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 reduced your exposure to an ATO tax audit. We have outlined these action points below to assist you.
|DATE||ACTION REQUIRED + UPDATES|
|Pre 30 June 2018||Trusts: Trustee resolutions need to be in place to be able to distribute trust income for the 2018 financial year to beneficiaries.
Companies: Review shareholder loan accounts and make minimum loan repayments (may need to declare dividends). The maximum franking percentage rules are currently in limbo – we can discuss this with you.
Pay superannuation by 25 June 2018 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 2018||Single touch payroll is compulsory for employers with 20 or more employees at 1 April 2018. 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 courier services or cleaning services.
GST applies to overseas sales of low value goods to Australian consumers in Australia, where the goods have a customs value of less than or equal to AUD$1,000.
GST on property developments and residential subdivisions – the way GST is collected on sales of newly constructed residential properties or new subdivisions will change from 1 July.
|14 July 2018
(on or before)
|PAYG Payment Summaries provided to all of your staff.|
|28 July 2018||Quarterly super guarantee payment due (1 April – 30 June).|
|14 August 2018||Annual PAYG Payment Summary to be lodged with the ATO. Penalties apply for late lodgement.|
|28 August 2018||Taxable payments annual report due for the building and construction industry|
|23 May 2019||Proposed super guarantee amnesty ends.|
|30 June 2019||$20k instant asset write-off reduces back to $1,000.|
|1 July 2019||Taxable payments annual reporting extended to security providers and investigation services; road freight transport; and computer system design and related services.
Single touch payroll – all employers will be required to use standard business reporting-enabled software from 1 July 2019 to report payments such as salaries and wages, PAYG withholding and superannuation information.
Key changes you need to be aware of
SUPERANNUATION GUARANTEE AMNESTY
The Government has announced an amnesty for employers that have fallen behind with superannuation guarantee (SG) payments to “self-correct”. The amnesty applies to employers that have underpaid or not paid SG for any period from 1 July 1992 up to 31 March 2018. Under the amnesty, the penalties that normally apply to late payments are waived as is the administration fee, and the SG payment is deductible – normally employers lose the ability to deduct superannuation payments where SG is late.
While the legislation dealing with the amnesty is not yet law, the time period for taking advantage of the amnesty is due to end on 23 May 2019 and it will be important to identify any potential problem areas as soon as possible so that appropriate action can be taken.
If your business has engaged any contractors during the period covered by the amnesty, then the arrangements will need to be reviewed as it is common for workers to be classified as employees under the SG provisions even if the parties have agreed that the worker should be treated as a contractor. You cannot contract out of SG obligations.
If you have not undertaken a payroll audit or an audit of rates paid to employees, you should do this within the next 12 months.
The amnesty applies to voluntary disclosures. The amnesty does not apply to amounts that have already been identified as owing or where the employer is subject to an ATO audit.
SINGLE TOUCH PAYROLL
Employers with 20 or more employees at 1 April 2018 must use standard business reporting-enabled software from 1 July 2018. The head count for ‘20 employees’ includes full-time, part-time, casuals (who worked any time during March 2018), employees based overseas, or on paid or unpaid leave. Directors and independent contractors are excluded from the count. For businesses that are part of a wholly owned group, the total number of employees across the group is used (i.e., if the total number of employees employed by all member companies of the wholly-owned group is 20 or more, all group members must use STP).
STP is currently voluntary for businesses with less than 20 employees although proposed reforms seek to extend the reporting system to all employers by 1 July 2019, regardless of the number of employees.
GST ON LOW VALUE IMPORTED GOODS
From 1 July 2018, GST applies to overseas sales of goods supplied to Australian consumers with a value under $1,000.
Australian businesses that purchase low value goods from overseas should check to make sure that overseas suppliers are not imposing GST on supplies of these goods unnecessarily.
The new rules are intended to apply to situations that are not captured by the existing GST importation rules because the goods are worth $1,000 or less. The rules are designed to only apply when goods are delivered to Australian consumers who are either not registered for GST in Australia or where the goods do not relate to an enterprise or business being carried on in Australia. If your business imports goods into Australia and is registered for GST, the tax should not apply to low value goods you import.
GST ON PROPERTY DEVELOPMENTS
From 1 July 2018, the way GST is collected on sales of newly constructed residential properties or new subdivisions will change. Rather than GST being collected when the vendor lodges their activity statement, the purchaser is required to pay a GST amount to the ATO, generally on or before settlement. The vendor must notify the purchaser in writing that the GST needs to be paid to the Commissioner and advise the amount that must be paid.
In most situations, the amount will be 1/11th of the contract price. Where the margin scheme is used, it is 7% of the contract price. Where the transaction is between associates, it is 10% of the GST-exclusive market value.
Notification rules will also apply to vendors who are selling residential dwellings or land, even if the transaction does not trigger a GST liability.
PAYMENTS 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 lodge additional reports to the Australian Taxation Office about payments made to contractors (individual payments and total for the year). While this is a year away, if your business is affected by the change, think about what systems you will need to track and measure these payments and collect the required information from contractors.
From 1 July 2018, cleaning and courier businesses are required to lodge taxable payment reports with the first report due on 28 August 2019.
Your 2018 EOFY Reminders & Action Items
PAYG PAYMENT SUMMARIES
You need to provide all of your employees with their PAYG Payment Summary on or before 14 July 2018. This includes any employees that left your employment during the 2018 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 2018 needs to be lodged with the ATO on or before 14 August 2018. 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 2018 at the latest. Decisions made by the trustees should be documented in writing, preferably by 30 June 2018.
If valid resolutions are not in place by 30 June 2018, 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: Please contact our office before 30 June 2018 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 21 July 2017 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 2018 to determine if there has been an under or over-payment of GST in the 2018 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 2018
- 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 2018
- Ensure employee superannuation contributions are made (and received by your employees’ superannuation fund/s) by 30 June 2018 to allow a tax deduction this financial year
- Realise any capital losses you have before 30 June 2018 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!