18 June 2021
Isabel Brew, Assistant Manager BDO in Australia
It’s that special time of year again, when you get to tally the transactions, hit-up your accountant and find out where you stand with the tax man.
You’ll need to have a clear understanding of what’s happened financially for you this 2021 financial year to date, to enact any remaining tax planning measures that are available to you before 30 June 2021.
From an individual perspective, your tax exposure is generally limited to a few common categories, start asking yourself some questions like:
- Did you buy or sell any shares/investments/cryptos in the 2021 year and do you have the appropriate records to document these buy/sells (Anyone get Dogecoin?);
- Did you work from home during the year due to COVID? There are a few methods available for claiming a deduction for this, with varying degrees of substantiation requirements – high level, do you have a separate office space where you work from home? Did you buy any equipment for your office? What is the business use percentage on your mobile phone contract?
- Do you have any subscriptions, professional memberships, education networking events that you attended relative to your work?
- Are you studying, and is that study in line with your current employment?
- Do you travel for work, either with your own vehicle or otherwise?
- Have you considered the First Home Super Saver Scheme?
- Have you considered your personal concessional contribution caps, availability for deduction and cash flow implications?
- Have you made any donations throughout the year/co-worker grew a mo, did some push-ups, cycled in the office, shaved their head and you pitched into the (DGR status) kitty?
Pending your personal circumstances, there will be a trove of other questions that not only you get to ask yourself, but your accountant will too. Above is a start on some of the common themes.
From a business perspective, some of the common topics you will need to start thinking about are:
- Do you have a high-level understanding of your profit or loss position for the year?
- Have you considered the backing business investment incentives or capital asset immediate deduction thresholds for the year?
- Have you considered if the 2021 tax rate step down applies to you, and the subsequent franking credit implications?
- Have you considered if the loss carry back rules apply to you in the 2021 financial year?
- Albeit employee super for the June 2021 quarter SC does not have to be paid until 28 July 2021, tax deductions for the superannuation contributions will be available in the 30 June 2021 tax year if the contribution is physically received by the superannuation fund by 30 June 2021. Have you considered whether there is cash flow available to enable a payment before year-end?
- Do you have a trust structure, do you have an indication of the income of the trust for the year and have you coordinated your trust distribution resolution for the year?
- Have you considered whether a dividend is beneficial for the year, availability of franking credits and group income tax implications? Do you have the cash flow to support any top up tax on a group dividend (if any)?
- Reminder that small business entities can consider the simplified depreciation, FBT exemptions and trading stock rules.
Probably one of the main items to focus on (from a tax perspective), is do you have an unrecognised tax bill and the subsequent cash flow to support this?
As much as I would like to think tax makes the world go around. Outside all of the above, it is important that you understand your business performance for the year, what the numbers mean and how that influences your future business decision making. The year-end rec-up process can illuminate issues, and it is beneficial to talk this through with someone that cares (and can explain it simply) to be able to empower you to make better business decisions going forward.
Feel free to reach out to me on 07 3237 5999 or Isabel.brew@bdo.com.au if you want to start a conversation, or need help getting a point in the right direction.
