A large part of the COVID stimulus packages announced by the Government last year was intended to encourage businesses to invest in capital assets.  They did this by announcing the “temporary full expensing of depreciating assets” provisions on 6 October 2020 for businesses with aggregated turnover of less than $5 billion.  Prior to this, the instant asset write-off threshold had been increased to $150,000 for businesses with aggregated turnover of less than $50 million.

These changes have resulted in many businesses investing in assets throughout this financial year with the view to claiming a full tax deduction for the asset.  Alternatively, businesses may still be considering purchasing an asset prior to 30 June 2021 in order to claim the tax deduction.  There are some tricks and opportunities to these depreciable asset write off provisions that you should be aware of.

These include (but are not limited to):

• To be entitled to use the temporary full expensing, the asset must be first held and used, or installed ready for use, between 6 October 2020 and 30 June 2021
• If you have ordered an asset but it hasn’t been received by 30 June 2021, the deduction will not be available – although it may well be deductible in the 2022 year
• If your business’ aggregated turnover is less than $50 million, assets purchased between 1 July 2020 and 5 October 2020 which cost $150,000 or less will be eligible to be written off in full using the instant asset write off rules
• You may be entitled to write off second hand depreciating assets (where aggregated turnover less than $50 million)
• The deduction for a new car is limited to the depreciation cost limit for cars which is $59,136
• A vehicle which is designed to carry more than one ton (has a payload capacity of more than 1,000 kg) is not considered to be a car and is not subject to the depreciation cost limit
• Capital works, including structural improvements are NOT included
• The backing business investment rules (essentially an accelerated depreciation regime) may be relevant for your business for assets purchased between 1 July 2020 and 5 October 2020 whose cost was greater than $150,000 (assets not subject to the immediate write off)

The number of changes to these provisions since 2015 means there are a number of thresholds, asset values and timeframes to be aware of to ensure deductibility for your investments.

You may have noted in the most recent Federal budget that the temporary full expensing measures have been extended from 30 June 2022 to 30 June 2023.

If you would like to discuss the above in more detail to determine your business’ eligibility, please contact your Holman Hodge adviser.

Over the last 12 months there have been significant changes to South Australia’s land tax regime.  Below we provide an update to the changes and highlight some key deadlines.

Land held in discretionary trusts – Beneficiary Nominations – Due date extended to 30 June 2022

Under the new land tax rules, where land is held by a discretionary trust on or before 16 October 2019, the trustee has the option to nominate a designated beneficiary.  This option was only available up until 30 June 2021, however Treasurer Rob Lucas recently announced that the due date would be extended to 30 June 2022.

Trustees of discretionary trusts will now have up until 30 June 2022 to nominate a designated beneficiary for land held by a discretionary trust on or before 16 October 2019, and that nomination can apply to their 2020/2021 land tax assessment and future years.

The land tax implications of nominating or not nominating a beneficiary may vary across groups and there are a number of requirements which must be considered before a nomination is made.  Determining whether a nomination should be made may take time and as such we urge you to contact us if you believe a nomination could or should be made.

Once this deadline passes, there will be no further opportunity to make a nomination and if the trustee does not make a nomination by this date, any taxable land will be assessed at the trust surcharge rates. Where a beneficiary is nominated, the land held by the trust will be assessed at the general land tax rates (aggregated with any other land they hold).

We suggest contacting your Holman Hodge adviser before making any nominations.

For more information on nominations and land held on trust, please visit the RevenueSA website: https://www.revenuesa.sa.gov.au/landtax/lt_trusts

 Land Tax Assessments 2020/2021

You may have already received your 2020/2021 Land Tax Assessment from RevenueSA. If not, you should expect to receive your assessment in the near future.  RevenueSA has said they hope to have all 2020/2021 assessments issued by 30 June 2021.

We suggest you review your Land Tax Assessment to ensure that it is correct. Examples of items to look out for include:

• Checking that the land included on the assessment is actually owned by the entity receiving the assessment – Comparing the assessment with the Land Holding Declaration submitted to RevenueSA may assist with this

• Ensuring your principal place of residence is exempt and that the site value is not included in the Land Tax calculation

• For companies, ensuring that any aggregation is correct – Comparing the assessment with the Land Holding Declarations and Corporate Group Declaration submitted to RevenueSA may assist with this

Transitional relief

Following the changes in the aggregation of land, transitional relief will be available to taxpayers who have an increase in their Land Tax Assessment for 2020/21, 2021/22 and 2022/23 because of the changes.  The transitional fund for year 1 has been extended to 31 December 2021 given not all assessments have yet been issued.

For more information on the transitional funds, including eligibility criteria, please visit the RevenueSA website: https://www.revenuesa.sa.gov.au/landtax/lt_transitionfund/guidelines

Can we give you a hand?

If you have any questions or require any assistance in relation to Land Tax matters, please contact your Holman Hodge adviser.

What you need to know

There haven’t been many changes in superannuation over the last few years but it’s always good to make sure that you are across what is available to you with regards to your super.

Concessional superannuation contributions

The concessional superannuation cap for the year ended 30 June 2021 is $25,000.  This means that total tax deductible contributions which can go into your superfund cannot exceed this amount – this includes any amounts that have been contributed by your employer including salary sacrifice.  If you were to choose to “top up” any employer contributions, you can claim a deduction for the top up to $25,000.

As in prior years, the contribution must be received by your fund before the 30 June 2021 to claim a tax deduction for it in the 2021 year and you must notify your super fund of your intention of claiming a deduction.

