The one thing every business should do before 30 June
Ah, tax. What a boring and, well, depressing subject for anyone – but especially business owners, where tax is generally the bane of our existence. If they’re not hitting you on company tax, they’ll get you on payroll tax. But one look at the coronavirus outbreak and we’re all a little bit more appreciative of the role tax plays in building a safe and harmonious society.
With tax being the biggest business outlay on average, it makes sense to plan ahead to ensure you don’t pay any more tax than you’re legally required to.
Why every business should do tax planning
To get the best tax outcome, I urge every business owner to schedule a tax planning meeting with your accountant or business adviser.
While I strongly advise against spending money just to minimise tax, there are definitely advantages to legitimately reducing your exposure to tax, and managing the cash flow of your tax obligations. This is best done as part of a tax-planning meeting. Ideally, schedule your meeting for around April or May to give you enough time to make the necessary changes.
There are three main benefits to tax planning:
1. It’s usually done in May, as your tax obligations will not be due until May of the following year. That gives you twelve months’ advance notice of your likely tax obligations based on your previous liabilities and projections. This can help with cash flow planning and give you greater surety about the year ahead.
2. It ensures that you take advantage of any new or existing state or federal government incentives for small businesses or households, plus manage any potentially negative impact of tax law changes. See below for the government’s stimulus measures, announced on 12 March, to help SMEs manage the economic impact of coronavirus.
3. Tax planning can also help with wealth creation activities. Superannuation contributions are one of the only tax deductions that must be paid – and, importantly, received by your super fund – by 30 June. Your tax planning should examine whether there are tax benefits, in addition to the benefits of growing your super, if you make additional super contributions before the end of the financial year. This should be done in conjunction with a licensed financial adviser.
Coronavirus assistance for businesses
Boosting cash flow for employers
Small and medium business entities that employ workers and have aggregated annual turnover under $50 million can receive up to $25,000, with a minimum payment of $2,000 for eligible businesses. The payment will be tax free.
“Small and medium business entities that employ workers and have aggregated annual turnover under $50m can receive up to $25,000.”
Eligible businesses will receive a payment equal to 50% of the amount of tax they withhold to the ATO on their employees’ salary and wages, up to a maximum of $25,000. Eligible businesses that pay salary and wages will receive a minimum payment of $2,000, even if they are not required to withhold tax. Visit www.ato.gov.au to find out more.
Supporting apprentices and trainees
Eligible employers can apply for a wage subsidy of 50% of apprentice or trainee wages up to a maximum of $21,000 per eligible apprentice or trainee ($7,000 per quarter). The reimbursement is for wages paid during the 9 months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer.
Small businesses employing fewer than 20 full-time employees who retain an apprentice or trainee that was in training with the small business as at 1 March 2020 are eligible. Employers of any size and Group Training Organisations that re-engage an eligible out-of-trade apprentice or trainee will be eligible for the subsidy.
Visit www.dese.gov.au for more details. For information on how to apply for the subsidy, including information on eligibility, contact an Australian Apprenticeship Support Network (AASN) provider.
• From Friday March 13 to July 1, the instant asset write-off for businesses will rise from $30,000 to $150,000. It will be expanded to businesses with an annual turnover of up to $500 million. Visit ato.gov.au to find out more.
• Businesses with a turnover of less than $500 million can deduct an extra 50% of asset costs in depreciation. Visit ato.gov.au to find out more.
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