CROWD SOURCED FUNDING

Mih Chowdhury C Accounting
Mobile Number 0414495057
Email Address : info@mihcaccounting.com.au
CROWD SOURCED FUNDING
EQUITY RAISING OVERVIEW
Paper 003-055
CONTENTS
Page
1. What Is Crowd Sourced Funding? 3
2. Stage I of the CSF Legislation Journey in Australia 3
3. Stage 2 - Corporations Amendment (Crowd Sourced Funding for Proprietary Companies) Bill 2018 4
4. Small Proprietary Company 4
5. CSF Shareholder 5
6. Eligible CSF Company 5
7. Issuer Cap 5
8. Fundraising in Addition to a CSF Offer 6
9. Annual Financial Reports and Directors’ Report 6
10. Small Proprietary Companies – Shareholder Directions 6
11. CSF Audit Threshold 6
12. Primary Issue Only 6
13. Making a CSF Offer 7
14. Corporate Governance Concessions 7
15. CSF Intermediaries – Financial Services Licensing Requirements 8
16. Australian Market Licence (AML) 8
17. The Obligation of a CSF Intermediary 8
18. Stages of a CSF Offer 9
19. CSF Investors 9
20. General Investor Protections 10
21. Investor Protections For “Retail Clients” Only 10
22. When is a CSF Document Defective? 11
23. Obligations in Relation to Defective Documents 11
24. Investor Rights – Defective Documents 11
25. Criminal and Civil Liability 11
26. ASIC 11
27. Professional Advice 12
CROWD SOURCED FUNDING
EQUITY RAISING OVERVIEW
Paper 003-055
This paper covers the journey from an enquiry to the preparation of the Crowd Sourced Funding Offer Document.
1. What Is Crowd Sourced Funding?
Crowd Sourced Funding (CSF) is a type of corporate capital raising whereby a company seeks funds, in small amounts, from a large number of individual investors in return for securities in the company. CSF involves:
• Companies (issuers) that propose to raise funds;
• Intermediaries that host the platform through which offers are made to crowd investors;
• Crowd investors.
CSF has developed over the last six years in other countries as an online phenomenon, utilised particularly by small start-up companies seeking seed capital, as a complement to more established financing options involving professional investors, such as angel investing and venture capital.
However, the legislative framework in Australia presented barriers to CSF. Proprietary companies have been limited to 50 non-employee shareholders and are prohibited from making public offers of securities, while public companies are subject to governance, reporting and disclosure requirements that may be too onerous for a small business.
2. Stage I of the CSF Legislation Journey in Australia
The legislation known as the Corporations Amendment (Crowd-Sourced Funding) Bill 2017 was passed by the Australian Parliament in March 2017.
The legislation authorised capital raising utilising Crowd Sourced Funding Equity Raising to commence from September 2017.
The Australian Security Investment Commission (ASIC) finalised the appointment of the initial group of Crowd Sourced Funding Intermediaries in early January 2018 thus enabling Crowd Sourced Funding Equity Raising to commence.
The Bill provided for the addition of a new Part 6D.3A to the fundraising provisions of the Corporations Act. The new Part provided for a disclosure regime that can be used instead of the existing fundraising disclosure requirements for certain offers of securities for issue in small unlisted companies.
In Stage I only unlisted public companies were able to use CSF.
However proprietary limited companies could convert to an unlisted public company so that they were able to utilise this legislation. During 2017 the government announced proposals to introduce amendments relating to crowd sourced funding equity raising which would enable private companies to raise capital from the public without having to convert to an unlisted public company.
3. Stage 2 - Corporations Amendment (Crowd Sourced Funding for Proprietary Companies) Bill 2018
The legislation which was originally introduced into parliament as a 2017 Bill was passed by Parliament on 12 September 2018. The Act commences on the 28th day after the Act receives the Royal Assent. This Paper summarises the ongoing position that applies under the new legislation.
Royal Assent was granted on 21 September 2018 – the amendments operate from 19 October 2018.
4. Small Proprietary Company
1. A small proprietary company needs to be limited by shares or be an unlimited company with a share capital.
2. A small proprietary company needs to:
(a) have no more than fifty shareholders, although employee shareholders and shareholders connected with CSF offers do not count for this purpose; and
(b) not do anything to require disclosure to investors under Chapter 6D – except for:
An offer of its shares to:
(i) existing shareholders of the company; or
(ii) employees of the company or a subsidiary of the company; or
(iii) a section 708 of securities that are of the same class as those offered under the CSF Offer; or
(iii) a CSF Offer.
3. A CSF shareholder (or an entity that has acquired a security of the company that was originally issued to another entity pursuant to a CSF Offer by the company) is not counted as a shareholder of the proprietary company.
