Temporary full expensing
From 7:30pm AEDT 6 October 2020, businesses with turnover under $5.0bn can deduct 100% depreciation on business- use of assets:
• First used; or
• Installed and ready for use by 30 June 2023
• the balance of a small business pool at the end of each income year in this period for businesses with an aggregated turnover under $10 million can be deducted.
• Businesses with turnover of $50m+ only access write-off on new asset purchases
• Business with turnover under $50m can also access write-off for 2nd hand assets
For assets first used or installed ready for us from 12 March 2020 until 30 June 2020 and purchased by 31 December 2020, the instant asset write-off: threshold amount for each asset is $150,000 (up from $30,000) eligibility has been expanded to cover businesses with an aggregated turnover of less than $500 million (up from $50 million).
If business (i.e. annual turnover less than $5billion), consider spending on depreciating asset which is immediately deductible for the 2021 year if purchased before 30 June 2021 and installed ready for use.
Note passenger vehicles limited to claim for $59,136 being ATO imposed cost limit.
Eligible assets egs – cars, vans, kitchens, machinery, etc. Not eligible items are stock, software for business and Marketing costs.
Companies – Loss carry back rules – dealing with losses 2021
• Budget announcement – now legislated – allowing losses incurred in 2020, 2021, and 2022 years to be offset against prior profits made in or after the 2018-19 financial year. The effect – can get a refundable tax offset – i.e., cash back for tax on prior year profits.
• Conditions apply i.e., need to be corporate entity, turnover < 5 billion, entity has lodged current tax return and past 5 years tax return.
• The limitations: The amount cannot exceed:
• the amount of earlier tax paid by the entity; and
• the entity’s franking account balance at the end of the income year for which the refundable tax offset is claimed.
Company tax rate cut for small businesses from 1 July 2021 from 26% to 25%
Small business company income tax rate is 26% for 2021 year. From 1 July 2021 company tax rate reduces to 25%.
For the 2020/2021 year the threshold as to what is small business has remained at $50 Million. Note that turnover of connected entities is included in the calculation of company turnover. For 2021/22 the threshold has remained at $50 Million. All other companies will continue to be subject to the current 30% tax rate on all their taxable income
Superannuation Guarantee rate increased from 9.5% to 10% from 1 July 2021
Single touch payroll extends to small employers with closely-held employees from 1 July 2021
Single Touch Payroll (STP) is a new way of reporting tax and super information to the ATO. If you are using a solution that offers STP reporting, such as payroll or accounting software, you will send your employees’ tax and super information to us each time you run your payroll and pay your employees. The information is sent to ATO either directly from your software, or through a third party – such as a sending service provider.
There will also be a number of options available for employees who do not use payroll software, such as No-cost and low-cost single Touch Payroll solutions.
Large employers with 20 or more employees and small employers with 19 or less employees should now be reporting through STP.
Employers with 19 or less employees do not need to report closely held payees until 1 July 2021. A closely held payee means the payee is directly related to the entity from which they receive payments, for eg family members of a family-owned business, directors or shareholders of a company, trustees or beneficiaries of a trust. Small employers will have the option to report their closely held information quarterly.
First Home Super Saver Scheme
The FHSS Scheme allows you to save money for a first home inside your superannuation fund. The scheme provides concessional tax treatment within super.
From 1 July 2017 you can following voluntary contributions into your super fund to save for your first home:
- Concessional contributions – including salary sacrifice amounts or contributions for which a tax deduction has been claimed. These are taxed at 15%.
- Non-concessional contributions – these are made after tax or where a tax deduction has not been claimed.
To qualify you must:
- have not previously owned property in Australia (subject to exceptions)
- have not previously released FHSS funds
- either live or intend to live in the premises you are buying as soon as practicable
- intend to live in the property for at least six months of the first 12 months you own it, after it is practical to move in.
You can apply for the release of voluntary contributions up to a maximum of $15,000 from any one financial year and $30,000 in total across all years. You can contribute up to your existing superannuation contribution caps.
2021 Federal budget proposed that maximum amount of voluntary super contributions that can be released under FHSS scheme will be increased from $30,000 to $50,000 from 1 July 2022.
Contributing proceeds of downsizing into superannuation
From 1 July 2018, the Australian Government will introduce the Contributing the proceeds of downsizing into superannuation measure. This measure applies to the sale of your main residence, where the exchange of contracts for the sale occurs on or after 1 July 2018.
If you are 65 years old or over and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home. Your downsizer contribution will not count towards your contributions caps or be affected by the total superannuation balance test in the year you make it. However, it will count towards your total super balance and transfer balance cap, currently set at $1.6 million. This cap applies when you move your super savings into retirement phase.You can only make downsizing contributions for the sale of one home.
Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension.
Other eligibility criteria: –
- Your home was owned by you or your spouse for 10 years or more prior to the sale.
- You have provided your super fund with the downsizer contribution form either before or at the time of making your downsizer contribution.
- You make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually the date of settlement.
2021 Federal budget proposed minimum eligibility age to make downsizer contributions into super will be reduced from 65 to 60 from 1 July 2022.
Are-you-ready-for-GST-on-low-value-goods TAX REPORT
Expanded access to small business concessions from 1 July 2016
From 1 July 2016, a range of small business tax concessions became available to all businesses with turnover less than $10 million (the turnover threshold) (increased from $2 million). The turnover threshold stays at $2m for Capital Gains Tax Small Business concessions).
From 1 July 2020 small business taxpayers (ie turnover from $10 million to $50 million can claim deduction for payments in advance where less than $1,000, under contract for service (eg salary and wages), services received within 13 months.
