Getting Ready for 2021 Year End
With June 30 fast approaching, it’s time to take action on year end matters.
- Single Touch Payroll – Deadline Approaching
- Superannuation for Year End – Looking for a tax deduction for this financial year?
- $150,000 Instant Asset Write Off – Limited for Passenger Vehicles
- Home Office Expenses – New rate available due to Covid
For all businesses not already using STP, it will now be mandatory to setup and use from 1 July 2021.
The ATO has removed the exceptions related to Small Employers and Closely Held Payees (essentially related parties such as family members) from 1 July.
So Single Touch Payroll will now be required for all businesses, even where where all the employees are family members or you might be the only employee (for example, a Health Practitioner operating through a Medical Company).
Single Touch Payroll replaces the old Group Certificate/PAYG Payment Summary system and reports live (each pay run) the employees’ Gross Pay, PAYG Withholding and other information.
Importantly, for closely held payees – related family members of the employer – from 1 July 2021 amounts paid can be reported through STP in any of the following ways:
- Report actual payments on or before the date of payment – This would typically be done using a computerised accounting system (like Xero) to process your payroll information in the same way as you would for any arms-length employees.
- Report actual payments quarterly – report your actual payments to closely held payees quarterly. Each quarter, when your activity statement is due, report all payments made in that quarter via STP enabled Software.
- Report a reasonable estimate quarterly – report amounts equal to or greater than a percentage of gross payments and tax withheld from the latest year, across each quarter (see ATO Examples).
Importantly, the amounts you disclose on the BAS are not sufficient – they must now be reported via STP-enabled Payroll Software.
Please note, Holmans do not offer STP reporting services so you must act now.
Steps to take now:
- Determine your Salary and Wages – If you are not sure of the salary amount you should pay yourself or related parties, you should consult with your Holmans accountant and/or complete Tax Planning with us.
- Determine the Software package you will use – If you are already using Xero or MYOB to maintain your business records, then you should continue to use that. If not, some alternative low-cost options are outlined here – https://softwaredevelopers.ato.gov.au/no-cost-and-low-cost-solutions-single-touch-payroll
- Organise a bookkeeper or watch training videos – If you already know the wage amount to pay, then contact your bookkeeper to assist you to establish and report your wages via STP. Xero and other software packages often have online training videos also. For example, one of Xero’s is here https://www.youtube.com/watch?v=63ObNo2ecUs
- Set it up well before 1 July if possible – Your goal should be to have walked through the above and be ready to implement from 1 July. Remember, Bookkeepers will be extremely busy at year end, so planning in advance is vital if you require their assistance.
- Pay Superannuation Regularly – We also recommend you pay your superannuation monthly (though legally required each quarter) and report that information via a SuperStream enabled software.
- More information can be found here https://www.ato.gov.au/Business/Super-for-employers/Paying-super-contributions/
More general information on Single Touch Payroll (STP) can be found here:
Of course, don’t hesitate to contact your Holmans accountant should you require some guidance.
Superannuation Guarantee (SG)
Your employee’s SG is due for this quarter (1 April 2021 to 30 June 2021) is required to be paid no later than 28 July 2021.
However, if you want a tax deductible this financial year, the SG needs to be paid prior to 30 June 2021. Keep in mind that many super funds/clearing houses have cut offs for super payments so you would want to allow 7 – 10 business days for the payment to process prior to 30 June.
Superannuation Contributions – Additional Catch-Up Contributions
Super fund members now have the ability to be able to ‘carry-forward’ unused concessional contributions (CC) where they have a total member balance of less than $500,000 across all superannuation funds.
The carry forward rule allows individuals to make additional CC in a financial year by utilising unused CC cap amounts from up to five previous financial years, commencing from the 2019 financial year. For example, if you made a $10,000 CC in 2018-19 you would have unused general CC cap for the year of $15,000, then this year would you be able to make a contribution of up to $40,000.
Concessional contributions include; employer superannuation guarantee, salary sacrifice and personal concessional contributions. Contribution caps are a total for all contributions made into all and any funds. Where you have more than one superannuation fund, you will need to contact both funds to find the balance remaining.
The instant asset write-off threshold of $150,000 has now been increased and expanded. There is now no upper limit or threshold (for most businesses) and will remain in place until 30 June 2022. For example, if you are predominately using the asset in your business and it’s not a car, you can claim the whole amount against your taxable income, even if that cost $250,000 (i.e. Truck).
Please be mindful that if you are thinking about purchasing a car (passenger vehicle only) the limit is $59,136 for the 2020-21 income tax year.
The asset must also be installed and ready for use before you are eligible for the tax deduction.
From 1 March to 30 June 2020 a temporary new shortcut method has been introduced to calculate home office expenses in addition to the current fixed rate of 52 cents and actual cost method.
Under the shortcut method you can claim a deduction of 80 cents for each hour you work from home from 1 March to 30 June 2020 as long as you:
- are working from home to fulfill your employment duties and not just carrying out minimal tasks such as occasionally checking emails or taking calls
- have incurred additional running expenses as a result of working from home