4. A proprietary company must not engage in any activity that would require disclosure to investors.
5. Small Proprietary Limited Company
Counted Not Counted
Ordinary shareholders Up to 50
Employee shareholders 
s708 Capital Raising (included in 50) 
6. CSF Company
Counted Not Counted
Ordinary shareholders Up to 50
s708 Capital Raising (included in 50) 
Employee shareholders 
CSF shareholders 
Shareholders who owns shares originally issued as a CSF shareholder shares 
5. CSF Shareholder
CSF shareholder of a proprietary company means an entity that holds one or more securities of the company due to being issued with the securities pursuant to a CSF Offer by the company.
6. Eligible CSF Company
1. At the time of the offer, the company making the offer must be an ‘eligible CSF company’, which is a company that satisfies the following conditions:
• it is a public company limited by shares;
• or the company is a small proprietary company (section 45A(2) that:
- has at least 2 directors
- with its principal place of business and a majority of its directors in Australia;
• the value of the consolidated gross assets of it and its related parties must be less than $25M at the time it is determining its eligibility to crowd fund (the “assets test”) (a related party, for the purpose of the CSF provisions, is a related body corporate or an entity controlled by a person who controls the company or an associate of that person);
• the consolidated annual revenue of it and its related parties must be less than $25M (the “turnover test”);
• neither it nor a related party is a listed corporation (as listed corporations generally have access to other forms of equity raisings such as rights issues and share purchase plans);
• neither the company, nor any related party of the company is included in an official list of a financial market operated outside this jurisdiction;
• neither the company, nor any related party has the intention of utilising the funds sought to be raised by the offer to issue a credit facility to the company or a related party of the company.
• The Explanatory Memorandum tabled in Parliament by the Minister for Small Business and Assistant Treasurer relating to the “Corporations Amendment (Crowd-Sourced Funding) Bill 2015 commented as follows:
“The company must not intend the funds sought under the offer to be used by the company or a related party of the company to any extent to invest in securities or interests in other entities or managed investment schemes.”
2. A CSF company only has to have an audit if it has raised a total of $3M or more.
7. Issuer Cap
The offer must comply with an “issuer cap” of $5M in any twelve month period, calculated taking into account:
• the amount sought to be raised under the current offer;
• all amounts raised from previous CSF Offers made within the twelve month period preceding the current offer;
• all amounts raised from small scale personal offers exempt from disclosure pursuant to s.708(1) within the twelve month period preceding the current offer;
• all amounts raised from certain offers made through the holder of an Australian Financial Services Licence (AFSL) and exempt from disclosure pursuant to s.708(10), within the twelve month period preceding the current offer.
8. Fundraising in Addition to a CSF Offer
In addition to the $5M that can be raised under the CSF regime, a company can raise funds from:
• sophisticated investors
• professional investors
Fundraising from these persons does not require a disclosure document under the current fundraising disclosure provisions in Chapter 6D of the Corporations Act (s.708(😎, 708(11)).
9. Annual Financial Reports and Directors’ Report
A Financial Report and a Directors’ Report must be prepared for each financial year by (section 292):
• all public companies
• a small proprietary company has to prepare the Financial Report and Directors’ Report only if (section 292 (2)):
(i) it is directed to do so under section 293 (refer item 10);
(ii) it has one or more crowd sourced funding shareholders at any time during the financial year (section 292 (2) (c).
10. Small Proprietary Companies – Shareholder Directions
Shareholders with at least 5% of the votes in a small proprietary company may give the company a direction to (section 293):
(a) prepare a Financial Report and Directors’ Report for a financial year; and
(b) send them to all shareholders.
The direction may specify all or any of the following:
(a) that the Financial Report does not have to comply with some or all of the accounting standards;
(b) that a Directors’ Report or a part of that Report need not be prepared;
(c) that the Financial Report is to be audited.
11. CSF Audit Threshold
The Audit Threshold for a Crowd Sourced Funding Company is $3 Million.
12. Primary Issue Only
The offer must be for a primary issue of securities of the company making the offer: it cannot be for secondary sale of those securities.
13. Making a CSF Offer
An issuer must, for each CSF Offer:
• prepare a CSF Offer Document containing clear, concise and effective information, as specified in the regulations (for instance, information about the company and its business, the securities on offer, how the proceeds from the offer will be used);
• in the CSF Offer Document, the following information needs to be shown:
- a description, or a summary, of the key provisions of the offering company’s constitution that deal with any rights and liabilities that attach to the securities in the issuing company (this information will be required from a public company as well as a small proprietary company that are seeking to raise Crowd Sourced Funding Equity Raising Capital);
• small proprietary companies that have one or more CSF shareholders are bound by the related party transactions rules contained in the Corporations Act as if the small proprietary company was a public company: (Section 738ZK);
• the related party transaction rules are designed to protect the interests of a proprietary company with one or more CS F shareholders as a whole, by requiring approval for giving financial benefits to related parties that could endanger those interests.
