Several tax changes apply in the 2019/20 income year. A brief summary is provided in this article. There may be some advantages in acting on some of these items before 30 June. If you think any of these changes may affect you, please contact us for more details.
Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2020/21 compared to 2019/20.
Most businesses are taxed on income when it is invoiced. Some small businesses may only be taxed when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.
Ensure that you have complied with the requirements to claim deductions in 2019/20:
“The small business instant asset write-off extended to 31 December 2020. The threshold for each asset is $150,000”
Small businesses planning major purchases or replacement of capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.
Scrap any obsolete item in the asset register before 30 June. Consider delaying sale of assets that will realise a profit on sale and bring forward any sales that will result in a loss.
Review valuations of trading stock in the lead up to 30 June. Best practice is generally to value stock at the lower cost or market selling value.
These best practices should be revised if you expect a tax loss for 2019/20, or substantially higher income in 2020/21 compared to 2019/20.
Subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June.
Consider realising capital losses if you have already realised capital gains on other assets during 2019/20. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2020/21 compared to 2019/20.
If you expect lower income in 2020/21 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.
Arrange for deductible donations to be grouped in the higher income year, if you expect substantially higher or lower income in 2020/21 compared to 2019/20. Make all donations in the name of the higher income earner.
Contact us for advice if you have moved to or from Australia for an extended period. You may need to review your residency status for tax purposes. There are important tax consequences if you change tax residency.
Trustees of trusts should ensure that all necessary documentation is completed before 30 June, especially where you intend to stream capital gains or franked distributions to specific beneficiaries who aren’t the default beneficiaries.
Family discretionary trusts may need to make a family trust election if the trust has unrecouped losses or has beneficiaries whose total franking credits for the year may exceed $5,000.
Be sceptical of year-end tax shelter schemes. You should not enter a scheme without advice regarding both its tax consequences and commercial viability.
The Single Touch Payroll reporting framework is expanding from 1 July 2021 to include closely held payees. A closely held payee is one who is directly related to the entity from which they receive payments, for example:
For the 2019/20 year eligibility for the reduced corporate tax rate of 27.5% remains unchanged and applies to base rate entity companies with an aggregated turnover of less than $50m.
The small business income tax offset remains the same, which is 8% discount of the income tax payable on the business income received from a small business entity (other than a company) with aggregated turnover of less than $5m, up to a maximum of $1,000 a year.
An immediate deduction is available for entities with an aggregated turnover of less than $10m for each asset that cost less than the threshold that applied when the asset was first used or installed for use. Different threshold apply:
The balance of the general small business pool is also immediately deducted if the balance is less than $150,000 at 30 June.
Business with a turnover of $10 million to less than $50 million are eligible to utilise the instant asset write off in the 2020 income year.
The income tax thresholds remain unchanged for the 2019/20 year.
Australian resident individuals whose income does not exceed $126,000 are entitled to the new low and middle income tax offset.
From 1 July 2019 the Medicare levy thresholds will be increased as follows:
For each dependent child the family income threshold increases by a further $3,471 up from $3,406.
The Capital Gains Tax main residence exemption will be denied to foreign residents effective from 7.30pm (AEST) May 9, 2017. The transitional period for dwellings owned before May 9, 2017 can be sold on or before 30 June 2020 and continue to be eligible for the CGT exemption.
Be aware that legislation is currently in consultation which aims to, from 1 July 2019, ensure that all remuneration (including payments and non-cash benefits) provided for the commercial exploitation of a person’s fame or image will be included in the assessable income of that individual.
Individuals with a total superannuation balance of less than $500,000 will be able to make catch-up superannuation contributions using their unused concessional contributions cap. The unused concessional contributions cap can be accessed on a rolling basis for five years.
From 1 October 2019 insurance within superannuation is to only be offered on an opt-in basis for accounts with balances of less than $6,000 and for new accounts belonging to members under that age of 25 years.
Legislation has been enacted to prevent employers from using employee salary sacrificed amounts to reduce their minimum superannuation guarantee.
Subject to the passage of legislation, from 24 May 2018 to 6 months after receiving royal assent, there will be an amnesty period to encourage employers to self-correct past super guarantee non-compliance without penalty.
Be aware of the proposed additional basic condition for the small business CGT concessions if the CGT event involves certain rights or interests in relation of the income or capital of a partnership.
The FBT rate for the year ending 31 March 2020 is 47%.
The information contained on this website and in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser. Taxation, legal and other matters referred to on this website and in this article are of a general nature only and are based on our interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.
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