A DECADE OF ADVENTURE and TAX
We can hardly believe that it’s now been TEN years since Marc & Sophie opened their small office in Stanley Street Wodonga starting off in that one tiny room (see pic attached) with their select group of very loyal clients and an unknown future. A lot has happened since then including family additions for Sophie, a move to our new Hume Street offices in January 2017, and more recently the merging with WA Gould & Associates and welcoming all these new clients here during very unprecedented times.
We cannot thank you (our clients) enough for being so loyal to our firm and being part of this incredible journey. Without both our clients and our very skilled team members, we would not be here today, and we look forward to the next ten years and beyond.
Attached are some articles of great interest to all of our clients that we ask you to take a little bit of time to read, including important information about recent tax rate changes and other tax compliance issues. If you need clarification on any of the attached information, just call us.
With the very unique year we have had here, all of our team are in great need for an extended rest, and as such we advise that we will be closed for a three week period over the Christmas/New Year break from Friday 18th December and re-open our doors again on Monday 11th January 2021.
PS. We look forward to seeing our clients faces once again starting in January 2021, when we expect to have our office door once again open.
The Team at Lidgerwoods
The team at Lidgerwoods would like to wish you a very Merry Christmas and a Prosperous New Year.
Tax Cuts = $ in Pockets Now
The Government announced various tax measures in the 2020 Budget on 6 October 2020, and it was able to secure passage of legislation containing some of the important measures very shortly afterwards, as summarised below.
Tax relief for individuals
The Government brought forward 'Stage two' of their Personal Income Tax Plan by two years, so that, from 1 July 2020:
In addition, in 2020/21, low and middle-income earners will receive a third annual additional benefit of up to $1,080 from the low and middle income tax offset (full amount paid with the tax refund if above $48,000 and below $90,000).
Employers need to apply recent tax cuts as soon as possible
The ATO has now updated the tax withholding schedules to reflect the 2020/21 income year personal tax cuts — the updated schedules are available at ato.gov.au/taxtables.
The ATO has said that employers now need to make adjustments in their payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay.
Employees should be aware that any withholding on the old scales will be taken into account in their tax return – thus overtaxing by employers in the first 4-5 months will result in additional tax refunds when completing the 2021 year tax returns.
Editor: This is designed by the government to put funds in taxpayer pockets now in the hope that they spend it to keep the economy ticking along. Employees will get payrises now, business owners will pay less tax in 2020/21 year on any profits made too, and for those clients paying quarterly PAYG Instalments the ATO is already notifying many taxpayers that their future quarterly instalments will be reduced to compensate for this big tax rate change.
Uncapped Immediate Write-off for Depreciable Assets
Businesses with turnover of less than $5 billion will be able to claim an immediate deduction for the FULL COST (no matter the amount) of an eligible depreciable asset, in the year the asset is first used or is installed ready for use,
where the following requirements are satisfied:
Small businesses (i.e., with aggregated annual turnover of less than $10 million) can deduct the balance of their simplified depreciation pool at the end of the income year while full expensing applies (i.e., up to 30 June 2022).
Furthermore, the provisions which prevent small businesses from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended.
Improvements to be made to full expensing measure
The government will expand eligibility for the temporary 'full expensing measure', which temporarily allows certain businesses to deduct the full cost of eligible depreciable assets in the year they are first used or installed.
Editor: The government initially announced in the 2020/21 Budget that businesses with a turnover of up to $5 billion would be able to immediately deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022. The budget announcement practically meant that businesses MUST claim this deduction – whether or not they wanted this deduction or could benefit to use it against current business profits.
The government has legislation in Parliament presently that will also allow businesses to opt out of temporary full expensing and the backing business investment incentive on an asset-by-asset basis. This legislation is not yet passed.
Editor: Please contact our office if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off. Asset depreciation is useful to minimise tax positions now, but will often present adverse tax implications in future years when these assets are sold, when the eventual sale proceeds result in profits declared in the disposal year for these assets.
