Are you ready for the EOFY?

After a tough 6 months that no-one anticipated, it is that time of year again; the end of the 2020 financial year. The end of the financial year is a good time to reflect on the year that’s been and ensure all your ducks are in a row as we commence 2021!

Chris Kirkwood of ESV, who is our friendly Auditor and Business Adviser, has the following tips for end of financial year.

For businesses

 

Bad debts:

Assess any overdue debts before the year-end and recognise those which aren’t likely to be repaid. Assuming you have undertaken all possible processes in order to recover these debts, you may want to consider writing these amounts off as bad debt; this will allow you to recover the GST in the next BAS.

Fixed Assets:

Make sure to review your fixed asset register and write off any depreciable assets that are no longerin use. Also, as part of the Federal Government stimulus packages announced in March 2020, there have been several changes to the depreciation regime to all sizes of taxpayers.

For entities who are not subject to the small business depreciation rules and have an aggregated turnover not exceeding $500 million, the following assets can be immediately written off:

›          Between 1 July 2019 and 11 March 2020 – assets costing less than $30,000; and

›          Between 12 March 2020 to 30 June 2020 – assets costing less than $150,000.

For assets costing more than $150,000 purchased prior to 30 June 2021 (and assets costing more than $30,000 upon expiry of the above expanded instant asset write-off), the Federal Government has announced an accelerated depreciation scheme. Once installed for use, a business with an aggregated turnover of less than $500 million can immediately claim a 50% depreciation deduction on the asset. The remaining balance will then be depreciated as per the regular depreciation rules applicable to the business.

Bonuses:

By changing the internal process where employee bonuses are concerned, you can change your tax position. With the aligning of employee contracts, timing of personnel reviews and communication of results, employee bonuses that would usually not be deductible until the following year can be claimed as a deduction in the current year.


Key due dates:

 

Item Due By
Staff Superannuation – 9.5% Gross Wages30 June 2020*
June Quarter Business Activity Statement28 July 2020
Finalisation Declaration for STP Reporting14 July 2020 (for 20+ employees)
31 July 2020 (for 1-19 employees)
Payroll Tax 2020 Annual Reconciliation Lodgement30 October 2020

 

*Note that superannuation contributions for employees need to be received by the respective superannuation funds prior to 30 June 2020 in order to obtain a tax deduction in the year ended 30 June 2020. The latest due date for superannuation guarantee contributions for the quarter ended 30 June 2020 will be 28 July 2020, to avoid potential penalties and additional tax consequences.

 

Working from home:

Due to the increased rate of those working from home, it makes sense that there would be a corresponding rise in deductible expenditure.

Examples of work from home expenditure may include:

›          Electricity related to heating, cooling and lighting the area you use to work;

›          Cleaning costs for a dedicated work area;

›          Phone, internet and data expenses;

›          Printer paper, ink and other stationery; and

›          Home office equipment.

 

In order to claim these deductions, the following criteria must be met:

›          You must have spent the money;

›          The expense must be directly related to earning your income; and

›          You must have a record to substantiate these expenses.

 

The ATO has provided a simplified method (i.e. short cut method) of calculating additional running expenses from 1 March 2020 until at least 30 June 2020. As such, there are now three ways to calculate these working from home expenses:

›          Shortcut method – 80c per hour worked from home (not just checking emails) and have incurred additional costs;

›          Fixed rate method – comprising of:

–          52c per hour for electricity, cleaning and depreciation of office furniture;

–          Work-related components of your phone, internet, data, stationery and computer expenses; and

–          Work-related component of the depreciation of computer hardware.

›          Actual cost method – claiming the work-related portion on all actual expenditure incurred whilst working from home.

Records must be kept for all working from home deduction claims, noting that the shortcut method requires only a record of hours worked at home. The other two methods require both a record of hours, along with records of expenditure incurred.