New Financial Year 2020 Tax Update
Author – Natasha Dohle
The impact of the global pandemic and its economic consequences has sent the 2020 financial year out with a bang. However, there is a new financial year beginning and it brings with it some interesting changes:
Company Tax Rate Reduction
As of 1 July 2020, the company tax rate for Base Rate Entities will be reduced from 27.5% to 26%.
To be eligible for this reduced rate companies will need to have an aggregated turnover of less than $50 million and 80% or less of their assessable income be base rate entity passive income.
For these purposes, the aggregated turnover refers to the income of not just the main company but also any entities with which it is associated.
The reduction in tax rate will also reduce the franking credits that can be attached to any dividends paid from eligible companies.
Instant Asset Write Off
The Instant Asset Write Off has been extended to the 31 December 2020 for assets costing less than $150,000.
Businesses with an aggregated turnover of less than $500 million are eligible for the Instant Asset Write Off.
As of 1 January 2021, the Instant Asset Write Off threshold will be reduced to $1,000 and it will only be available to small businesses with an aggregated turnover of less than $10 million.
Cents per Kilometre Rate Increase
As of 1 July 2020, the cents per kilometre rate for work-related car expenses will increase from 68 cents per kilometre to 72 cents per kilometre.
Using this rate covers all the vehicle running expenses and can be used for a maximum of 5000 business kilometres per car, per year.
Care should always be taken when choosing between using cents per kilometre and a logbook to ensure that you receive the best possible outcome.
Voluntary Superannuation Contributions for Those 66 and 67 Years Old
The legislation is currently before parliament to remove the work test requirement for people aged 66 and 67. If the legislation passes this will come into effect on 1 July 2020.
The work test requires that an individual be gainfully employed for 40 hours in 30 consecutive days during the year that the contribution is made and currently applies to anyone over the age of 65.
Increased Age Limit to Make Superannuation Contributions for your Spouse
A reform has been announced to increase the maximum age at which an SMSF member can receive a spouse contribution. If the legislation passes, from 1 July 2020, spouse contributions will be able to be made until the receiving spouse reaches 75 years of age. Previously, this age limit was 69.
Receiving spouses will still need to meet the requirements of the work test if relevant.
Changes to the Bring Forward Rule for Non-Concessional Contributions
The legislation is currently before parliament to increase the maximum age at which individuals are able to access the bring-forward rule for non-concessional contributions.
If the legislation passes, individuals under 67 years of age will be able to access the bring forward non-concessional contributions cap in a particular year. Previously, this was limited to individuals under 65 years of age.
Make the New Financial Year a Good One
Having a proactive team of business accountants and advisors onboard can help you maximise your financial position in the new financial year. SRJ Walker Wayland can help you get optimal tax outcomes and also provide opportunities for complete business improvement.
Get in touch with us to find out more about the new financial year tax updates and what they mean for you.