Non-concessional contributions cap reduced from 1 July 2021 from $100,000 to $110,000 per year
Non-concessional (after-tax) contributions include:
- personal contributions for which you do not claim an income tax deduction, and
- spouse contributions.
This reduction will remain available to individuals aged between 67 and 74 years old if they meet the work test.
If you are under 67 years, you may make non-concessional contributions of up to three times the annual non-concessional contributions cap in a single year by bringing forward your non-concessional contributions cap for a two or three year period. If eligible, when you make contributions greater than the annual cap, you automatically gain access to future year caps. This is known as the “bring forward” arrangement.
From 1 July 2017, the non-concessional contributions cap amount that you can bring forward, and whether you have a two or three year bring forward period, will depend on your super balance at the end of 30 June of the previous financial year. For eg if you have a balance of less than $1.4million at 30 June 2020, you may be entitled to the maximum of 3 years ($300,000 brought forward non-concessional contribution in 2020-21 year). The brought forward limit increases to $330,000 from 1 July 2021.) Consider waiting until 1 July 2021 to access bring forward rule as you can make $330,000 in contributions rather than $300,000.
From 1 July 2017 to 30 June 2021
The amount of the non-concessional contributions cap you can bring forward is either:
- three times the annual non-concessional contributions cap over three years (that is, $300,000) if your total super balance on 30 June of the previous financial year is less than $1.4 million
- two times the annual cap over two years (that is, $200,000) if your total super balance on 30 June of the previous financial year is above $1.4 million and less than $1.5 million
- nil ($0) if your total super balance is $1.5 million or above.
From 1 July 2021
The amount of the non-concessional contributions cap you can bring forward is either:
- three times the annual non-concessional contributions cap over three years (that is, $330,000) if your total super balance on 30 June of the previous financial year is less than $1.48 million
- two times the annual cap over two years (that is, $220,000) if your total super balance on 30 June of the previous financial year is above $1.48 million and less than $1.59 million
- nil ($0) if your total super balance is $1.59 million or above.
The remaining cap for years two or three of a bring forward arrangement is reduced to nil for a financial year if your total super balance is greater than or equal to the general transfer cap at the end of 30 June of the previous financial year. For eg if your super balance is $1.6million at 30 June 2021 you are not entitled to brought forward period for 2021-22 year as the non-concessional cap applies. The Superannuation general transfer balance cap is set to increase from $1.6 million to $1.7 million on 1 July 2021.
Change to personal super contributions deductions from 1 July 2017 – $25,000 concessional contribution cap. From 1 July 2021 the cap increases to $27,500.
- These changes are for people who make personal super contributions from their income after tax (this does not include contributions made under a salary sacrifice arrangement and compulsory super paid by your employer), and
- want to claim a deduction for these contributions.
From 1 July 2017, the 10% maximum earnings condition will be removed. This means most people under 75 years old will be able to claim a tax deduction for personal super contributions (including those aged 65 to 74 who meet the work test). To satisfy the work test, you must work at least 40 hours during a consecutive 30-day period.
You can claim a deduction for personal super contributions made on or after 1 July 2017 if:
- you made the contribution to a complying super fund or a retirement savings account that is not a
- Commonwealth public sector superannuation scheme in which you have a defined benefit interest
- CPF or other untaxed fund that would not include your contribution in its assessable income
- Super fund that notified the ATO before the start of the income year that they elected to treat all member contributions to
- the super fund as non-deductible
- the defined benefit interest within the fund as non-deductible.
- you notify your fund in writing of the amount you intend to claim as a deduction
- your fund acknowledges your intent to claim a deduction in writing
- if you are 75 years old or older, you can only claim a deduction for contributions you made on or before the 28th day of the month following the month in which you turned 75.
Concessional contributions cap from 1 July 2017 $25,000 for everyone. From 1 July 2021 cap increased to $27,500
Concessional (pre-tax) contributions to your super include:
- employer contributions
- any amount you salary sacrifice into super
- personal contributions you claim as a personal super contribution deduction
As concessional contributions are paid before tax is applied, it means that your super fund pays tax on the contributions at 15%.
From 1 July 2017, the concessional contributions cap is $25,000 for everyone. From 1 July 2021 the cap is increased to $27,500.
The contributions that you claim as a deduction will count towards your concessional contributions cap. If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions.
If you have a year of substantial capital gain or income, you can claim concessional contribution against capital gain which will reduce income.
Carry-forward of unused concessional contributions
From 1 July 2018, you will be able to carry-forward any unused amount of your concessional contributions cap. You will be able to access your unused concessional contributions cap 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 2019-20.
You will only be able to carry forward your unused concessional contributions cap if your total super balance at the end of 30 June of the previous financial year is less than $500,000.
Change to Division 293 income threshold from 1 July 2017
Currently, individuals with income and concessional super contributions greater than $250,000 will trigger a Division 293 assessment.
From 1 July 2017, the Division 293 income threshold decreased from $300,000 to $250,000. An individual with income, and concessional super contributions, exceeding the $250,000 threshold will have an additional 15% tax imposed on the lessor of: –
- the excess, or
- the concessional contributions (except excess contributions)
New transfer balance cap for retirement phase accounts from 1 July 2017. From 1 July 2021 cap the superannuation general transfer balance cap is set to increase from $1.6 million to $1.7 million.
A new transfer balance cap applies for people who are retired and have $1.6 million or more in their retirement phase super accounts.
The ‘transfer balance cap’ is a limit on how much of your super you can transfer from your accumulation super account(s) to tax-free retirement phase account(s) to receive your pension income.
The transfer balance cap will start at $1.6million, and will be indexed in line with the consumer price index (CPI), rounded down to the nearest $100,000.