News

Key Changes from 1 July 2016

Posted 22 June, 2016

Businesses need to take note of a number of key tax changes that apply from 1 July 2016. These include:

  • Small Business Entity (SBE) threshold turnover increased to $10 million. This allows many more business to access tax concessions that improve cashflow, simplify reporting, and bring forward tax deductions.
  • SBE Company Tax Rate reduced to 27.5%.

SBE Company Tax Rate reduced to 28.5%

Effective 1 July 2016, the company tax rate for SBE (Small Business Entities) reduces by 1% from 28.5% to 27.5%. To be considered an SBE, your group aggregated turnover must be less than $10 million.

$20,000 Immediate Deduction for SBE’s

From 7:30pm on 12 May 2015, small business entities (SBEs) were able to claim an immediate deduction for depreciating assets costing less than $20,000.

Depreciating assets costing $20,000 or more will be allocated to the SBE’s general small business pool and will depreciate at a rate of 15% in the income year in which the assets are first used or installed ready for use. The assets will then be depreciated as part of that pool at 30% in subsequent income years.

If the balance of the General Asset Pool is less than $20,000 at the end of the income year this is also written off.

FBT Exemption increased

Fringe benefits tax has been abolished on all portable electronic devices use for work, such as mobile phones, laptops and tables. Currently the exemption applies only to devices that perform substantially different functions restricting employees to one device. The change takes effect at the start of the FBT year which commenced 1 April 2016.

Start-ups

Professional costs incurred in starting up a new business will now be immediately deductible. Commencing 1 July 2015, previous restrictions meant these costs had to be apportioned over five year period. For those who have started business as a sole trader and wish to change structure there are new capital gains tax exemptions.

Trust Distributions - Timing of Resolutions

Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2016 at the latest (the trust deed may actually require this to be done earlier). Decisions made by the trustees should be documented in writing by 30 June 2016.

If valid resolutions are not in place by 30 June 2016, the risk is that the taxable income of the trust will be assessed in the hands of a default beneficiary (if the trust deed provides for this) or the trustee (in which case the highest marginal rate of tax would normally apply).

Please contact our office before 30 June 2016 so that we can properly prepare this document for you to sign.

You might not need to do a Stocktake

Small Business Entities (operational businesses with an aggregated turnover below $2 million) have access to a range of tax concessions. One of these concessions is the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes if there is a difference of less than $5,000 between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year. You will need to record how you determined the value of trading stock on hand.

If you would like to take advantage of the simplified trading stock rules, call us today to make sure you are eligible to use the simplified rules and to discuss how to use them properly.

Deadline for 2016 PAYG Payment Summaries

You need to provide 2016 PAYG Payment Summaries to your employees and other workers by 14 July 2016. These must then be submitted to the ATO by 14 August 2016 or penalties will apply.

If you have any doubt about how to correctly complete your 2016 PAYG Payment Summaries, please contact us for assistance BEFORE you prepare them.

Building and Construction Industry Reporting

From 1 July 2012, new tax reporting rules apply for businesses in the building and construction industry. Businesses will have to lodge an annual report with the ATO setting out details of payments made to contractors. This will assist the ATO to reduce the “cash economy” by ensuring tax is paid on all income including “cash” payments.

You will need to record the following details of all payments made to contractors for building and construction services:

  • The ABN of the contractor
  • The name and address of the contractor
  • The gross amount paid for the financial year, including GST
  • The total GST included in the gross amount paid

If you use computerised accounting software, your system should be able to track this information for you and prepare the required Taxable Payments Annual Report.

Ensure that you lodge your Taxable Payments Annual Report with the ATO no later than 28 August 2016.

 

Payroll Tax

Payroll tax applies to all entities that have an Australian payroll that exceeds state-based limits.

You should note that in addition to normal salaries and wages, the following items are generally also included in payroll expenses if payroll tax applies:

  • fringe benefits based on the grossed-up taxable value of fringe benefits;
  • all employer contributions to superannuation on behalf of employees; and
  • some contractor or sub-contractor fees.

For more detailed information about whether payroll tax applies to your business, please contact our office.

The Annual Return/Reconciliation for payroll tax must be lodged by 21 July 2016 with your State Revenue Office.

WorkCover/WorkSafe

Your WorkCover/WorkSafe insurer sends an annual reconciliation to all registered employers at the end of the financial year.

In completing your annual reconciliation, you will need to include the following items in addition to normal salaries and wages:

  • fringe benefits based on the taxable value of fringe benefits (do not gross-up);
  • all employer contributions to superannuation on behalf of employees; and
  • some contractor or sub-contractor fees.

For more detailed information about what items to include in the reconciliation statement, please contact our office.

Once the reconciliation is received and processed by your WorkCover/WorkSafe insurer, you will be issued with a final assessment or a refund depending on the instalments you have paid during the year.

Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.

Goods and Services Tax (GST)

A reconciliation of GST should be performed as at 30 June 2016 to determine if there has been an under or over-payment of GST in the 2016 tax year. If a discrepancy has arisen, then it is possible to amend a subsequent Business Activity Statement (BAS) to rectify the error, however there are limits imposed on adjustments that can be made in this way.

Income declared on your BAS should be reconciled to income declared on your income tax returns.

Also, please note that you are required by law to substantiate all Input Tax Credit claims with a complying Tax Invoice, and you need to retain these documents for a minimum of 5 years.

Complete the annual GST reconciliations, and check that you have all required tax invoices and other supporting documents.

ATO Audit Activity

Please note that the ATO and State Revenue Office are constantly increasing their audit activities. In particular, there has been an increase in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts from companies, and Trust distributions from Discretionary Trusts.

We are able to offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.

 

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