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Last Minute 2016 EOY

 

Tax Minimisation

Tips

           

Another financial year is about to finish! As a business owner, there are

 many obligations that you need to consider and action just before and

just after 30 June. Some of these will help to minimise your tax. We have

outlined these action points below to assist you.

 

BEFORE
30 June 2016

  • Ensure your employee superannuation payments are received and allocated by your employees' super fund prior to 30 June 2016 to ensure a tax deduction for this year. Any payments made between 1July 2016 and 28 July 2016 will count towards your Superannuation Guarantee requirement but will not be tax deductible until the 2017 financial year.
  • If you operate through a trading company review shareholder loan accounts and make minimum loan repayments.
  • If you operate through a discretionary family trust ensure that a Trust Distribution Resolution for each Trust is signed by 30 June 2016.
  • Review 2016 LAST MINUTE strategies further below to reduce your tax prior to 30 June 2016.
  • Carry out a stocktake by 30 June 2016 (companies with turnover over $2million)
  • Review company shareholder loan accounts and make minimum loan repayments (may need to declare dividends)

1 July 2016

  • Superannuation guarantee rate is still 9.5%
  • 2% Temporary Budget Repair Levy continues.

14 July 2016 or before

  • Provide 2016 PAYG Payment Summaries to all employees

28 July 2016

  • Quarterly Superannuation contributions due for employees (for the period 1 April 2016 to 30 June 2016). THIS IS A KEY DEADLINE!

(Note: If you fail to meet your requirements by 28 July 2016, you must complete a Superannuation Guarantee Charge Statement and forward it to the ATO together with underpaid superannuation plus administration fees and interest by 14 August 2016. Superannuation Guarantee Charge payments are NOT tax deductible.)

14 August 2016 or before

  • Lodge your 2016 Annual PAYG Payment Summary Statement (for employees) with the ATO. Penalties apply for late lodgement.

28 Aug 2016

  • Taxable Payments Annual Report due for lodgement with the ATO (building and construction industry)

 

Key Changes from 1 July 2016

Businesses need to take note of a number of key tax changes that apply from 1 July 2016. These include:

  • Small Business Entity (SBE) threshold turnover increased to $10 million. This allows many more business to access tax concessions that improve cashflow, simplify reporting, and bring forward tax deductions.
  • SBE Company Tax Rate reduced to 27.5%.

 

SBE Company Tax Rate reduced to 27.5%

Effective 1 July 2016, the company tax rate for SBE (Small Business Entities) reduces by 1% from 28.5% to 27.5%.  To be considered an SBE, your group aggregated turnover must be less than $10 million.

$20,000 Immediate Deduction for SBE's

From 7:30pm on 12 May 2015, small business entities (SBEs) were able to claim an immediate deduction for depreciating assets costing less than $20,000. 

Depreciating assets costing $20,000 or more will be allocated to the SBE's general small business pool and will depreciate at a rate of 15% in the income year in which the assets are first used or installed ready for use. The assets will then be depreciated as part of that pool at 30% in subsequent income years.

If the balance of the General Asset Pool is less than $20,000 at the end of the income year this is also written off.

FBT Exemption increased

Fringe benefits tax has been abolished on all portable electronic devices use for work, such as mobile phones, laptops and tables.  Currently the exemption applies only to devices that perform substantially different functions restricting employees to one device.  The change takes effect at the start of the FBT year which commenced 1 April 2016.

Start-ups

Professional costs incurred in starting up a new business will now be immediately deductible.  Commencing 1 July 2015, previous restrictions meant these costs had to be apportioned over five year period.  For those who have started business as a sole trader and wish to change structure there are new capital gains tax exemptions.

Trust Distributions - Timing of Resolutions

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2016 at the latest (the trust deed may actually require this to be done earlier).  Decisions made by the trustees should be documented in writing by 30 June 2016.

If valid resolutions are not in place by 30 June 2016, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

Action Step:  Please contact our office before 30 June 2016 so that we can

 properly prepare this document for you to sign.

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $2 million) have access to a range of tax concessions.  One of these concessions is the simplified trading stock rules.  Under these rules, you can choose not to conduct a stocktake for tax purposes if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year.  You will need to record how you determined the value of trading stock on hand.

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

Deadline for 2016 PAYG Payment Summaries

You need to provide 2016 PAYG Payment Summaries to your employees and other workers by 14 July 2016.  These must then be submitted to the ATO by 14 August 2016 or penalties will apply.

Action Step: If you have any doubt about how to correctly complete your 2016

 PAYG Payment Summaries, please contact us for assistance BEFORE you

 prepare them.

Building and Construction Industry Reporting

From 1 July 2012, new tax reporting rules apply for businesses in the building and construction industry. Businesses will have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the "cash economy" by ensuring tax is paid on all income including "cash" payments.

You will need to record the following details of all payments made to contractors for building and construction services:

·         The ABN of the contractor

·         The name and address of the contractor

·         The gross amount paid for the financial year, including GST

·         The total GST included in the gross amount paid

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

Action Step:  Ensure that you lodge your Taxable Payments Annual Report

 with the ATO no later than 28 August 2016.

Payroll Tax

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

·         fringe benefits based on the grossed-up taxable value of fringe benefits;

·         all employer contributions to superannuation on behalf of employees; and

·         some contractor or sub-contractor fees.

For more detailed information about whether payroll tax applies to your business, please contact our office.

Action Step: The Annual Return/Reconciliation for payroll tax must be lodged

 by 21 July 2016 with your State Revenue Office.

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

·         fringe benefits based on the taxable value of fringe benefits (do not gross-up);

·         all employer contributions to superannuation on behalf of employees; and

·         some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

Action Step: Complete and lodge the Annual Reconciliation with your

 WorkCover/WorkSafe insurer by the due date.

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2016 to determine if there has been an under or over-payment of GST in the 2016 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

Action Step: Complete the annual GST reconciliations, and check that you

 have all required tax invoices and other supporting documents.

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

Action Step: Please contact our office if you would like to request this service.

Last Minute Tax Minimisation Tips

Here's a few final reminders about ways to reduce your tax for 2016

1.       Write-off Bad Debts

2.       Write-off any trading stock that is damaged or obsolete

3.       Review your asset register and scrap any obsolete plant and equipment

4.       Pay for marketing materials, repairs, consumables, office stationery, and 

          donations before 30 June 2016

5.       Ensure employee superannuation contributions are made (and received by

          your employees superannuation fund) by 30 June 2016 to allow a tax

          deduction this financial year

6.       Realise any capital losses you have before 30 June 2016 to offset against

          any capital gains you may have made

 

 

 

General advice disclaimer

General advice warning: The advice provided is general advice only as, in preparing it we did not take into account your investment objectives, financial situation or particular needs. Before making an investment decision on the basis of this advice, you should consider how appropriate the advice is to your particular investment needs, and objectives. You should also consider the relevant Product Disclosure Statement before making any decision relating to a financial product.

 

 

           

 

WANT TO TALK

FEEL FREE TO CALL OUR OFFICE ANY TIME

             

MJ BUSINESS SOLUTIONS

Level 1 176 Burgundy Street, Heidelberg VIC 3081

P: 03 9455 0219

Email: reception@mjbs.com.au