The FMA team have put together the top 10 actions your business needs to consider before 30 June:
  1. Single Touch Payroll
  2. Trust Distribution Planning
  3. Change to Company Tax Rate and Declaring Dividends
  4. Instant Asset Write Off
  5. Pay Superannuation Entitlements
  6. Super Guarantee Increasing to 10% from 1 July
  7. Write Off Those Bad Debts
  8. Organise Your Stocktake
  9. Consider Prepayments
  10. 2022 Budget and Business Planning

Single Touch Payroll (STP) Reporting

By now all businesses with employees should be using STP enabled software to report their payroll to the ATO.
The reporting of wages and director’s fees for closely held payees including family members, directors and shareholders had an exemption where the business had 19 or fewer employees through to 1 July 2021. The ATO has advised that no further extensions will be granted. If your business is not using STP enabled payroll software or you have not been reporting closely held employees, you must start doing so from 1 July 2021.
If your business needs assistance setting up STP enabled software, please contact our office immediately.

Trust Distribution Planning

The Trustees of Family Trusts must decide who is receiving the Trust’s income and capital before 30 June. This typically requires a formal resolution to be prepared and signed by the Trustee prior to 30 June.
If a Trustee of a Trust fails to make a resolution to distribute the income and capital of the Trust before the end of the financial year, the Trustee may be assessed on the Trust income at the highest marginal tax rate of 47%.
We recommend all Trustee's review their estimated Trust income and capital for the 2021 financial year now. The FMA team will be in touch with all Trustees to discuss finalising any trust distribution planning over the next two weeks.

Change to Company Tax Rate and Declaring Dividends

The tax rate for companies with turnover of less than $50m in the financial year ending 30 June 2021 is 26%.  For these companies, any dividends paid during the year and before 30 June 2021 can be franked to 26%.

The corporate tax rate for such companies will reduce to 25% from 1 July 2021. This reduction will also change the maximum franking rate that applies to dividends to 25%.

To take advantage of the higher franking rate in the 2021 financial year, dividends should be declared and credited before 30 June 2021.

Instant Asset Write Off

As  reminder, there is currently no limit to the amount a business with less than $5 billion of turnover can write off for the purchase of a business asset under the instant asset write-off regime. This is known as “temporary full expensing” and is available for any asset purchased between 7.30 pm AEDT 6 October 2020 to 30 June 2022. It even applies to second-hand assets where the aggregated turnover is less than $50 million.
Here at FMA Partners, we love doing the extra one percenters. Given the corporate tax rate is changing from 26% to 25% from 1 July 2021 for businesses under $50M, purchasing that business asset before 30 June may result in a (slightly) bigger tax saving.

Pay Superannuation Entitlements

Super Guarantee (SG) contributions must be paid by 30 June 2021 to qualify for a tax deduction in the 2020-21 financial year. Not only does it need to be paid before 30 June but the superannuation funds must receive these contributions by 30 June. This is especially important if business owners or employees are looking to make additional contributions to maximise their superannuation contribution caps for the 2021 financial year.
Some clearing houses can take more than a week to submit the payment to the super fund. If you use the XERO automatic superannuation clearing house, payments must be made by 22 June 2021. We recommend checking with your clearing house provider for key cut off dates.

Super Guarantee Increasing to 10% from 1 July

The Super Guarantee (SG) rate is increasing from 9.5% to 10% from 1 July 2021.
Timing is critical and it is important to note:
  • Any superannuation guarantee for wages earned in June but not paid until 1 July or after will be subject to the new 10% SG rate.
  • If your business is considering paying bonuses for the 2021 financial year, the superannuation component will increase if the bonus is paid after 1 July 2021.

Write Off Those Bad Debts

Most businesses pay income tax based on when invoices are issued, not when they are paid. It is important that your business reviews any outstanding debts before 30 June to avoid paying tax and GST on sales where payment will not be received.
There are two key steps that are often overlooked when declaring a bad debt.
  1. You need to determine that the debt is bad. This means it must be an amount that is unlikely to be recovered through any reasonable and commercial attempts.
  2. You must have made the decision to write off the debt and recorded that decision in writing before the end of the income year in which you claim a deduction. The simplest way to satisfy this is to record the bad debt expense in your accounting system by 30 June.
The rules around claiming a tax deduction for bad debts are complicated, so speak with us if you have material debts to write off.

Organise Your Stocktake

If you hold inventory in your business the ATO requires you to undertake a stocktake as close as possible to 30 June each year, unless you estimate that the value of your trading stock changed by less than $5,000 where your turnover is less than $10m.
An increase in your trading stock’s value over the year will contribute to a higher assessable income, while a decrease will result in an allowable deduction.
Obsolete, slow-moving or damaged stock should be identified by 30 June and accounted for within your inventory system to receive a deduction.

Consider Prepayments

Expenses paid by a small business entity (less than $10m turnover) are deductible in the year of payment as long as the service period for which the payment relates to is not longer than 12 months. Examples include subscriptions, rent, insurance and service agreements.
If your business is in a taxable position, consider whether prepaying those expenses is worthwhile given the corporate tax rate is reducing in the 2022 financial year.

2022 Budget and Business Planning

Whilst 30 June is not a hard deadline for your 2022 financial year budget and business planning, it made our list because of the importance of getting it done. It has been proven over and over that there is a much better chance of your business achieving success if there is a clear plan in place.
If you haven’t already, you should contact the FMA team to discuss how your business has performed in 2021 so that you know exactly where you stand. Examining the business allows you to identify areas for improvement and what can be done differently to achieve success in the new financial year and beyond.
Next you should be planning out your strategy for the following twelve months whilst ensuring that it aligns with your long term business strategy.
The defined strategy will then drive the financial budget. This budget is the financial road map to success and enables the business to monitor and manage how it is tracking towards the goals.
Contact the FMA team to organise a strategy and planning session to get your business on the right track for 2022.

Here to Help

As always, the FMA team are across the detail and ready to answer any questions you may have. 

Contact our office on +61 2 9540 6888 or via email at 
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