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Cruising through the finish line

The end of financial year can sometimes feel like a race to the finish. To help you cruise through the finish line come June 30, we've prepared a handy list of tips for both businesses and individuals.

Small business tips

Pay expenses, delay income

In most cases, it can be prudent to look for ways to bring forward tax-deductible expenses to the current financial year and delay income until July.

You may also be able to prepay 12 months interest on a margin loan, or prepay 12 months premiums of income protection insurance held outside super, and claim the full deduction in this year's return. You might also consider prepaying membership fees for professional organisations and subscriptions for work-related publications.

Bad debts and obsolete stock

Think about writing off any bad debts in the business before June 30. You must have documentation to show you have made serious efforts to recover the debts which must have been previously included as assessable income.

Similarly, if you've got any inventory that you're struggling to clear, it might be worth considering writing off or writing down obsolete stock.

Car expenses

When it comes to car expenses there are multiple ways to claim and calculations can be complex. It's wise to get some advice on which method suits your company best.

Instant asset write-off

The threshold for the instant asset write-off has risen again by $5,000 and extended to include medium-sized businesses with turnover less than $50 million. Given that there have been a number of changes to the threshold, the amount you can claim will depend on when the asset was purchased or installed.

        
 Relevant thresholds for the year:
 Threshold      Dates applicable 
 $30,000  7.30pm (AEDT) 2 April 2019 - 30 June 2020
 $25,000  29 January 2019 - 7.30pm (AEDT) 2 April 2019  
 $20,000  Before 29 January 2019


Superannuation

Superannuation is another area to consider, both for you and your employees. While employees' super guarantee contributions don't need to be paid until July 28, it makes sense to pay them by June 30 so you can claim the tax deductions in the current year.

Personal EOFY tips

Topping up your super

Topping up your super before June 30 can be tax effective and assist you towards a more comfortable retirement. There are many ways to do this such as personal deductible contributions, salary sacrificing, or spousal contributions. If you are struggling to meet the $25,000 cap, as of July 1, you will be able to carry forward any unused cap amount for up to five years if you have less than $500,000 in super. Talk to us about which strategy will work best for you.

Review your investment portfolio

After a mixed year on global share markets, you may be sitting on paper losses on some of your stocks. This could be a good time to sell some of your poor performers to offset against capital gains made on the sale of other investments over the past 12 months. Look to sell investments held for at least 12 months if you want to take advantage of the 50 per cent capital gains tax discount, while also taking into account your longer-term investment goals.

Claiming relevant deductions

Work related expenses
You're entitled to claim deductions for certain work expenses, most of which are directly related to earning your income such as tools, uniform and travel expenses.

Rental property
You can claim an immediate deduction for interest on your investment loan, maintenance and tenancy costs such as the preparation of a lease or eviction. Some expenses are also claimable over a number of years such as the cost of depreciating assets, structural improvements and borrowing expenses such as stamp duty and loan fees.

Tax time doesn't have to be a hassle if you get prepared early.

Both business owners and individuals should start getting their books in order now to make the most of any concessions before the June 30 cut-off. And remember, we're always here to help to make reaching the EOFY finish line a walk in the park.

 
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After the election: tax changes on the way

With the uncertainty of the federal election now out of the way, we can look forward to some significant reforms to Australia's existing tax system.

The Morrison Government went into the election with a comprehensive suite of tax proposals and these are now likely to pass swiftly through Parliament, as the Opposition has indicated it will support the legislation.

So just what are the changes we are likely to see when it comes to both our personal tax and the taxes that apply to small and medium-sized businesses?

Higher tax offset for personal tax

A centrepiece of the Government's re-election campaign was its beefed up tax plan providing $158 billion in immediate tax relief. The first part of this plan is a doubling of the already legislated Low and Middle Income Tax Offset.

In the 2018-19 financial year, if legislation passes in time, taxpayers earning up to $37,000 will receive a tax offset of up to $255, rising to $1,080 for those earning between $48,000 and $90,000, before phasing out to $0 for taxpayers earning over $126,000.

Before you start checking your payslip for extra dollars, however, it's important to understand that this is a tax offset, not a tax cut. This means it reduces the amount of tax you pay when lodging your annual tax return, rather than giving you more money in your pay packet.

Flatter tax rates in the longer term

In 2022-23, there are further proposed changes to the tax system with the top threshold for the 19 per cent tax bracket increasing to $45,000.

A key part of the Government's campaign promises included a new proposal to lower the 32.5 per cent tax rate to 30 per cent in 2024-25, which would more closely align the middle tax bracket with corporate tax rates. This means that by 2020-24, a projected 94 per cent of taxpayers would have a marginal tax rate of no more than 30 per cent.

