Planning for 2020 year-end

1. Superannuation contributions

Below is a list of super contribution options available before 30 June 2020. We encourage you to read this ACCRU FACT SHEET, and if any areas are unclear, please contact your local Accru Office.

“CC’s” – Concessional (tax deductible) contributions:

  • Tax deduction – To be deducible in the 2020 FY, CC’s need to be received by your Fund before 30 June 2020.
    • Important – For employers who use the Small Business Superannuation Clearing House (SBSCH), payments must be received by SBSCH by 23rd June for the purpose of claiming a tax deduction for the 2020FY, to allow time for ultimate receipt by employee Fund.
  • Cap – The annual CC cap is $25,000 for all members, regardless of age.
    • Excess contributions – Any excess CC’s are assessable income of the individual and taxed at marginal rates with a non-refundable tax offset of 15%. If the excess is elected to be released from the Fund, it will not be assessable income.
    • Division 293 Tax – An additional tax of 15% will be imposed on CC’s if your adjusted taxable income was greater than $250,000. This tax can be paid by yourself or by your Fund.
    • NEW THIS YEAR – Unused concessional cap carried forward – Individuals are able to make catch-up CC’s in 2020FY using unused carried forward amounts from 2019FY. Member balance as at 30 June 2019 must be below $500,000 to make a catch-up contribution. Unused CC cap amounts not utilised after 5 years will expire.
  • Work test – If over 65 years, you need to pass a work test to contribute – gainfully working 40 hours over a 30-day period at some point during the 2020 financial year (requires a PAYG summary, volunteering is insufficient).
    • From 1 July 2019, individuals aged 65 to 74 with member balances under $300,000 can make voluntary contributions to their Fund for 12 months from the end of the financial year in which they last met the work test.
    • Proposed, but not law as yet – increasing work test age from 65 to 67.
  • Extra note for employees – If employed, your employer would have been making super guarantee contributions to your Fund, on your behalf.
    • “Top up contribution option” – Employees are able to contribute a “top-up” CC into your Fund before 30 June 2020, which will be deductible in your own hands.
      • Your CC cap of $25,000 (plus any applicable unused CC from 2019FY) includes ALL CC’s, including super guarantee contributions from your employer PLUS personal deductible contributions. Excess contributions treatment above does apply if you exceed your cap.
    • To make a deductible contribution to your Fund, ensure you advise your Fund of this intention.
    • Your Fund will issue a s290-170 notice to confirm deductibility of the top-up contribution. You will need to send this notice to us when we complete your 2020 tax return.
  • Extra note for employers – Superannuation contributions are only deductible once physically paid to your employees’ Funds. Your June 2020 quarter super guarantee liability could be paid before 30 June 2020, to claim an extra tax deduction in the 2020FY. See note above regarding payments to SBSCH that must be made by 23rd June.

“NCC’s” – Non-concessional (tax free) contributions:

  • Cap – The annual NCC cap is $100,000 for the year ended 30 June 2020.
    • Or $300,000 over 3 years, if under 65 years.
      • Transitional rules apply if this “bring-forward rule” was triggered in 2018 financial year. Contact your local Accru office for confirmation if you are unsure.
      • If your member balance is greater than $1.4m at 30 June 2019, contact Accru before making a bring-forward contribution as limits apply.
      • Proposed, but not law as yet – increasing bring forward rule age from 65 to 67.
    • Balances over $1.6m – If your member balance in your Super Fund was over $1.6m at 30 June 2019, you are NOT able to contribute any further NCC for the 2020 financial year.
    • Other contributions – For further details on downsizer contributions, first home super saver scheme, spouse contribution tax offset, contribution splitting, government co-contributions, and low income super tax offset, please refer to the fact sheet in the link above.

2. Pension withdrawals

For Fund members in pension mode, kindly ensure that you withdraw in cash the required minimum pensions from your SMSF before 30 June 2020. We also encourage you to read this ACCRU FACT SHEET, and if any areas are unclear, please contact your local Accru Office.

  • The minimum amounts required to be withdrawn were documented in the send-out package for your 2019 SMSF reports.
  • NEW THIS YEAR – The Coronavirus Acts have reduced the minimum payment amounts by half for 2020FY and 2021FY.
  • Please note that any pensions you have already withdrawn during this financial year, will count towards the minimum amounts above.