• obtain the consents of persons associated with the offer document;
• publish the offer document (including, or together with, the offer itself) on the platform of a single CSF Intermediary;
• have only one CSF Offer open at any one time;
• not have a CSF Offer open at the same time as a CSF Offer of a related party (this avoids circumvention of the issuer cap).
An issuer has the power to withdraw a CSF Offer at any time before the Offer is complete by notifying the Intermediary. Other stages of a CSF Offer are mostly under the control of the Intermediary. Refer to Section 15 and 17.
Issuers have particular responsibilities when a CSF Offer Document is found to be defective. Refer to Section 22.
The regulations also clarify that the description of the rights attaching to a company’s securities also covers rights and liabilities arising out of the company Constitution and Shareholders Agreements and there must be disclosure of any restrictions that apply to the company in relation to the off market transfer of shares, including any rights of the directors to refuse to register a transfer of shares in the company including where such a transfer would bridge the fifty shareholder cap.
The requirement to summarise the key terms of a company’s Constitution applies to both public and proprietary companies.
14. Corporate Governance Concessions
These concessions only apply to a public company or a proprietary company that converted to a public company and the required application was lodged before the “eligibility end day”.
“Eligibility end day” means the day, 28 days after the Royal Assent was given to Corporations Amendment (Crowd Sourced Funding for Proprietary Companies) Bill 2018 – 19 October 2018.
The legislation provides a CSF issuer with corporate governance concessions for five years from the date of registration as a public company if it:
• satisfies the CSF eligibility criteria at the time of registration as a new public company and at the end of the relevant financial year; and
• intends to crowd fund at the time it is registered; and
• completes a CSF Offer within twelve months of registration.
The corporate governance concessions are:
• an exemption from holding a physical Annual General Meeting;
• the option to provide financial reports to shareholders online only;
• not being required to have audited Financial Reports until more than $3M has been raised from CSF offers or other fundraising offers requiring disclosure.
15. CSF Intermediaries – Financial Services Licensing Requirements
A CSF Intermediary must hold an AFSL (Australian Financial Services Licence) to provide a crowd-funding service, which is a new category of financial services created under the Bill.
A person provides a crowd-funding service if:
• applications may be made to the person for the issue, by an issuer company, of securities pursuant to the offer;
• a CSF Offer Document relating to securities of a company is published on a platform operated by the person.
The crowd-funding service is provided to:
• the issuer (when the issuer enters into the hosting arrangement for the offer of securities with the Intermediary);
• potential investors who apply for CSF securities through the Intermediary’s platform (when the investors first use the Intermediary’s application facility to apply).
16. Australian Market Licence (AML)
In some circumstances, the operations of a CSF Intermediary may require it to hold an Australian Market Licence (AML).
17. The Obligation of a CSF Intermediary
The obligations of the Intermediary include:
• Gatekeeper obligations, which require the Intermediary to conduct certain checks (which are prescribed in the regulations) to a reasonable standard before publishing an issuer’s Offer Document on its platform and not to publish an offer if the Intermediary:
- is not satisfied about the identity of the company making the offer, or of any of the company’s directors or other officers;
- has reason to believe that any of the company’s directors or other officers are not of good fame or character;
- has reasons to believe that the company, or any of its directors or senior managers or officers, has knowingly engaged in misleading or deceptive conduct in relation to the offer, for instance, by providing misleading information in response to a post on the communications facility;
- has reason to believe that the offer is not eligible to be a CSF Offer (for instance, if it does not comply with the issuer cap);
• to have adequate arrangements, recorded in writing, to ensure that it complies with its gatekeeper obligations;
• to provide an application facility, reject applications not made via that facility (to ensure that applicant investors are aware of, and receive, the various investor protections) and not allow an application to be made while an Offer is suspended or when it has closed;
• to provide a communication facility to allow potential investors, the issuer and the Intermediary to communicate with each other about a particular CSF Offer. This facility should enable:
- investors to make and see posts relating to the offer and ask the issuer or the intermediary questions relating to the offer;
- the company or the Intermediary to make posts responding to questions and other posts (officers, agents and employees of the issuer or the Intermediary must disclose their status when making posts on the facility);
• to display prominently on the offer platform:
- the CSF risk warning (the terms of which, to be specified in the regulations, will include the potential risks associated with, and high failure rates of, start-ups and emerging companies);
- information on investors’ cooling-off rights (including the means by which investors can exercise these rights);
- fees charged to, and interests that the intermediary has or intends to take in, an issuer company;
• to comply with the prohibition on giving financial assistance to a retail client to purchase securities pursuant to the CSF Offer;
• to close or suspend the offer as required;
• to deal with application money appropriately.
