It’s that time of year again – the end of the 2020 financial year has finally arrived.
After a tough 6 months that no one anticipated, the close of the financial year feels different this time around. While some businesses were running to the finishing line, others simply happy to have arrived. Either way – the end of the financial year is a good time to reflect on the year that’s been and ensure all your ducks are in a row as we commence 2021.
We have put together a checklist of items to complete and tax planning opportunities to consider as the 2021 financial year begins:
Review outstanding debts prior to year-end and identify any debts that are not likely to be recovered. On the basis that you have done everything practically possible to recover the outstanding debt, consider writing off the outstanding amount as a bad debt and recover the relevant GST in your next BAS.
Ensure that you have reviewed your fixed asset register and written off any depreciable assets identified which are no longer being used. Additionally, as part of the Federal Government stimulus packages announced in March 2020, there have been several changes to the depreciation regime to all sizes of taxpayers. For entities who are not subject to the small business depreciation rules and have an aggregated turnover not exceeding $500 million, the following assets can be immediately written off:
- Between 1 July 2019 and 11 March 2020 – assets costing less than $30,000; and
- Between 12 March 2020 to 30 June 2020 – assets costing less than $150,000.
For assets costing more than $150,000 purchased prior to 30 June 2021 (and assets costing more than $30,000 upon expiry of the above expanded instant asset write-off), the Federal Government has announced an accelerated depreciation scheme. Once installed for use, a business with an aggregated turnover of less than $500 million can immediately claim a 50% depreciation deduction on the asset. The remaining balance will then be depreciated as per the regular depreciation rules applicable to the business.
Employee bonuses are an area where changes to internal processes can change your tax position. By aligning your employee contracts, timing of personnel reviews and communication of results, accrued employee bonuses that would otherwise not be deductible until the following year can be claimed as a deduction in the current year.
Key due dates are as follows:
|Staff Superannuation – 9.5% Gross Wages||30 June 2020*|
|June Quarter Business Activity Statement||28 July 2020|
|Finalisation Declaration for STP Reporting||14 July 2020 (for 20+ employees)
31 July 2020 (for 1 – 19 employees)
|Payroll Tax 2020 Annual Reconciliation lodgement||30 October 2020|
*Note that superannuation contributions for employees need to be received by the respective superannuation funds prior to 30 June 2020 in order to obtain a tax deduction in the year ended 30 June 2020. The latest due date for superannuation guarantee contributions for the quarter ended 30 June 2020 will be 28 July 2020, to avoid potential penalties and additional tax consequences.
For individuals / trusts
Motor vehicle logbooks are only valid for 5 years. If your logbook is 5 years old, please complete a new logbook for a continuous, representative 12-week period.
If you have a trust, to comply with relevant trust legislation, distribution minutes must be completed before the end of the financial year. This will ensure that the income of the trust for the year is distributed in accordance with the trust deed.
Working from home:
With many people currently working from home, it would be expected there to be a rise in deductible expenditure relating to these changed working circumstances.
Examples of expenditure which may be deductible relating to working from home include:
- Electricity related to heating, cooling and lighting the area you use to work;
- Cleaning costs for a dedicated work area;
- Phone, internet and data expenses;
- Printer paper, ink and other stationery; and
- Home office equipment.
To claim a deduction for these working from home expenses, all the following must be satisfied:
- You must have spent the money;
- The expense must be directly related to earning your income; and
- You must have a record to substantiate these expenses.
The ATO has provided a simplified method (i.e. short cut method) of calculating additional running expenses from 1 March 2020 until at least 30 June 2020. As such, there are now three ways to calculate these working from home expenses:
- Shortcut method – 80c per hour worked from home (not just checking emails) and have incurred additional costs;
- Fixed rate method – comprising of:
- 52c per hour for electricity, cleaning and depreciation of office furniture;
- Work-related components of your phone, internet, data, stationery and computer expenses; and
- Work-related component of the depreciation of computer hardware.
- Actual cost method – claiming the work-related portion on all actual expenditure incurred whilst working from home.
Records must be kept for all working from home deduction claims, noting that the shortcut method requires only a record of hours worked at home. The other two methods require both a record of hours, along with records of expenditure incurred.
ESV’s advisors work from a solid understanding of EOFY protocol; if you are in need of a personalised assistance plan, please don’t hesitate to get in touch with us on (02) 9283-1666.