2020 Tax Planning

Dear Valued Clients,

It’s tax planning time. There’s only a few weeks before the end of the financial year (30 June 2020).

We would like to take this opportunity to highlight various tax minimisation options that are available to you.

Kind regards,

Prathana Harris (Mai) – CPA

Director

BUSINESS & INDIVIDUALS:

Instant Asset Write-Off

Businesses can claim an immediate deduction for plant and equipment costing less than $150,000.

The assets may be new or second-hand and must be acquired and ready for use before 30 June 2020.

Backing Business Investment

Businesses are eligible to claim a 50% deduction for the total cost of the asset in the first year, plus depreciation calculated on the asset’s balance under the existing rules.

The assets must be new, acquired and ready for use before 30 June 2021.

PAYG Withholding Regime

From 1 July 2019, you can only claim deductions for payments you make to your employees and/or contractors where you have complied with the pay as you go (PAYG) withholding and reporting obligations for that payment. The deduction will be disallowed for payments where you haven’t withheld or reported the PAYG tax to the ATO

Payments you need to withhold from are:

  • Salary, wages, commissions, bonuses or allowances to an employee
  • Directors’ fees
  • Subcontractors that don’t quote their ABN to you on their tax invoice
  • Contractors who have a voluntary agreement with you

Employee Superannuation

Employee super for June 2020 quarter must be paid by 28 July 2020 to be deductible in 2021 financial year.

To claim a tax deduction for super in 2020 financial year, the super payment must be made and received by the Super Fund before 30 June 2020. Therefore, please consider making your super contribution payment by 21 June 2020.

Bad Debts

Please review your trade debtors list before 30 June 2020 and write off any bad debts before 30 June 2020. Amounts that are not recoverable and subsequently written off will be deductible in 2019-20.

Fixed Assets, Plant and Equipment

Please review your fixed assets register and depreciation schedule and scrap any obsolete items before 30 June 2020.

Taxable Payments Annual Report (TPAR)

The TPAR include payments that are made to contractors (subcontractors, consultants and independent contractors) for providing services.

If applicable, you need to lodge a taxable payments annual report (TPAR) by 28 August 2020 if you are a business providing:

  • Building and construction services
  • Cleaning service
  • Courier services
  • Road freight services
  • Information technology (IT) services
  • Security, investigation or surveillance services

Prepayment – Business

Small businesses can choose to claim an immediate deduction for prepaid expenses where the payment is for a period of service of 12 months or less and ends in the next income year, for example; prepaid rent, prepaid interest or insurance.

Prepayment – Personal or Investment

You can prepay items like income protection insurance or interest on margin or investment home loans where such loans are used to acquire income-generating assets such as property, shares or units in managed funds.

If the prepaid arrangement is finalised and paid before 30 June 2020, you can claim 100% tax deduction on these expenses.

Motor Vehicle Logbooks

If you are claiming motor vehicle expenses via the logbook method, please check your logbook is still valid for the 2019-20 year as they expire every 5 years.

If your logbook has expired, please complete a new logbook to capture 12 continuous weeks of motor vehicle travel and the resulting business use.

 

SUPERANNUATION MATTERS:

Pensions

If you are in pension phase, please ensure you’ve drawn your minimum pension for 2019-20 from your superannuation fund.

Concessional contributions are subject to a yearly cap

The general concessional contributions cap is $25,000 for all individuals regardless of age.

If your annual super contribution or SGC is less than the cap, you may wish to accelerate your super balance by making a top-up contribution up to the cap amount of $25,000.

The top-up amount is 100% tax-deductible against your taxable income regardless of your employment status.

Superannuation Carry-forward

From 1 July 2018, members can make ‘carry-forward’ concessional super contributions if they have a total superannuation balance of less than $500,000. Members can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

The first year in which you can access unused concessional contributions is the 2019–20 financial year.

You can use this carry-forward rule to make an additional super contribution in excess of $25,000 cap and claim an additional tax deduction.

Government Co-Contribution

If your income is below $38,564 and between $53,564, you might consider making a personal superannuation contribution of up to $1,000 before 30 June 2020. For the 2019-20 financial year, the maximum government co-contribution entitlement is $500.

Spouse Contributions

You may be able to claim an 18% tax offset on up to $3,000 in super contributed on behalf of your spouse if their income is less than $37,000. The maximum tax offset available is $540 each financial year.

If you require assistance with making informed tax savings decisions or require further information, please do not hesitate to contact our office.

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