The provision of a crowd-funding service includes all these Intermediary’s obligations. This wide meaning of ‘crowd-funding service’ will ensure that all the Intermediary’s activities will be subject to the general obligations of a licensee (s.912A), such as the obligation to provide the service ‘efficiently, honestly and fairly’.
Intermediaries have particular responsibilities when a CSF Offer Document is found to be defective. Refer to Section 22.
18. Stages of a CSF Offer
CSF Intermediaries play a key role in determining when CSF Offers are made, open, closed, suspended and complete.
The maximum duration for a CSF Offer is three months from the time the Offer was made. This maximum offer period ensures that the information contained in the CSF Offer Document remains current and is consistent with the notion of CSF as a simpler, faster way of raising funds with streamlined disclosure.
When an Offer is complete (that is, when the minimum subscription condition is met, disregarding any withdrawn applications), the Intermediary must pay the application money to the issuer following the issue of the securities. If the minimum subscription amount is not raised, the Intermediary must refund the application money to the applicants.
19. CSF Investors
CSF Investors must:
• make their applications in response to a CSF Offer via the Intermediary’s offer platform, to ensure that they have the various protections of the CSF regime (such as the communication facility, the risk warning and cooling-off rights);
• provide the application money via the Intermediary, to ensure that the money is handled according to the client money provisions and is subject to the CSF rules for when money is paid to the issuer and refunded to applicants.
20. General Investor Protections
Issuers and Intermediaries must comply with the stipulated advertising rules. For instance, an advertisement or publication about a CSF Offer must include a statement that a person should, in deciding whether to make an application under the offer, consider the CSF Offer Document and general CSF risk warning.
There is an exception from the advertising rules for publishers and the publication of certain reports and notices.
There is also an exception for statements made in good faith on the Intermediary’s communication facility. However, the onus is on the person making the statement to show that it is made in good faith.
Persons will be prevented from offering securities for issue or sale through an unsolicited meeting or telephone call (a practice known as “securities hawking”), regardless of whether the offer is identified as a CSF Offer.
ASIC will have “stop order powers” in relation to advertising and publications that are misleading or deceptive or that do not draw attention to the CSF Offer Document or the general CSF risk warning.
21. Investor Protections For “Retail Clients” Only
When providing a crowd-funding service to a person, the Intermediary must determine whether the person is a “retail client” (i.e. not a “sophisticated investor”), as retail clients have additional protection both under the current law (Financial Services Guide, access to dispute resolution and compensation arrangements) and under the CSF provisions.
The tests for determining whether an investor is a retail client are, for the most part, the same as under the current licensing provisions.
Additional protection applicable to retail clients only under the CSF provisions are:
• an investor cap of $10,000 per issuer via a particular Intermediary’s platform within a twelve month period (this amount is to be apportioned equally if there are joint applicants for securities);
• an unconditional ‘cooling off’ right for a retail investor to withdraw from a CSF Offer within five business days of making an application;
• a prohibition on the company and its related parties, and the CSF Intermediary and its associates, providing retail investors with the financial assistance to acquire securities under CSF Offers;
• the requirements for a CSF Intermediary to obtain a risk acknowledgment from a retail investor before accepting a CSF application from the investor.
Investors have particular rights when a CSF Offer Document is found to be defective. Refer to Section 22.
22. When is a CSF Document Defective?
A CSF Offer Document is defective where:
• it contains a misleading or deceptive statement;
• it omits information that is required to be included;
• since the document was published, a new circumstance has arisen that would have been required to be included if it had arisen before the document was published.
23. Obligations in Relation to Defective Documents
The following obligations arise when the relevant person becomes aware, while a CSF Offer is open, that the Offer Document was defective:
• the issuer must notify the Intermediary as soon as practicable;
• the Intermediary must:
- notify the issuer as soon as practicable;
- remove the Offer Document from the platform and either close or suspend the offer
• a person liable on the Offer Document must notify the issuer and the Intermediary as soon as practicable.
The issuer need not do anything other than notify the Intermediary: it has the option of providing a replacement or Supplementary Offer Document, but no obligation. The Intermediary is not obliged to publish a replacement or supplementary document, as the Intermediary’s gatekeeper obligations apply to these types of document in the same way as to the original Offer Document.
24. Investor Rights – Defective Documents
Prospective investors who have already applied for securities under the document will either:
• receive a supplementary or replacement Offer Document that corrects the defect and then have the right, for fourteen days, to withdraw their acceptance; or
• be refunded any application money paid as soon as practicable.
