Top Tips before riding into the New Financial Year
With the end of financial year approaching we’ve focused on 4 key areas to help you wrap up the current financial year and prepare you for the new one ahead.
Keep reading for a refresher course on:
- Single Touch Payroll
- Immediate Asset Write-offs
- Super Contributions Cap
- Trust Resolutions
Single Touch Payroll
Single Touch Payroll (STP) is a new way of reporting tax and superannuation to the Australian Taxation Office. The new legislation came into effect on 1 July 2018 which requires businesses with more than 20 employees to be STP compliant as of this date. The legislation has now been extended to small businesses with less than 20 employees from 1 July 2019, which will affect how and when you’re required to report payroll to the ATO.
Single Touch Payroll (STP) is a new way of reporting tax and superannuation to the Australian Taxation Office. The new legislation came into effect on 1 July 2018 which requires businesses with more than 20 employees to be STP compliant as of this date. The legislation has now extended to small businesses with less than 20 employees from 1 July 2019, which will affect how and when you’re required to report payroll to the ATO.
Single Touch Payroll is a cloud-based system and the objective is to simplify the way payroll is reported, allowing both employees and the ATO to access payroll and super information on a timely basis.
STP is currently available through payroll, accounting and business management software (eg. Xero and MYOB) that sends your tax and super information directly to the ATO as you run your payroll.
For small businesses with 1-4 employees, there are a number of no-cost and low-cost solutions available to assist with the transition to STP. Both major software providers Xero and MYOB have low-cost options available, however if you’re currently not using a software, there is no requirement (yet) to purchase one. In addition to the options mentioned above, for a transition period the ATO provides the option for Registered Tax or BAS Agents to report STP on your behalf on a quarterly basis, rather than with each payroll run.
Immediate Asset Write-offs
For small businesses, under the simplified depreciation rules, business assets costing below the instant asset write-off thresholds can be written off in the year they are first used, or ready for use. This threshold applies to both new and second-hand assets and businesses are allowed to claim a deduction for several assets, as long as each individual asset is below the relevant threshold.
The ATO has announced that the instant asset threshold has been increased to $30,000, for assets purchased from 7.30pm AEDT on 2 April 2019. As of this date, the instant asset write-off has also been extended to larger businesses, with a turnover from $10 million to $50 million. If you purchased the asset prior to 2 April 2019, the write-offs are only available to small businesses with a turnover up to $10 million and separate thresholds apply, as listed below.
- $30,000, from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020
- $25,000, from 29 January 2019 until before 7.30pm (AEDT) on 2 April 2019
- $20,000, before 29 January 2019.
Super Contributions Cap
The superannuation contributions cap limits the amount that can be contributed to your superfund each financial year. There are two types of contributions – Concessional (before tax) and Non-concessional (after tax).
Concessional contributions are taxed in your superannuation fund at a ‘concessional rate’ of 15%. The most common concessional contributions include employer contributions, such as Super Guarantee, and Salary Sacrifice contributions – any additional contributions made from your employer above the required super guarantee amount and personal contributions for which a tax deduction is claimed.
The concessional contributions are currently capped at $25,000, which came into place from 1 July 2017. Prior to this date the cap was set at $35,000. If you exceed the $25,000 cap, the excess amount is included in your taxable income and you are required to pay tax at your marginal rate, less a 15% tax offset for the tax already paid by your super fund.
Non-concessional contributions are contributions that aren’t included in your super fund’s assessable income, which generally relates to personal contributions for which no tax deduction is claimed. Non-concessional contributions are not taxed within your fund, as these are paid from after tax income (ie. You have already paid tax on this income).
For the 2019 financial year, these contributions are capped at $100,000 for individuals aged 65 or over but below 75. For individuals below 65 years of age that wish to boost their super balance, there’s an additional option to contribute up to $300,000 for a three-year period, subject to their current superannuation balance.
With the 2019 financial year coming to an end, we wanted to remind you need to complete your trust distributions before 30 June 2019 to avoid paying additional tax.
Trust resolutions are made by the Trustee, in accordance with the Trust’s deed to elect who the income of the trust is to be distributed to. All trust resolutions are required to be made on or before the 30 June for each financial year to enable you to comply with the ATO regulations governing discretionary trust distributions (Note. If you are one of our trust clients this would have been sent to you directly).
If the resolution is completed after this date, the Trustee may be assessed on the trust income by the ATO, as opposed to the beneficiaries of the trust, at their highest marginal tax rate of 47%.
Any questions in relation to any of the above? Just give us a buzz and we’ll assist you further.
Author: Petra Wikstroem