Superannuation Guarantee Rate Increase
Recently, arguments both for and against increasing the rate of compulsory superannuation guarantee ('SG') have continued to be tossed around!
Tax Treatment of JobKeeper Payments
Broadly, JobKeeper Payments received by an employer are assessable income to the employer.
Likewise, the payments an employer subsequently makes to an employee that are funded (in whole or in part by the JobKeeper Payment) are generally allowable deductions to the employer.
The ATO has recently issued some guidance for employers in receipt of JobKeeper Payments.
For sole traders, they will need to include the payments as business income in their individual tax return.
For partnerships or trusts, JobKeeper payments should be reported as business income in the relevant partnership or trust tax return.
For a company, report JobKeeper payments as income in the company tax return.
The normal rules for deductibility apply in respect of the amounts a taxpayer pays to their employees, even where those amounts are subsidised by the JobKeeper payment. That is, if the underlying salary is deductible, then it is still deductible to the employer where it has been subsidised by a JobKeeper payment.
For employees who have received JobKeeper payments, these will be included as salary and wages (or an allowance) in their income statement (or payment summary) as provided by their employer.
For a taxpayer that has repaid (or is in the process of repaying) any of their JobKeeper payments to the ATO, these amounts do not need to be included in their tax return.
Editor: Note a business would be refunding JobKeeper payments to the ATO if it had been discovered that the business had incorrectly claimed JobKeeper payments, and had either voluntarily disclosed this to the ATO, or the ATO made this determination as a result of audit activity. This area of ATO review is already very active and visible in recent media releases too.
Our annual Audit Insurance service documentation was recently forwarded to all clients of Lidgerwoods Accountants in early November 2020 for policies ending in November 2021. JobKeeper reviews by the ATO would be one such circumstance covered under this service. Business clients will shortly receive another follow up reminder in the post regarding this service. To participate in this service or to find out more about this we encourage you to contact our office.
JobMaker Hiring Credit - Incentive to Employ Younger Workers
The government has passed legislation to establish the JobMaker Hiring Credit, which is part of the government’s economic response to the COVID-19 pandemic.
The JobMaker Hiring Credit is specifically designed to encourage businesses to take on additional young employees and increase employment.
It does this by providing employers with a fixed amount of $200 per week for an eligible employee aged 16 to 29 years and $100 per week for an eligible employee aged 30 to 35 years, paid quarterly in arrears by the ATO.
To be eligible, the employee must have been receiving JobSeeker Payment, Youth Allowance (Other) or Parenting Payment for at least one of the previous three months, assessed on the date of employment. Employees also need to have worked for a minimum of 20 hours per week of paid work to be eligible, averaged over a quarter, and can only be eligible with one employer at a time.
The hiring credit is not available to an employer who does not increase their headcount and payroll.
Employers and employees will be prohibited from entering into contrived schemes in order to gain access to or increase the amount payable.
Existing rights and safeguards for employees under the Fair Work Act will continue to apply, including protection from unfair dismissal and the full range of general protections.
Editor: Now our economy is starting again to take steps forward after the lifting of many restrictions, businesses looking to take on extra workers should be considering this before making the employment decision.
Superannuation Reforms - 2020 Budget
The Government will provide $159.6 million over four years from 2020/21 to implement reforms to improve outcomes for superannuation fund members.
Currently, structural flaws in the superannuation system mean that unnecessary fees and insurance premiums are paid on multiple accounts, members pay too much in super fees, underperforming products are costing members in lost retirement savings, and there is inadequate transparency on how funds are spending members’ money.
From 1 July 2021, the proposed reforms will make the system better for members in four key ways:
Editor: More reform of the superannuation sector – all with one aim – to ensure that superfunds are doing the right things on behalf of members, and providing more control to members of their own retirement savings. Not yet law, but we should see this get over the line.
Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.
Lastly we welcome your feedback. If you found this E-Newsletter very useful (or not?),
'The Team' at Lidgerwoods Accountants