25. Criminal and Civil Liability
An issuer that offers securities under a defective CSF Offer Document is criminally liable if the relevant statement, omission or new circumstance is materially adverse from the point of view of an investor.
An Intermediary that publishes an Offer Document that it knows to be defective is criminally liable.
An investor can recover from various persons associated with a CSF Offer the amount of loss or damage suffered. The investor has six years from the day the cause of action arose to commence recovery proceedings.
26. ASIC
Unlike other disclosure documents, a CSF Offer Document will not need to be lodged with ASIC. However, ASIC will have “stop order powers” where a company offers securities under a defective CSF Offer Document.
27. Professional Advice
Please contact your accountant for further advice if you are interested in raising capital utilising Crowd Funding.
AN IMPORTANT MESSAGE
The forms and commentaries contained in this paper are provided as a guide only and should not form the sole basis for any advice in relation to the particular situation of any person without first obtaining proper professional advice.
Mih Accounting Accounting
Mobile Number 0414495057
Email Address : info@mihcaccounting.com.au

liverpool business accountat

Mihcaccounting

Liverpool Business Accountant
MIHC Accounting
Mobile Number 0414495057
Email Address : info@mihcaccounting.com.au
INDEX
A The 2021 Financial Year Is Coming To An End 1
B End Of Year Tips 1
C Taxing Of Trading Income 1
D Small Business Entities 2
E Stock - All Businesses 3
F Assets 4
G Employment Issues 4
H Income Issues 4
I Utilising Tax-Free Threshold 5
J Entities Not Defined As Small Business 5
K Primary Producers 8
L Companies 8
M Capital Gains Tax 8
N Reportable Payment Report 8
O Superannuation Funds 9
P Early Stage Innovation Company Report On Shares Issued 9
Q Property Investments 9
R End Of Financial Year Review 9
S Business Review 9
T Individuals 10
End Of Year Tax Planning - June 2021
A The 2021 Financial Year Is Coming To An End
This special edition of the Business Plus newsletter contains commentary on many of the items you may encounter as part of your end of financial year deliberations. Please contact us for a copy of our end of financial year tax planning paper and checklist. Both will assist you in identifying items which you might like to discuss with us.
B End Of Year Tips
• Prepayments - if you’re business’ turnover is under $10 million for 2020/21, consider any prepayments that you could make prior to 30th June 2021.
During 2020/21 the Australian government has had two depreciation/asset write off policies overlapping – “Instant Asset Write Off” and “Temporary Full Expensing”:
• Instant Asset Write Off - if your business had an annual turnover of less than $500 million, you can write off expenditure on individual assets new and second-hand first used or installed ready for use between 1st July 2020 and 30th June 2021 and purchased by 31st December 2020. The instant asset write off threshold amount for each asset is $150,000.
• Temporary Full Expensing - the business portion of the cost of new or second hand assets acquired after 6th October 2020 and installed ready for use by 30th June 2021, by businesses with an aggregated turnover under $500 million can be deducted in full.
• The balance of the small business pool at the end of each income year for businesses with an aggregated turnover under $10 million can be deducted.
C Taxing Of Trading Income
There are two forms of taxation treatment for trading income, depending on whether the business is assessed on a:
1. “Cash” Basis - businesses are assessed when income is received and payments are deductible when they are paid, if the business’ income is less than $10 million for the year (see Section D).
2. “Accruals” Basis - businesses are assessed when a legally recoverable debt arises, usually at the point of invoicing and payments are deductible when the supplier’s invoice is received and entered into the business’ accounting records, irrespective of the date of payment (see Section D).
D Small Business Entities
• Aggregated Turnover (relates to annual turnover received by your business, plus the annual turnover of any business connected to you or that is an affiliate of yours) of less than $10 million. “Aggregated Turnover” is calculated on a group basis and must be “business income”. Please ignore this section if it is not applicable to you. In that case, if you are in business, please refer to “Section J - Entities Not Defined as a Small Business”.
• The Small Business Entity rules apply to a sole trader, partnership, company or trust which has a group turnover of less than $10 million in the previous year, or likely to be less than $10 million in the current year.
• Depreciation Rules - for “new or second hand assets” first used, or installed ready for use, between 1st July 2020 until 30th June 2021 and purchased by 31st December 2020, businesses can utilise the “Instant Asset Write Off” for assets costing up to $150,000.
• For new or second hand assets first used or installed ready for use by 30th June 2021 and purchased after 6th October 2020, these assets can be written off under the “Temporary Full Expensing Rules”.
• There is a restriction on the availability of the Instant Asset Write Off for passenger vehicles.
Car Limit:
• For passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than 1 tonne and fewer than 9 passengers, the limit is $59,136 (this is the limit of depreciation allowed on a passenger vehicle).
