Tax advisors are stepping in earlier this year with a special warning to small businesses to act now.
HLB tax partner Judd Sydney Peter Bembrick said fiscal 2020/21 economic uncertainty should motivate SMEs to revisit tax planning strategies now – not at the last minute.
After a year of turmoil, small business owners and individuals should all try to maximize their returns and recover losses from last year’s downturn.
“There have been a number of stimulus measures over the past year, including JobKeeper and JobSeeker – some of which have already been hired – and the early release of the superannuation system. So it’s important to get people back on balance.” Mr. Bembrick said.
“Filing a tax return sooner rather than later also reduces ongoing quarterly tax payments. Therefore, the key message for taxpayers is to consider tax planning strategies now or to take the risk of paying a heavy price. “
Entrepreneurs need to be aware of their specific tax obligations as well as any measures taken to minimize the amount of tax paid.
Mr. Bembrick has encouraged small businesses to pay special attention to the following key areas:
- Super Guarantee (SG): SG contributions must be paid by June 30, 2021 in order to receive a tax deduction in the 2020/21 financial year. The pension fund must receive these contributions by June 30th. He said that some clearinghouses may take more than a week to submit the payment to the super fund. It would therefore be advisable to ensure that the superannuation is paid out by mid-June if possible.
- Temporary Full Expenses (formerly known as Immediate Asset Depreciation): The guidelines have been expanded again in the last two federal budgets as part of the government’s COVID-19 initiative to encourage business spending to improve cash flow. The amount a small business can write off under this concession is now unlimited. Unlike larger corporations, small businesses with total revenue less than $ 50 million receive a full write-off on used assets. While the federal budget of May 2021 extended the concession to June 30, 2023, there is still a time advantage if claims can be asserted between 2020 and 21.
- Loss carryforward: Another concession that was introduced in the October 2020 federal budget and extended for a further 12 months in the May 2021 budget. This concession allows a company (ie not available to partnerships, trusts or individuals) to carry back tax losses in any of the income years 2019-2020, 2020-21, 2021-22 and 2022-23 up to an earlier year 2018-19. When filing tax returns from 2020–2021, a refund could be requested that represents the tax savings that would have arisen if the tax loss in the previous year had been available for assertion.
- Small Business CGT Concessions: Those who operate a small business may be eligible for these concessions when a company sells corporate assets or sells shares in a company that operates a company. The concessions may be available if total sales are less than $ 2 million or total net worth (excluding the family home and pension fund balances) is less than $ 6 million, although the eligibility rules are quite strict and have been tightened significantly in recent years .
- Income deferral: Companies may want to defer tax payments on taxable income this fiscal year by deferring invoices until after June 30th. Income from the payments will only be taxed in the following financial year.
Mr. Bembrick stated that by leveraging all available tax strategies, both individuals and corporations will set the tone for the fiscal year to come.
“Once taxpayers get into the habit of fully understanding their tax administration and what to do and when, it will be a lot easier and more efficient to manage,” said Bembrick.
“Taxes are a constantly changing legal framework, and up-to-date tax planning can ensure that changes are used more effectively.”
Small businesses have been asked to look at key areas and get involved in EOFY tax planning now
Last updated: May 25, 2021 Published: May 25, 2021