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2019 Year End Strategies
Effective planning and preparation is critical for all taxpayers as the end of financial year approaches. The good news is that RBC Accountants support you so you don’t have to do all of the heavy lifting yourself.
This is the perfect time of the year to seek advice from us to maximise your tax savings for 2018-19 and start planning fresh for next year.
Single Touch Payroll to include everyone
Single Touch Payroll (STP) is changing the way employers report their workers' tax and super information to the ATO.
Employers are expected to report information on a variety of areas through software that offers STP reporting or third-party service providers. Withholding amounts, superannuation liability information, ordinary times earnings, salaries, wages, allowances and deductions should all be included in reports.
Parliament has passed legislation to extend STP to now include businesses of any size. There are separate guidelines and due dates in place for different sized businesses.
Businesses with 20 or more employees:
As STP for businesses with 20 or more employees started on 1 July 2018, relevant businesses should already be reporting through STP or have applied for a deferral. If you are unsure if your current software has STP reporting, the ATO recommends talking to your software provider or tax professional.
Businesses with 5-19 employees:
Reporting can start anytime from 1 July to 30 September 2019. If you already use payroll software which offers STP, you can update your product and start reporting early. Online forms will be available from April 2019 for those who need to defer reporting or meet exemption criteria.
Businesses with 1-4 employees:
Micro employers with four or less employees who don’t currently use payroll software can report STP information in other ways. The ATO has listed software developers who offer no-cost and low-cost STP solutions to make the transition smoother. There is also an option for your registered tax or BAS agent to report your STP information quarterly rather than each time you run payroll. This will be available until 30 June 2021.
To help with ease of transition for everyone involved, the ATO offers no penalties for mistakes, missed or late reports for the first year. Exemptions from STP reporting can also be provided for employers experiencing hardship, or in areas with intermittent or no internet connection.
The Instant Asset Write-Off Scheme has been extended to 30 June 2020 for assets purchased under $30,000.
The scheme affects small to medium businesses with a turnover of up to $50 million a year, allowing business owners to immediately deduct assets costing up to $30,000 which can then be claimed for tax return in that income year. The new rules will apply from 2 April 2019 and are set to remain in place until 30 June 2020.
This extension was introduced in the 2019-20 Federal Budget, increasing the write-off threshold and eligibility criteria. The threshold applies on a “per asset” basis, meaning that eligible businesses can instantly write off multiple assets. There are certain assets that are excluded from the scheme so it is best to check with your accountant or financial advisor.
While the Instant Asset Write-Off Scheme reduces the tax your business has to pay, it is not a rebate. Your cash flow will still have to be sufficient enough to support any purchases. Ways that assets are purchased, such as lease or borrowing methods, may affect eligibility for the scheme.
This change will not supersede the previously announced threshold increase that allows businesses to immediately deduct purchases of eligible assets costing less than $25,000. The $25,000 increase applies from 29 January 2019 until budget night (2 April 2019) whereas the new $30,000 increase applies from budget night until 30 June 2020.
There is no guarantee that the Federal government will extend this scheme beyond 30 June 2020.
Tax tips for property investors
- Reduce Your Tax Bill
Issue 28 - GST Changes
Issue 26 - Year End Strategies
Issue 25 - Federal Budget Edition
Owning an investment property can provide great benefits, including additional income and entitlement to tax deductions.
Now is the time for property investors to take advantage of the tax strategies available to them this 2019-20 financial year.
In order to maximise your tax bill this financial year, bring forward any maintenance expenditure that will need to be completed by 30 June. Ensure to distinguish between what the ATO considers a ‘repair’ and an ‘improvement’, as improvements are non-deductible.
Prepay interest on property investment loans if you have adequate cash flow in order to claim an immediate deduction. Investors may choose to pay interest in advance in order to simplify finances by making one prepayment of interest upfront or protect against possible interest rate rises over the 12 month period.
Investors must maintain a sufficient filing system to substantiate any claims made. The ATO requires you to keep up-to-date records of things such as proof of earned rental income, all incurred expenses, periods of private use by you or your friends, periods the property was used as your main residence, loan documents and efforts to rent out the property.
A depreciation schedule can be provided by a qualified quantity surveyor, outlining the tax deductions that are available and help to provide a significant return. The cost of a depreciation schedule is also tax deductible.
There's much more in our full 2018-19 End Of Year Newsletter. Click HERE to download...
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