Under the proposal, from 1 July 2024, Australia's tax system would only have three tax rates: 19 per cent, 30 per cent and 45 per cent (see table).

Small business tax changes

Small and medium-sized enterprises (SMEs) will also see some important tax changes under the re-elected Morrison Government, with the proposed cut to business tax rates being fast tracked. Instead of SMEs having to wait until 2026-27 for a cut in their tax rate from 27.5 per cent to 25 per cent, this will now occur five years earlier, starting 1 July 2021.

This means SMEs with an annual turnover of less than $50 million will enjoy a 25 per cent tax rate, compared to a standard company tax rate of 30 per cent for large business.

There will also be a significant increase in the unincorporated small business tax discount rate. From the current 8 per cent, the tax discount rate will rise to 13 per cent from 1 July 2020 and then again to 16 per cent from 1 July 2021.

The threshold for the instant asset write-off threshold has also been increased, meaning individual assets costing less than $30,000 can be immediately written off rather than depreciated over time by SMEs. The Government is also extending the asset write-off provisions to businesses with an annual turnover up to $50 million and keeping it in place until 30 June 2020.

Tax system initiatives

The Government will be streamlining GST reporting requirements for small businesses by reducing the number of BAS questions covering the GST.

SMEs may also find it quicker and cheaper to resolve tax disputes following the creation of a dedicated Small Business Taxation Division within the Administrative Appeals Tribunal and the introduction of lower fees and fast tracked decision-making. In a further win for SMEs, the ATO will be required to pay reasonable legal costs in certain circumstances when an SME challenges ATO decisions.

On the flipside, the tax man is likely to be taking a harder line on tax avoidance. The ATO's Tax Avoidance Taskforce is being extended until 2023 and will continue its focus on multinationals, big business and high-wealth individuals. The Government will also proceed with extra measures to ensure people in high-risk industries are not hiding or under-reporting income. It plans to make it harder for businesses to pay cash wages to staff and evade their obligations to report income.

If you have any questions relating to any of the proposed tax changes resulting from the election, please give us a call.

Make tax time less taxing

Tax time comes around with alarming regularity, so why is it that we tend to wait till the 11th hour to get all our affairs in order?

Good tax planning is about more than simply maximising deductions. It enables you to focus on the big picture so you can arrange your business and personal affairs in the most tax effective way and make the most of our services and tax updates throughout the year. Not only will it reduce stress as June 30 approaches, but you could end up better off as you won't have forgotten anything in the last-minute scramble.

Read more…

Tax Alert: March 2019

With small business votes likely to be a key battleground during the Federal election campaign, the Morrison Government has announced its first tax sweeteners.

Here's a round up of key developments in the world of tax:

Read more…

Car expenses on the ATO's radar

With almost 4 million Australians making work-related car expense claims, the Australian Tax Office has the practice in it's headlights.

Not only are they on the lookout for people wrongly claiming, but they are also armed with enhanced technology to check these claims.

As a result, you need to make sure that if you claim your car expenses, or if your employees use a company car for private use, that you are sticking to the rules, not double dipping and not misrepresenting actual usage.

Read more…

Tax and your website: What can you claim?

Most small businesses and independent contractors have a website these days. If you are planning to launch a new website or refreshing an existing one, it's important to understand the tax implications. As with all things tax, it's not always easy.

The complexity of the technology and associated services that go with running a website can make it tough to determine what you can claim upfront as a tax deduction and what you need to depreciate over time.

Read more…

'Black Economy' rules target tax avoidance

Small businesses are likely to find themselves kept busy with the progressive transition to the Single Touch Payroll system and new rules designed to beat Australia's 'black economy'. Here's a round up of the latest tax news:

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The FBT Grinch that Stole Christmas

With Christmas carols and decorations popping up in every shopping centre, you know the festive season is just around the corner. That means it's time to celebrate another year of hard work with your colleagues by taking time out to have a little fun.

For most organisations, however, the lavish parties and restaurant meals of holiday seasons past are now but a fond memory due to the modern-day Grinch of Christmas - the fringe benefits tax (FBT). FBT applies wherever an employer provides a benefit to an employee other than their regular salary or wage, with employers required to pay FBT at a rate of 49% on the grossed-up taxable value of these benefits. Unfortunately, the tax mean deems Christmas parties to be an 'entertainment benefit' because food and drink are provided in a social situation and the aim is for employees to enjoy themselves.

Read more…

     
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