• The passenger vehicle limit does not apply to vehicles modified for use by people with a disability.
• The “Instant Asset Write Off” is limited to the business portion of the car limit. If a passenger vehicle is used for 70% business activities, the maximum write-off for that vehicle would be $59,136 x 70% = $41,395.
• If a vehicle has a payload of more than one tonne and is used 100% for business the claim under the Instant Asset Write Off can be up to $150,000 and, if the claim is being made under the “Temporary Asset Expensing Provision”, the claim can be the cost of the vehicle.
• Assets excluded from the “Temporary Full Expensing Rules” include:
- capital works, horticultural plants, assets allocated to a software development pool, buildings, intangible assets including customer lists and Goodwill.
• Prepayments - Small business entity taxpayers are entitled to a deduction for prepayments where the relevant services will be wholly provided within 12 months of the date of expenditure, such as office supplies, stationery, rent and advertising etc.
General Deductions:
• Staff Bonuses - ensure that a cheque has been written or payments made prior to 30th June 2021 and PAYG Withholding Tax deducted.
• Staff Holidays - where practical, encourage staff to take holidays prior to 30th June 2021 or when cashing in holidays, the payment is made before 30th June 2021.
• Superannuation - for the year ending 30th June 2021, superannuation contributions can be paid for any eligible person:
- Up to 65 years of age - $25,000.
- People aged 65 - 74 must be working for a minimum of 40 hours in any 30 consecutive day to make voluntary contributions to their superannuation account. This is known as the “Superannuation Work Test”.
- Superannuation Guarantee – 9.5% in 2020/21 increasing to 10% from 1 July 2021.
- Self-Employed Persons - self-employed persons can obtain a superannuation deduction on the same basis as that adopted for employees.
• Salary Sacrifice Arrangements - salary sacrifice arrangements can be utilised to maximise superannuation contributions subject to the overall deduction limits.
• Non-Concessional Contributions - the non-concessional contribution cap is $100,000 for 2020/21. If you are aged under 65, the Bring Forward Rule lets you make up to $300,000 (3 times the annual contribution cap in a single year) of non-concessional contributions over 3 years.
• If you are aged 67 to 74, you can make voluntary superannuation contributions for the first year after you retire without satisfying the work test provided that you have less than $300,000 in your superannuation account at the 30th June 2020.
• If you are over 65 years and you have recently sold your house in Australia or you are about to sell your house that you have lived in for more than 10 years, you are able to make a downsizer contribution of up to $300,000 to your superannuation fund within 90 days of settlement. This contribution is made from the proceeds of the sale of your house. If you provide your superannuation fund with a form before or while making the contribution, the downsizer contribution won’t be accounted for under the concessional or non-concessional contribution caps.
• You can only have $1.6 million in superannuation and retirement funds used to commence a retirement income stream.
• Superannuation Minimum Contributions - superannuation contributions have to be paid to all eligible employees who are paid, at least, $450 gross per month.
• Interest on Loan Funds - interest can be claimed on loans taken out for business purposes or to purchase income producing properties and shares in companies.
• Repairs and Maintenance - ensure that the work has been completed prior to 30th June 2021.
• Director’s Fees - ensure that cheques are drawn for payments made prior to 30th June 2021 and that PAYG withholding tax is deducted.
• Travel Deductions:
- Overseas - prepare a full itinerary and diarise this travel.
- Local away for more than 6 nights you are required to maintain a diary.
A ban on travel related tax deductions for most real estate investors now applies.
• Motor Vehicle Expenses - there are two methods available to calculate tax deductions for work-related motor vehicle expenses:
1. Cents Per Kilometre - $0.72 per kilometre (you can claim up to a maximum of 5,000 business kilometres per vehicle per annum).
2. Logbook Method - you can claim your actual business kilometres as a percentage of the total kilometres that the motor vehicle has travelled and then utilise that percentage as the claimable percentage of the total motor vehicle expenses incurred.
• Donations - any promised tax-deductible donations should be made prior to 30th June 2021 to claim the deduction.
• Borrowing Costs - can be claimed over the shorter of 5 years or the term of the loan.
• Entertainment - is not deductible unless it is provided as a fringe benefit and the fringe benefit taxes have been paid.
• Gifts - ensure payment is made to a tax-deductible charity on or before 30th June 2021.
• Audit Fees - deductible if there is a contract that creates a presently existing liability before 30th June 2021.
• Salary Packages - ensure 2021/22 salary packages are negotiated and documented prior to 30th June 2021.
• Legal Costs - review any legal costs that have been incurred. If the legal costs relate to regular business operations (e.g. debt collection), separate these legal costs from the remaining legal costs which will relate to capital items which are not claimable for income tax purposes.