3. $30,000 or $150,000 simplified depreciation instant write-off for small business entities

  • Any assets purchased with a cost less than $30,000 (ex GST) and installed ready for use within your business before 30 June 2020 can be claimed immediately as a tax deduction for the year ended 30 June 2020.
    • This threshold increased to $150,000 for assets purchased between 12 March and 30 June 2020.
    • The increase to $150,000 has also been extended to include medium sized businesses (up to $500m)
  • Also note that any small business pools with a balance less than $150,000 as at 30 June 2020 will be written off in full for the 2020 financial year.
  • The entire cost of the asset must be less than the relevant threshold, not just the taxable purpose proportion.
  • The threshold will revert to $1,000 from 1 January 2021 (but with an upfront write-off of 50% until 30 June 2021).

4. Cash flow boost for employers, JobKeeper measures, Superannuation early release, other state grants

Please contact your local Accru office if you’d like further details on any of the measures issued by the Government to stimulate the economy in light of the coronavirus outbreak. We have updated our website to include the latest information – CLICK HERE.

5. General business tax planning options and other deadlines

  • Single touch payroll – since 1 July 2019, all employers are required to use single touch payroll enabled software for reporting to the ATO. Please contact your local Accru office if you need help setting up your STP system.
    • Finalisation declarations must be lodged to the ATO before 14 July 2020 (20 or more employees) or 31 July (19 or less employees). These replace the PAYG Payment Summaries you used to provide to employees and the ATO.
    • In response to the covid-19 crisis, small employers (less than 19 employees) with only “closely held payees” will not need to report through STP until 1 July 2021.
    • Micro employers (less than 4 employees) are allowed to report quarterly until 30 June 2021, though their tax agent.
  • Company tax rate for “base rate entities” for 2020 FY – 27.5%. Base rate entities have aggregated turnover of less than $50m and 80% or less of their assessable income is passive.
    • All other companies remain taxed at 30%.
    • From 2021FY, the lower company tax rate will reduce to 26%, and then to 25% for 2022FY.
  • Other allowable tax deductions:
    • Pay June 2020 quarterly super guarantee for your employees before 30 June 2020.
    • Pay June 2020 quarterly FBT instalment before 30 June 2020.
    • Approve and notify staff of any bonuses before 30 June 2020 to claim a tax deduction.
    • Approve any directors fees before 30 June 2020 to claim deduction.
    • Think about utilising the instant asset write-off rules to purchase business assets.
    • Review your asset schedule and scrap any unused assets.
    • Review your trading stock for obsolete items.
    • Write off any bad debts before 30 June 2020 – the debt must be bad and not merely doubtful.
    • Small businesses can claim deductions for prepaid expenses such as office supplies, insurance, rent, lease payments, interest on business loans, advertising and maintenance contracts – where the relevant services will be provided within 12 months of the date of expenditure.
  • Taxable payment reporting – for businesses in the building, construction, courier, cleaning, road freight, security, investigation or surveillance and information technology services, you will need to lodge your Taxable payments annual report to the ATO by 28th August 2020. This report provides information about payments you made to contractors (subcontractors, consultants and independent contractors) during the 2020 FY.
    • Note – even if you did not pay any contractors in 2020FY, if you are in this industry, you will still need to lodge a form reporting this to the ATO.
  • HELP repayment rates and thresholds – note that a new minimum threshold of $45,880 has been established with a 1% repayment rate
  • No deductions for holding costs on vacant land – from 1 July 2019 (regardless of whether land was held prior to this date), no deductions allowed for outgoings incurred to the extent they relate to a taxpayer holding vacant land.

6. Trust distributions

Where applicable, ensure that trust distribution resolutions are completed by 30 June 2020 (or earlier if required by your trust deed) showing entitlements to the trust beneficiaries. Where you wish to stream capital gains or franked dividends to specific beneficiaries, ensure your trust deed allows this and review the reporting requirements.

If you would like to find out more please contact your local Accru advisor.

About the Author
Katherine Buczynski , Accru Felsers Sydney
Katherine’s openness and ability to listen are key attributes that help her relate to clients and their individual situations. She likes to explain things simply, so business owners can understand complex tax issues in terms of their practical and financial implications.
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