2020 tax planning: Now is the time to plan for your best results

Article by Robyn Tyler

With the end of the financial year approaching quickly, now is the time to plan the actions you need to take before 30 June to reduce your tax. Tax planning (also known as a pre-year-end review) helps you minimise the tax liability of your business. While paying tax isn’t a bad thing – if you’re not making a profit, you won’t pay any tax – most people like to save on tax and want to see their business working to its fullest potential.

 

COVID-19 has had a significant impact on the business landscape in 2020. Now is the time to review likely business results for this financial year. Results projected at the end of December 2019 will most likely be significantly different now.

 

For the 2020 financial year, consideration may need to be given to following areas:

  1. Maximising superannuation contributions without exceeding the relevant caps
  2. COVID-19 Stimulus Packages from federal, state and local governments
  3. Bringing forward deductible expenses
  4. Managing capital gains tax income
  5. Review of current business structures

 

Let’s look a little deeper into the first two key areas that will affect many businesses this tax planning season.

 

Superannuation Contributions

When you retire, your superannuation is likely to become an important source of your income. That’s why it’s a good idea to top it up while you are working.

But did you know, there are also some excellent tax benefits you can take advantage of right now – just making your own voluntary superannuation contributions?

There are several ways you can get tax benefits from super contributions. Please contact our office to discuss the tax strategies available to your circumstances. It is noted, we can only provide advice regarding the tax consequences and you should also discuss this matter with your financial planner.

 

COVID-19 Stimulus Package

There are many various stimulus packages that have been released by federal, state and local governments in the last couple months. Here’s some of the key incentives your business may have received or be entitled to.

 

Instant Asset Write Off

The instant asset write-off is a tax deduction that reduces the tax liability of your business. You can immediately deduct the cost of a business asset if it costs less than the following amounts and turnover thresholds:

  • $150,000 excluding GST from 12 March 202 to 30 June 2020 (with business aggregated annual turnover up to $500 million)
  • $30,000 excluding GST up to 11 March 2020 (with business aggregated annual turnover up to $50 million)

This applies on a per asset basis to new or second-hand assets first used or installed ready for use in the above timeframe. Eligible businesses can immediately write-off multiple assets.

 

Accelerated Depreciation

Businesses with a turnover up to $500 million can purchase eligible assets over $150,000 until 30 June 2021 and claim accelerated depreciation of an additional 50% of the asset cost in the first year of purchase. Existing depreciation rules apply to the balance of the asset cost. This is an extra tax deduction and not a cash back amount.

‘Eligible assets’ are new assets purchased after 12 March 2020 and first used or installed by 30 June 2021. It includes plant and equipment but does not apply to buildings, capital works or second-hand assets.

 

ATO Administration Relief

The ATO will provide administration relief for some tax obligations for people affected by the Coronavirus crisis on a per business basis. Relief options include:

  • Deferring payment dates of Business Activity Statements, income tax assessments, fringe benefit tax assessments up to 12 September 2020;
  • Businesses on a quarterly reporting cycle can choose to change to monthly GST reporting to receive GST refunds sooner;
  • Business can vary PAYG instalment amounts to zero for the March or June 2020 quarters and if they lodge this variation, they can also claim a refund for instalments made for the September 2019 and December 2019 quarters;
  • Remission of any interest and penalties incurred on or after 23 January 2020; and
  • Allowing affected businesses to enter into low interest payment plans on existing tax liabilities.

 

Want to know more about what your business should do before 30 June? Get in touch with our team today.