• Luxury Car Tax - the luxury car tax is 33% and applies to the GST inclusive value in excess of $68,740 (including GST). The luxury car tax for fuel efficient vehicles applies from a cost of $77,565 (including GST).
• Research and Development Expenditure for Companies with Turnovers Under $20 million - a company will receive the benefit of a refundable Research and Development Tax Incentive Rebate calculated at 43.5% of the eligible research and development expenditure spent during 2020/21. For companies with turnovers under $20m, the tax offset can be paid to the company by the Australian Taxation Office within 30 days of lodgement of the company’s income tax return, if the company elects to receive this payment in the company’s income tax return. It is important to note that, for the research and development claims in respect of the year ending 30th June 2021, the company must register with AusIndustry by 30th April 2022 or the date of lodgement of the company’s income tax return, whichever is the earlier. Companies must lodge any Overseas Finding Application relating to expenditure in 2020/21 with Australian Taxation Office by 30th June 2021.
• Stock
Trading Stock Rules - small business entities (turnovers under $10 million) do not have to account for changes in trading stock or prepare a stock-take for taxation purposes, where the difference between the opening value of stock in a reasonable estimate of the closing stock is $5,000 or less.
E Stock - All Businesses
• Stock on Hand - review stocktake lists in early June 2021. Determine whether to conduct “sales” prior to 30th June 2021. Conduct stocktake as at 30th June 2021. If you are conducting regular “rolling” stocktakes throughout the year, it may not be necessary to conduct a stocktake as at 30th June 2021. Stocktaking may not be necessary if you are a small business entity (refer Section D - Trading Stock Rules).
• Value of Stock - stock can be valued at different individual methods for each item of stock:
- stock
- sale value
- lower of market value or replacement cost
• Obsolete Stock - identify any obsolete stock and decide whether to clear or dump that stock prior to stocktake.
F Assets
• Fixed Assets - determine if there are any benefits for scrapping any fixed assets to obtain a tax write off prior to 30th June 2021.
G Employment Issues
• Payment Summaries - if you’re using the Single Touch Payroll (STP) you are exempt from issuing payment summaries to your employees. The payment summaries will be made available to your employees online through MyGov. The finalisation declaration requires the employer to declare that all of the information relative to the financial year for each employee has been provided through your STP reporting. Finalisation declaration lodgement is required by 14th July.
If you have 20 or more employees, you should be reporting closely held payees each payday along with arm’s-length employees. The finalisation due date for closely held payees is 30th September each year.
For small employers (19 or fewer employees) who only have closely held payees, the due date for the end of year STP finalisation will be the payee’s income tax return due date.
If you are an employer with a mixture of both closely held payees and arm’s-length employees, the due date for the end of year STP finalisation for closely held payees is 30th September each year. All other employees are due by 14th July each year.
• Payment Summaries - if you are not using Single Touch Payroll, payment summaries have to be prepared and sent to all employees by 14th July 2021.
• PAYG Withholding Tax - if you are not using Single Touch Payroll, the annual summaries are due to be lodged with the Australian Taxation Office by 14th August 2021.
• Payroll Tax (if you are liable - this is a State/Territory government tax - if you have any questions, please contact us) - you have to prepare a reconciliation of total payroll for the year showing the total amount of payroll tax payable and then reconciled this with the remittances that you have forwarded to your State/Territory government agency during the year.
• WorkCover - a WorkCover declaration is due by 31st August 2021 certifying wages paid for the year ending 30th June 2021.
H Income Issues
• Government Grants - if your business has received a grant from an Australian, State or Territory government department, other than the “cashflow boost payments”, it is most likely paid to you on the basis that it is taxable income and therefore you need to disclose the receipt of the government grant in your income tax return.
If you are lodging your income tax return on a cash basis, this highlights the desirability of ensuring that all of the government grant funds have been expended on tax deductible items prior to 30th June 2021 (if possible).
Please note: The “Job Keeper Payments” provided by the government are to be treated as taxable income by the business receiving the payments.
• Personal Services Income - taxation laws include measures that are designed to limit the deductions available to certain contractors, whether operating as a sole trader or through a company, trust or partnership; these are known as the “Personal Services Income (PSI) Measures”. A taxpayer, who meets certain specified tests, will be treated as carrying on a personal services business and will be able to claim a wider range of deductions. If you are operating a personal service business you need to be aware of the Australian Taxation Office’s strict approach to income retention and income splitting. If you have any questions relating to this item, please contact us.
• Non-Commercial Losses - for a business to be commercial, under the “Non-Commercial Losses Tests”, the business needs to meet certain prescribed tests. If the tests are not met, any losses, arising from the activities, have to be carried forward as an offset in a later year against future income from the same type of source. If you have non-commercial losses, please contact us for advice on the treatment of the losses in 2020/21.