Carry-forward unused concessional contributions

Individuals can “carry forward” unused concessional contributions from the 2019 and 2020 financial year.  If your total superannuation balance is less than $500,000, this provision allows you to make contributions this year to use up any unused concessional cap from the 2019 and 2020 financial years. Unused cap amounts can be carried forward for up to five years before they expire.

For example, if in the year ended 30 June 2020, concessional contributions had been made into a fund of $15,000, the “unused” portion of the concessional cap of $10,000 can now be carried forward.  This means an additional contribution of $10,000 could be put into superannuation with a tax deduction claimed for it, along with $25,000 for the current 2021 financial year.

Budget announcements

In the recent Federal budget there were two notable changes announced with regards to superannuation – please note, these are only announcements and are not yet legislated.  It is anticipated that both of these changes will apply from 1 July 2022.

• The “downsizer contribution” will now be available for individuals who are over 60 years (rather than 65 years) to contribute up to $300,000 into superannuation from the proceeds of the sale of their home
• The work test for people aged between 67 and 74 will no longer apply to non- concessional and salary sacrifice contributions. However, the existing $1.6 million cap on lifetime superannuation contributions will continue to apply (increasing to $1.7 million from 1 July 2021). Access to concessional personal deductible contributions for individuals aged between 67 and 74 will still be subject to meeting the work test.

Changes to caps and thresholds

From 1 July 2021 (so effective for the 2022 year financial year) the caps and thresholds with regards to superannuation will be indexed.  The most notable changes are:

• The concessional superannuation contribution cap will increase from $25,000 to $27,500
• The non-concessional superannuation contribution cap will increase from $100,000 to $110,000 (with the 3 year bring forward rule for non-concessional contributions increasing to $330,000)
• The transfer balance cap will increase from $1.6M to $1.7M
• The Division 293 threshold will stay at $250,000
• The Capital Gains Tax cap amount for superannuation contributions will increase from $1.565M to $1.615M

As always, if you have any questions in relation to the above, please contact your Holman Hodge adviser.

Top Tips

As always, here are a lot of things to consider before the end of the financial year.

Here are our top 5 bookkeeping tips to help make year-end run a smoothly as possible.

• Process and make superannuation payments for employees before 30^th June to ensure you get a tax deduction for the payment.
• Once you’ve run your last payroll for the financial year reconcile payroll liability accounts (wages payable, superannuation payable & PAYG withholding payable) and finalise your Single Touch Payroll reporting. You can also reconcile, prepare and lodge WorkCover, payroll tax & Taxable Payments Annual Report (if applicable).
• Review aged debtors & creditors to ensure all amounts being carried are recoverable or payable.
• Reconcile all bank, credit card, loan and petty cash accounts.
• Perform a stocktake if applicable on 30^th June to ensure correct stock valuation.

If you have any questions in relation to the above or any other bookkeeping matters, please contact your Holman Hodge adviser.

As we approach the end of the financial year it’s a good time to start thinking about what you could do to minimise your tax liability.

New items for the 2021 financial year

• The company tax rate for base rate entity companies has reduced to 26% for base rate entities (a drop from 27.5%). From 1 July 2021, the tax rate will drop to 25%.
• In last year’s budget, loss carry-back measures were introduced. This means eligible companies can claim a refundable tax offset using the new loss carry-back measures when they lodge their 2021 financial year tax returns.
• Where your business has claimed JobKeeper & Cash Flow Boost payments throughout the 2021 financial year, ensure that records are kept to prove eligibility.
• Temporary full expensing for asset purchases and instant asset write off: please refer to our detailed summary here.
• Carry-forward unused concessional contributions: individuals can claim an additional tax deduction if a superannuation contribution is made to use up unused concessional contributions from the 2019 and 2020 financial years. Please refer to our detailed summary here.

General Tax Planning Tips

• Capital Gains Tax: If you have made a capital gain during the 2021 financial year, you may consider realising a capital loss (if appropriate) on another asset to offset the capital gain
• Cash flow: Vary PAYG instalments for the June 2021 quarter (if appropriate). This is best done in conjunction with an estimate of your 2021 tax position
• Plant & equipment: Consider whether you have any obsolete plant & equipment to write off
• Personal superannuation contributions can be made up to your $25,000 cap (which includes contributions from your employer). To claim, your super fund will need to have received the contribution prior to 30 June and you will need to provide them with a notice of intent to claim a deduction.
• Home office expenses: You can claim 80 cents per hour for the 2021 financial year where you worked from home. Make sure you have detailed records of the periods you worked from home.
• Ensure that you retain receipts or substantiation for any expenses you would like to claim
• If you travel over 5,000kms in your motor vehicle for work, consider whether you should have a log book or whether you need to complete a new one (to be completed every five years). If you are relying on a log book prepared from a previous year you also need to record the odometer reading as at 30 June.
• Trading stock: Conduct a stocktake at 30 June, write off any obsolete or damaged stock and choose your stock valuation method. You can use cost, market selling value or replacement value, and this can be changed each year. If you are a small business entity and your trading stock value has not moved by more than $5,000 you do not have to do a stocktake.
• Trust minutes/resolution: Under ATO guidelines all trusts have to resolve where they would like to distribute their income for the 2021 financial year prior to 30 June 2021. We prepare trustee resolutions for our clients and will send these out ahead of 30 June.
• Superannuation (businesses): Pay your super before 30 June in order to get a tax deduction for the 2021 financial year. Super contributions need to have been received by the superannuation fund by 30 June.
• Prepaid expenses: If your business is a small business entity, you are entitled to a tax deduction where expenses covering a period of up to 12 months are prepaid
• Bad debts: Review and write off bad debts

Can we give you a hand?

If you would like any further detail on the above, or for an estimate of your tax position for the 2021 financial year, please contact your Holman Hodge advisor.