Another financial year is about to finish! As a business owner, there are many obligations that you need to consider and action just before and after 30 June.
Some of these will help to minimise your tax. Others will reduce your exposure to an ATO tax audit. We have outlined these action points below to assist you.
Please carefully consider this information and contact us immediately if you have any questions we can answer or if there is anything we can assist you with.
DATEACTION REQUIRED + UPDATESPre 30 June 2019Trusts: Trustee resolutions need to be in place to be able to distribute trust income for the 2019 financial year to beneficiaries.
Companies: Review shareholder loan accounts and make minimum loan repayments (may need to declare dividends).
Pay superannuation by 25 June 2019 to deduct contributions in the current financial year.
Complete a stocktake where required.
Write off bad debts and scrap any obsolete stock or plant and equipment.
Ensure any inter-entity management fees have been raised.1 July 2019
Single touch payroll is compulsory for all employers. Standard business reporting-enabled software must be used to report payments such as salaries and wages, PAYG withholding and superannuation information.
Taxable payments annual reporting extended to businesses providing road freight, information technology, security, investigation and surveillance services.
14 July 2019 (on or before)PAYG Payment Summaries provided to all of your staff - or Single Touch Payroll Finalisation Declaration needs to be made by 31 July 2019.
28 July 2019Quarterly super guarantee payment due (1 April – 30 June 2019).14 August 2019Single Touch Payroll Finalisation Declaration need to be made.
Annual PAYG Payment Summary to be lodged with the ATO if applicable (not required if you have lodged a Single Touch Payroll Finalisation Declaration). Penalties apply for late lodgement.28 August 2019Taxable payments annual report due for the building and construction industry, cleaning and courier service industries.Key changes you need to be aware of
SINGLE TOUCH PAYROLL NOW REQUIRED FOR ALL EMPLOYERS
All employers are now required to use Single Touch Payroll (STP) from 1 July 2019.
STP is the direct reporting to the ATO of salary and wages, PAYG withholding and superannuation contributions.
Employers with 20 or more employees have been required to use STP since 1 July 2018. Please note that the ATO has provided a small amount of leniency to smaller employers for a limited period of time.
There are a number of low cost or even free software payroll options for micro employers (1 to 4 employees).
The ATO has also stated that businesses with 20 employees or less can initially lodge STP in a quarterly BAS lodged by a registered Tax Agent.
NO TAX DEDUCTIONS IF YOU DON'T MEET YOUR TAX OBLIGATIONS
From 1 July 2019, if taxpayers don't meet their PAYG withholding and reporting obligations to the ATO, they will not be able to claim a tax deduction for payments:
of salary, wages, commissions, bonuses or allowances to an employee;
of Director's fees;
to a religious practitioner;
under a labour hire arrangement; or
made for services where the supplied does not provide an ABN.
If you make a mistake and voluntarily correct it before the ATO begins a review or audit, a deduction may still be available but penalties may still apply for failure to withhold the correct amount of tax.
PAYMENT TO CONTRACTORS
From 1 July 2019, security providers and investigation services, road freight transport, and computer system design and related services businesses will need to collect specific information about payments made to contractors (individual payments and totals for the year). A Taxable Payments Annual Report will need to be lodged with the ATO by 28 August 2020.
Businesses that operate in the building and construction industry, cleaning and courier services will need to report their payments to contractors for the year ended 30 June 2019 by 28 August 2019 to the ATO.
Your 2019 EOFY Reminders & Action Items
PAYG PAYMENT SUMMARIES
If you have not used STP for 2019, then you need to provide all of your employees with their PAYG Payment Summary on or before 14 July 2019. This includes any employees that left your employment during the 2019 financial year.
The ATO imposes penalties for the late lodgement of PAYG Payment Summary Statements. The annual PAYG Payment Summary Statement for the year ending 30 June 2019 needs to be lodged with the ATO on or before 14 August 2019. However, if we are preparing your Payment Summary for you and you only employ family members in your business (closely held employees), you may be eligible for an extension.
REPORTABLE FRINGE BENEFITS ON PAYG PAYMENT SUMMARIES
Where you have provided fringe benefits to your employees in excess of $2,000, you need to report the FBT grossed-up amount on their PAYG Payment Summary. This is referred to as a `Reportable Fringe Benefit’ (RFB) amount and a label is included on the PAYG Payment Summary for this purpose.
Businesses that buy and sell stock generally need to do a stocktake at the end of each financial year as the increase or decrease in the value of stock is included when calculating the taxable income of your business.
If your business has an aggregated turnover below $10 million, you can use the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes if the difference in value 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 is less than $5,000. You will need to record how you determined the value of trading stock on hand.
If you do need to complete a stocktake, you can choose one of three methods to value trading stock:
Cost price – all costs connected with the stock including freight, customs duty, and if manufacturing, labour and materials, plus a portion of fixed and variable factory overheads, etc.
Market selling value – the current value of the stock you sell in the normal course of business (but not at a reduced value when you are forced to sell it).
Replacement value – the price of a substantially similar replacement item in a normal market on the last day of the income year.
A different basis can be chosen for each class of stock or for individual items within a particular class of stock. This provides an opportunity to minimise the trading stock adjustment at year-end. There is no need to use the same method every year; you can choose the most tax effective option each year. The most obvious example is where the stock can be valued below its purchase price because of market conditions or damage that has occurred to the stock. This should give rise to a deduction even though the loss has not yet been incurred.
TRUST DISTRIBUTION RESOLUTIONS
Trustees (or directors of a trustee company) need to consider and decide on the distributions they plan to make by 30 June 2019 at the latest. Decisions made by the trustees should be documented in writing, preferably by 30 June 2019.
If valid resolutions are not in place by 30 June 2019, 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).
ACTION STEP: If you haven’t already signed your Trust Distribution Resolution, please contact our office before 30 June 2019 so that we can properly prepare this document for you to sign.
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.
ACTION STEP: The Annual Return/Reconciliation for payroll tax must be lodged by 22 July 2019 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.
ACTION STEP: 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 2019 to determine if there has been an under or over-payment of GST in the 2019 tax year. If a discrepancy has arisen, then it is possible to adjust 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.
ACTION STEP: 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. 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 can offer a review of your records and record-keeping procedures if you are concerned about your ability to satisfy an audit.
ACTION STEP: Please contact our office if you would like to request this service.
Last Minute Tax Minimisation Tips
Here’s a few final reminders about ways to reduce your tax for 2019
Write-off Bad Debts
Write-off any trading stock that is damaged or obsolete
Review your Asset Register and scrap any obsolete plant and equipment
Pay for marketing materials, repairs, consumables, office stationery, and donations before 30 June 2019
Ensure employee superannuation contributions are made (and received by your employees’ superannuation fund/s) by 30 June 2019 to allow a tax deduction this financial year
Realise any capital losses you have before 30 June 2019 to offset against any capital gains you may have made.
WANT TO TALK? Feel free to contact our office anytime by phone or email – We can’t wait to provide you with better advice now for a beautiful future!