Once July hits and a new financial year has begun, it is time for tax planning – take stock and get your taxes in order for the year ended 30 June.
Now is a great time to ensure you are tax-ready and making the most out of the 2019 financial year.
Here are some tips to ensure you are good to go before meeting with your accountant to raise some points with them.
First things first, you should have a read of our article on tax deductions to ensure you are across everything claimable.
Remember, there is no point in spending money to get a deduction, you are only getting, at best, 47c in the dollar back in your return.
Secondly, the advent of Single Touch Payroll (STP) means that if you have worked for a large employer (more than 20 in staff) then you will not receive a PAYG Payment Summary after 30 June.
Your employer has been reporting your pay every pay cycle to the ATO directly, so the information is readily available to your accountant.
Thirdly, timing is everything!
For most taxpayers, they are assessed on a cash basis, that is, the income is assessable when payment is physically received, and the expense is deductible when paid.
You may be able to defer the receipt of some business or investment income or bring forward deductions by speaking to your adviser.
This is particularly important if you think your income is going to significantly change in the next financial year. For example, you might be increasing higher paid work as a consultant or going away on fellowship.
Negative gearing is likely to stay here for the foreseeable future.
To maximise your rental deductions, you may consider prepaying expenses, such as interest, if you have the cash.
Having a Quantity Surveyor’s (or Depreciation) Report to claim as much as you can without outlaying anything other than the cost of the report, is a great way to increase your rental deductions.
Recently, the government changed the law around depreciation- so that you can only claim for assets that are new to you. That is, if they have been depreciated before, there will be no claim allowed for assets passed on to the next owner.
Private Health Insurance
Having a basic hospital cover will mean you avoid the Medicare Levy Surcharge (MLS) which is an extra 1-1.5% tax levied upon those without the cover and earning $90k or $180k for a couple.
Importantly, the theory that you avoid the MLS altogether by getting hospital cover at any time before 30 June is a fallacy.
The surcharge is pro-rated based on the number of days you and all your dependents had the cover.
Depending on the cost, purely from a cash and tax saving perspective, you might actually be better off waiting until 1 July.
The instant asset write-off thresholds for small businesses using the simplified depreciation rules experienced a minor shake up in the most recent budget.
For assets purchased during the 2019 financial year, the threshold for an immediate deduction is as follows:
|7:30pm (AEDT) 02/04/2019 to 30/06/2020||$30,000|
|29/01/2019 to before 7.30pm (AEDT) 02/04/2019||$25,000|
|7.30pm (AEST) 12/05/2015 to 28/01/2019||$20,000|
Be sure to hang on to your receipt showing the amount paid for each asset.
The date and time it was installed ready for use in your small business determines how it should be depreciated.
Your income protection premium is likely deductible, if paid before 30 June 2019. You should receive a tax statement from your insurance provider.
Similarly, you may be able to claim a deduction for other insurances that are held in your super fund by treating the payment you make for the premium as an additional personal contribution.
Ensure you submit The Notice of Intent to Claim a Deduction form to your super fund, and receive a confirmation letter, before lodging your return.
Company Tax and Dividends
New rules have been implemented around the corporate tax rate and dividend franking rates for certain companies.
The Small Business Entity rules have been replaced with the Base Rate Entity (BRE) concept. To be classed as a BRE, a company must meet two tests:
- Base Rate Entity Passive Income (BREPI) must equal less than 80% of total company income. This includes interest, rent, dividends, royalties, distributions etc.
- Turnover less than the threshold which for the 2019FY is $50m.
Whilst the company’s tax rate is based on the BRE status in the current year, franking of dividends is based on the tax rate of the preceding year.
Your accountant will be able to advise on the requirements of your company and to maximise the tax and franking benefits.
Having a resolution or a minute to distribute Trust income signed by all Trustees/Directors of Corporate Trustees is imperative to avoid having income taxed in the hands of the Trustee at the top marginal rate.
Speak to your accountant if you are a Trustee and haven’t signed our resolution yet as it must be completed by 30 June.
Division 7A and UPEs
Some of the biggest changes to Division 7A have been announced to take effect from a deferred start date of 1 July 2020.
Whilst this may seem a while away, it is important to consider actions that can be taken prior to 30 June of 2019 and 2020 to avoid any issues under the new legislation.
Disclaimer: * The information contained in this site is general and is not intended to serve as advice. DPM Financial Services Group recommends you obtain advice concerning specific matters before making a decision.