utilise it in the previous financial year (2018–19) and your super balance was less than $500,000 as of July 1, 2019.

$10,000 superannuation early release

By June 30, 2020, employees and sole proprietors who were economically disadvantaged during the COVID-19 period are eligible to take a $10,000 one-time withdrawal from superannuation. A one-time withdrawal of up to $10,000 is possible once more between July 1, 2020, and September 24, 2020.

Only in specific situations—being jobless, getting JobSeeker or other income support, being laid off, having your work hours cut by more than 20%, having your sole proprietorship stopped, or having your turnover drop by more than 20%—is this possible.

You can apply via myGov, and any money that is released will not be counted against your income. It is normally recommended that you obtain financial guidance before pursuing this option.

The First Home Super Saver Program

In order to ease the burden on housing affordability, the Australian government launched the First Home Super Saver (FHSS) program in the Federal Budget 2017–18.

You can use your superannuation fund to save money for your first house through the FHSS plan. First-time homebuyers will be able to save more quickly because to the super’s concessional tax treatment.

In order to save for your first house, you can choose to voluntarily make non-concessional (after-tax) and concessional (before-tax) contributions to your super fund as of July 1, 2017.

You can then seek to have your voluntary contributions and related profits released on July 1, 2018, to assist you in buying your first property. To apply for the release of these funds, you must fulfil the eligibility requirements.

If you need more information, give me a call.

Optimising permissible deductions

Before-year-end expenses have the potential to lower taxable revenue. Think about future obligations and the benefit of acquiring them prior to the end of the year.

If you own a rental property, think about whether you are getting the most out of your claims for capital works deduction and capital allowance.

Before the year ends, pay the premiums for income protection insurance.

low-paid individuals

Some low-income earners won’t have to file income tax returns for the 2020 tax year because to the tax-free level of $18,200 and the low income tax offset.

Government Co-Contribution to Superannuation

A co-contribution, up to a maximum of $500, is made by the government to your super fund if you are a low- or middle-income earner and make personal (after-tax) super contributions. If you would like to receive this benefit, please get in touch with me as there are additional qualifying requirements.

Make the Switch to Retirement Income Sources

You can be qualified to start receiving a “Transition to Retirement” pension if you have attained preservation age. Advantages could consist of:

Being able to contribute to superannuation with a salary sacrifice in order to obtain reduced tax rates; Getting pension income while working; and

spouse’s involvement

If you make super payments of up to $3,000 on behalf of your non-working or low-income spouse, you can be eligible for an 18% tax offset.

Reports on Property Depreciation

If you own an investment property, you can deduct depreciation and capital works from both the property itself and its capital items by using a Property Depreciation Report (created by a Quantity Surveyor).

The tax savings in the first year of property ownership typically more than offset the cost of this report.

Contributions for Concessions

For 2019–20, the concessional contribution ceiling is $25,000 for all individuals, regardless of age. Those who have established salary sacrifice plans must make sure they don’t go over this lower concessional cap, and they should review and adjust their plan as necessary.

Employees who are unable to make salary sacrifices to superannuation can still make personal contributions and deduct them from their taxes. Again, you must make sure that the combined amount of your employer’s and your personal deductible contributions does not over the $25,000 cap for 2019–20. There are further notification requirements that must be followed.

The concessional contribution maximum for this year can be increased by adding unused contributions from the 2018–19 year starting on July 19; however, this is only possible if the member’s total super balance as of June 30, 2019, was less than $500k.

Contributions That Are Not Concessional

For 2019–20, the non-concessional ceiling is $100,000. However, the non-concessional cap is zero for anyone as of June 30, 2019, if their “total super balance” was at least $1.6 million.

The bring forward rule may be used, where qualified, to non-concessional contributions made by those under 65 in 2019–20. But as of June 30, 2019, the member’s entire super balance also plays a role in this.

Don’t wait till the last minute to make contributions.

It is imperative that any 2019–20 payments are received by the fund by June 30, 2020, at the latest. Know the terms of service that apply, the date the transaction will be performed, and most crucially, when the deposit will appear in the fund’s bank Account, if contributions are made through internet banking. In principle, if an electronic contribution is made on June 30, 2020, it won’t show up in the fund’s bank Account until the next business day—that is, the next financial year—though some banks might take longer to process it.

Retirement Plans

Make sure that by June 30, 2020, the minimum age-based pension amount is paid.

Change to a pension for retirement

The tax exemption on earnings held in TTR pension Accounts has ended, and they will now be subject to 15% accumulation phase asset Taxation. If you are already employing this tactic, you might want to take a closer look at it to make sure it is still working for you. As of July 2019, the maximum pension that can be taken is 10% of the initial sum.

Contributions to superannuation are reduced.

As of July 1, 2018, individuals who satisfy the eligibility criteria and are 65 years of age or older, have the option to contribute up to $300,000 from the profits of the sale of their house towards a downsizer contribution into their superannuation.

Assets valued at market

For assets with a quoted market price, such as managed funds and listed equities, this is a straightforward process. However, if the SMSF has non-market assets, including real estate and collectibles, it is advisable to schedule the appropriate assessors in advance, if necessary. While it may not be necessary to obtain external valuations annually, superannuation legislation mandates that the SMSF trustee(s) consider and ascertain the market value for the annual financial statements each year.

Investment Plan

In July 2020, please examine your investment strategy as soon as you can to ensure sure the asset allocation still aligns with the strategy and it still satisfies all of your objectives. The SIS Act also mandates that the plan be reviewed on a regular basis.

Make sure you have the appropriate support system.

Even the most involved trustees find that managing an SMSF is not easy. The SMSF’s operations may be impacted by new or proposed laws, and the regulations themselves may be complicated.

Nonetheless, it’s critical that trustees of SMSFs understand that they have the resources needed to oversee their fund. For control and flexibility, you may decide to manage your own SMSF, but that doesn’t imply you’re by yourself.

If you are a trustee of an SMSF, you should also consider the following questions:

Do I have all the paperwork I need for my superannuation Accounts and contributions?

What is the entire amount I have paid in this year, including the sums from my super guarantee?

Can I donate on my spouse’s behalf? Is this a plan for tax minimisation that works?

Can I super split any contributions from the prior fiscal year into the current fiscal year?

Should I think about making any further concessional or non-concessional contributions before the conclusion of the fiscal year?

Have I taken out the annual minimum pension?

Has my approach to investing changed?

Do I currently have enough insurance?

The list above is merely an overview; you might not be able to use everything on it. Please contact Mitesh Modi at MM Consultancy, Chartered Accountants at 02 8277 4313 or by email at info@mmcpl.com if you would like to discuss any of the topics in more depth.au

Disclaimer:

Nothing in this material is meant to be advise on any specific issue; rather, it is merely general commentary and information. It is not advisable for readers to take any action or depend on any information without first seeking suitable professional counsel.

Unless otherwise stated, all financial numbers are quoted in Australian dollars.