We are close to the end of the 2019/20 financial year. It’s not yet too late to make some important changes to your 2020 tax situation. Make sure you have taken all the action that you need, to help minimise your tax liability and increase any potential refund.
Here are some last-minute tips and reminders (whichever is applicable for you) to help you prepare for the end of financial year:
Individuals (and small businesses)
Generally:
- 2020 Tax Checklists: We need these completed for our quality control purposes when we do your tax. Tax is complicated in Australia, and the ATO can be very demanding with substantiation. It’s easy to forget claims, and this might prompt you to remember some other income or expenses that you might have otherwise forgotten by the end of the tax year. Get yourselves a copy of these checklist here:
- Rental Properties: Please use the Rental section of the tax checklist when preparing your rental information. It has useful tips on what info to supply, and should make sure that everything is there so your tax returns can be prepared in a timely manner. It also means that we don’t have to summarise your information from 30 different pdf documents, which can be very time-consuming.
How to treat your superannuation contributions
- If you are paying additional amounts into superannuation outside of your PAYGW employer contributions, make sure the contributions are sent to the fund and received by them well before 30 June 2020.
- When you are getting your 2020 tax information documents together, you need a confirmation letter from the super fund confirming that they have treated your contribution as a tax-deductible contribution. If you have not received this letter, contact the super fund and request a copy. This is a really important point, because the tax deductions are often very large, and we need this evidence before we claim for you.
- Member Contributions: If you have a family member not earning over $53,564 from working, you may consider putting a deposit into their super fund as a member/non-tax deductible contribution. Eg if you make a $1000 member contribution, and they are eligible for ATO purposes, the government will automatically contribute $500 as a co-contribution once you lodge your tax return. For more detail, see your financial planner, or go to the ATO website .
Uniform Claims
- The ATO is expecting that uniform claims will be greatly reduced in 2020 due to COVID. Please advise us as to how many weeks you actually worked in your uniform during the year, because the standard number of weeks uniform claim will not apply this year.
Motor Vehicle Expenses
- MV Claims using Cents Per Km basis (maximum 5000km claimable): If you want to claim motor vehicle expenses, we can’t just claim 5000 for the sake of it. We need your reasonable estimate of how many km you travelled on behalf of your business/investments/employer for the year. Make sure you record your odometer reading as at 30 June 2020, and send it into us with your 2020 checklist.
- Note: The ATO is raising the cents per kilometre deduction rate for motor vehicle expenses from 67 to 72 cents per kilometre for the next tax year starting 1 July 2020. Read more of our MV tax deduction blog here.
- MV Claims using Logbook Method: If you want to claim more than the $3K we can claim for 5000 km, we need a list of everything you’ve paid for your vehicle, and if you haven’t already supplied it to us, details of the purchase/depreciation schedule from a previous accountant.
For businesses – general
$150,000 Instant Asset Write-Off
- A reminder that small to medium businesses can write off for tax purposes assets up to $150K, up to 31 December 2020. This includes Small Business General Pools under $150K, so a great opportunity for some businesses to potentially reduce tax in 2020 and 2021 without spending an extra cent!
- There are financiers who will lend money for these purchases, so please call us if we can help with your loan application or get finance. In some cases, finance can be arranged in a very short space of time.
- For those who won’t make the 30 June 2020 deadline, the government has now extended it to 31 December 2020. You will need to consult with your accountant as to which tax year it is best to purchase your business equipment/vehicle.
General
- Debtors: What can you/your staff collect, to increase your cashflow and reduce your debtor risk? Are you invoicing regularly? Are you sending statements on a regular basis?
- Book-keeping: You can manage your business finances much better if you know how your business is travelling financially. Keep your book-keeping up to date and your bank accounts reconciled. If you have direct bank feeds through online accounting programs, this makes it much easier to do your reconciling on a daily or weekly basis. If you need a demonstration of Xero, let us know at info@in8businessadvisory.com.au and we’ll run a Zoom session so you can get started with an improved book-keeping system for the 2021 tax year.
For those clients with Companies:
- The Annual ASIC Fees for private Australian companies will be $273, no GST
- Loans in your company account to related parties (Assets on your balance sheet in the company): The government has not yet passed new legislation regarding what are known as Div 7A loans, but what they are looking at is increasing financial penalties for owing your company money, or your Trust owing your company money, if applicable. It’s so much better if you don’t pull too much cash out of the company, to avoid these loans. If you have existing loans, they’re going to cost you a lot more in 2021 and following years, if this legislation is passed. For our clients, send an email to colleent@in8businessadvisory.com.au to make an appointment to discuss, if necessary.
For those clients with Trusts:
- We need to prepare a trust distribution declaration for 2020. We will be contacting you shortly to get those signed before 30 June 2020, or the date specified by your own trust deed.
- Where a trust has given a trust distribution to a company, the cash needs to follow the distribution, as soon as possible, otherwise the loan will attract interest expense, from 1 July 2020. Pay down these debts as much as possible by 30 June 2021, even though the government may hopefully give an extension on this, as requested by Australian Accounting bodies.
Please also check out Ban Tacs’ 2019/20 Financial Year End Tax Strategies and Must Dos Before 30 June, 2020 for more tips and reminders.
