The PCR Blog

Helpful news, tips and business advice for small to medium business owners about how to maximise profit, minimise waste and grow and protect your business.



End of Financial Year Update and Key Changes as of July 1st

As a business owner, there are many obligations that you need to consider and action over the next few weeks. Some of these will help to minimise your tax. We have outlined these action points below to assist you.

Date Action Required
BEFORE
30 June 2021
  • Ensure your employee superannuation payments are received and allocated by your employees’ Super Fund prior to 30 June 2021 to ensure a tax deduction for this year. Any payments made between 1 July 2021 and 28 July 2021 will count towards your Superannuation Guarantee requirement but will not be tax deductible in the 2021 financial year. If using a clearing house including the SBSCH this usually needs to be paid before the 23rd June 2021.
  • If you operate through a Trading Company, review Shareholder Loan accounts and make minimum loan repayments.
  • If you operate through a Discretionary Family Trust, ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2021.
  • Carry out a stocktake by 30 June 2021.
1 July 2021
  • Superannuation Guarantee increases the same for 2021 to 10%
  • Medicare Levy stays at 2%
14 July 2021 or before
  • Complete STP Finalisation for all your employees
28 July 2021
  • Quarterly Superannuation contributions due for employees (for the period 1 April 2021 to 30 June 2021). THIS IS A KEY DEADLINE!
28 August 2021
  • Taxable Payments Annual Report due for lodgement with the ATO (building and construction industry, cleaning services, courier services, IT services, security, investigation or surveillance services)

 Key Changes from 1 July 2021

Please urgently check these key things:

1. Has your payroll software automatically updated for these changes? Or do you need to load these changes into your payroll software? (Xero does this automatically.)
2. Check your first pay run from 1 July 2021 to ensure the changes are correct.
3. Review any salary packaging and calculations and make any adjustments to employee FBT contributions or other items where needed.

Temporary Full Expensing

All businesses with an aggregated annual turnover of less than $500 million will get an immediate tax deduction for any individual assets. This applies to each individual item. For small business (less than $10million) this means an instant write off of all existing assets. These arrangements have been announced to be extended until the end of June 2023.

Here is a useful link to the changes with Instant Asset Write Off (Temporary Full Expensing).

Interaction_of_tax_depreciation_incentives.pdf (ato.gov.au)

 Trust Distributions – Timing of Resolutions

Trustees (or directors of a Trustee Company) need to consider and decide on the distributions they plan to make by 30 June 2021 at the latest (the Trust Deed may actually require this to be done earlier). Decisions made by the Trustees should be documented in writing by 30 June 2021.

If valid resolutions are not in place by 30 June 2021, the risk is that the taxable income of the Trust will be assessed in the hands of a default beneficiary (if the Trust Deed provides for this) or the Trustee (in which case the highest marginal rate of tax would normally apply).

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $10 million) have access to a range of tax concessions. One of these concessions is the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes, if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year. You will need to record how you determined the value of trading stock on hand.

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

Deadline for 2021 STP Finalisation

You need to complete your 2021 STP Finalisation by 14 July 2020.

 Action Step: If you have any doubt about how to correctly complete your 2021 STP Finalisation, please contact us for assistance BEFORE you prepare them.

Taxable Payments Annual Reports

Since the 1 July 2012, tax reporting rules apply for a range of businesses. Businesses have to lodge an annual report with the ATO, setting out details of payments made to contractors. This will assist the ATO to reduce the “cash economy” by ensuring tax is paid on all income including “cash” payments.

You will need to record the following details of all payments made to contractors for building and construction services, cleaning services, courier or road freight services, IT services and security, investigation or surveillance services:

• The ABN of the contractor
• The name and address of the contractor
• The gross amount paid for the financial year, including GST
• The total GST included in the gross amount paid

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

Action Step: Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 28th August 2021.

Payroll Tax

Payroll Tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that, in addition to normal salaries and wages, the following items are generally also included in payroll expenses, if Payroll Tax applies:

• fringe benefits based on the grossed-up taxable value of fringe benefits;
• all employer contributions to Superannuation on behalf of employees; and
• some contractor or sub-contractor fees.

For more detailed information about whether Payroll Tax applies to your business, please contact our office.

Action Step: The Annual Return/Reconciliation for Payroll Tax must be lodged by 21 July 2021 with your State Revenue Office.

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

• fringe benefits based on the taxable value of fringe benefits (do not gross-up);
• all employer contributions to Superannuation on behalf of employees; and
• some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund, depending on the instalments you have paid during the year.

Action Step: Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2021 to determine if there has been an under or over-payment of GST in the 2021 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

Action Step: Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures, if you are concerned about your ability to satisfy an audit.

Action Step: Please contact our office if you would like to request this service.

 Last Minute Tax Minimisation Tips

Here are a few final reminders about ways to reduce your tax for 2021

1. Write-off Bad Debts.
2. Write-off any trading stock that is damaged or obsolete.
3. Review your Asset Register and scrap any obsolete Plant and Equipment.
4. Pay for repairs, consumables, office stationery, and donations before 30 June 2021.
5. Realise any capital losses you have before 30 June 2021 to offset against any capital gains you may have made.

Feel free to call our office any time on 03 9847 7516 or email us at hello@pcr.accountants

Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.