Tax Laws (and associated Laws) are changing constantly, which makes it difficult for small buiness owners in particular to keep track of everything they need to know. Complying with the rules is hard enough, let alone being proactive to minimise your tax and maximise your wealth.
We’ve created this article to cover some of these changes and provide you with some tips to get ahead of the pack.
SINGLE TOUCH PAYROLL
As detailed in our article covering this topic (view it here), STP is now mandatory for all payments to all employees. Most businesses have been compliant for their staff, but many forget that owners fall under these rules also.
If your business pays money to its owner, there is a good chance you have to comply with the STP rules.Failure to do so may mean those wage payments are not tax deductible.
Chat to us about your specific circumstances.
SMALL BUSINESS CONCESSIONS
There have been a litany of changes in tax deductions and rates for small businesses – largely around the ability to write off the full cost of an asset. The threshold was $30,000, then it moved to $150,000, and now it has no threshold (i.e. assets of any cost).
If you are after a last minute tax deduction, buying an asset may be the answer. We don’t advocate buying things you don’t need (because even with the tax deduction you are still out of pocket buying the asset), but if there is something you need it can be an effective strategy.
Keep in mind though that this isn’t a “bonus” or “free” deduction. You can claim the cost of the asset under normal rules, it’s just spread over the life of the asset (e.g. spend $30,000 on a work van, under normal rules you can claim the $30,000 over 8 years). The benefit to the immediate write off is that you get it all now.
Before you buy however, be sure that you will get the biggest benefit this year. It could be that you save more tax next year than you would this year. This is particularly relevant for sole traders, partnerships, and trusts.
SUPERANNUATION RATE INCREASE
A reminder for businesses that the rate of super that needs to be paid to staff is increasing to 10% (up from 9.5%) on 1 July 2021. This new rate applies to wages paid to staff on or after 1 July.
Most payroll software will automatically update their programs and rates, however if you are not using the in-built superannuation categories you may need to manually update yours.
Not a change but a reminder – to claim a deduction for superannuation contributions in the 2021 year, they must be received and processed by your super fund before 30 June. Given most super payments go via a clearing house which can take up to 7 days, you need to physically pay this super by 23 June in most cases to meet this criteria.
RECONCILE YOUR PAYROLL
Once 1 July ticks over, you should be thinking about reconciling your payroll to ensure that the information you put on your staff’s group certificates is correct. This means checking that the payroll data matches your ledger data and the info you reported on your BAS’s.
We have a great checklist that goes through these (plus covers your payroll tax , workcover, and taxable payments report requirements).
Once done, small businesses have until 31 July to lodge their group certificates with the ATO (which is now called an STP finalisation).
MINIMUM WAGE INCREASE
The minimum wage is increasing 2.5% from 1 July to $20.33 per hour, and usually this flows through to many awards.
Keeping in mind that “wage theft” is now a crime (see our article on this here), please ensure you are diligent in paying your staff at least the minimum requirements.
RANDOM TAX TIPS
We have a heap of tax tips in our EOY Tax Tips brochure, but some important ones include:
- Bring forward expenses that you will incur next year can move the tax deduction from next year to this year;
- Staff bonuses that are committed to before 30 June are deductible this year, even if paid next year;
- Ensure you do a stocktake and calculate your work in progress (the value of materials and labor used / paid for on jobs that you haven’t invoiced as yet) as these are used by your accountant in calculating taxable income, and if they don’t know the figures, your options are limited; and
- Check what is owed to you by customers and write-off any amounts that you expect to never receive.