• Trust Distributions - the Australian Taxation Offices indicated that it will be enforcing the full measure of the law, whereby trustee distributions/resolutions have to be made by 30th June each year.
I Utilising Tax-Free Threshold
• Every adult taxpayer has a tax-free threshold of $18,200. If a taxpayer is verging on losses, consideration should be given to the decisions being made in relation to the valuation of stock, bringing forward a delay of sales etc. to utilise the tax-free threshold. Otherwise, the benefit will be lost for ever.
J Entities Not Defined As Small Business
• Aggregated turnover (Refer Section D) of over $10M for the year. Please ignore this section if not applicable to you - refer to Section D - Small Business Entities.
• The prepayment rule for “other small businesses” applies to business taxpayers with a group turnover of $10M or more.
Depreciation Rules For Turnover Of $10 Million To $50 Million:
• Depreciation rules for “new or second-hand” assets first used, or installed ready for use, between 1st July 2020 until 30th June 2021 and purchased by 31st December 2020, businesses can utilise the “Instant Asset Write Off” for assets costing up to $150,000.
• For “new or second-hand assets” of any value first used, or installed ready for use, by 30th June 2021 and purchased after 6th October 2020, can be written off under the “Temporary Full Expensing Rules” (the application of which has been extended until 30th June 2023).
• Businesses can also apply “Temporary Full Expensing” to the business portion of the cost of “improvements made to eligible depreciating assets” from 1st January 2021 to 30th June 2021.
• There is a restriction on the availability of the Instant Asset Write Off for passenger vehicles.
Car Limit:
• For passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers, the limit is $59,136 (this is the limit of depreciation allowed on a passenger vehicle).
• The passenger vehicle limit does not apply to vehicles modified for use by people with a disability.
• The “Instant Asset Write Off” is limited to the business portion of the car limit. If a passenger vehicle is used for 70% business use, the total you can claim under the Instant Asset Write Off is activities, the maximum ride for that vehicle would be $59,136 x 70% = $41,395.
• If a vehicle has a payload more than one tonne and is used 100% the business, the claim under the “Instant Asset Write Off” can be up to $150,000 and, if the claim is being made under the “Temporary Asset Expensing Provision” the claim can be the cost of the vehicle.
Accelerated Depreciation For Turnover $50 Million To $500 Million:
• Depreciation rules for “new or second-hand assets” first used, or installed ready for use, between 1st July 2020 and 30th June 2021 and purchased by 31st December 2020 businesses can utilise the “Instant Asset Write Off” for assets costing up to $150,000.
• For new assets of any value first used, or installed ready for use, by 30th June 2021 and purchased after 6th October 2020, can be written off under the “Temporary Full Expensing Rules” (the application of which has been extended until 30th June 2023).
• Businesses can also apply “Temporary Full Expensing” to the business portion of the cost of “improvements made to eligible depreciating assets” from 1st January 2021 to 30th June 2021.
• For passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers, the limit is $59,136 (this is the limit of depreciation allowed on a passenger vehicle).
• The passenger vehicle limit does not apply to vehicles modified for use by people with a disability.
• The “Instant Asset Write Off” is limited to the business portion of the car limit. If a passenger vehicle is used for 70% business use, the total you can claim under the Instant Asset Write Off is activities, the maximum ride for that vehicle would be $59,136 x 70% = $41,395.
General Deductions:
• Staff Bonuses - ensure a cheque has been written with payment made prior to 30th June 2021 and tax deducted.
• Staff Holidays - where practical, encourage staff to take holidays prior to 30th June 2021 or if being cashed out, paid before 30th June 2021.
• Superannuation - for the year ended 30th June 2021 superannuation contributions can be paid for any eligible person:
- up to $25,000
- people aged 65 - 74 years must be working for a minimum of 40 hours in any 30 consecutive days to make a voluntary contribution to their superannuation account. This is known as the “Superannuation Work Test”.
• Superannuation Guarantee - 9.5% in 2020/21, increasing to 10% from 1 July 2021.
• Self-Employed Persons - can obtain a superannuation deduction on the same basis as that adopted for employees.
• Salary Sacrifice Arrangements - salary sacrifice arrangements can be utilised to maximise superannuation contributions subject to the overall deduction limits.
• Non-Concessional Contributions - the non-concessional contribution cap is $100,000 for 2020/21. If you are aged under 65, the Bring Forward Rule lets you make up to $300,000 (3 times the annual contribution cap in a single year) of non-concessional contributions over 3 years.
If you are aged 67 to 74 years you can make voluntary superannuation contributions for the first year after you retire without satisfying the work test provided you have less than 300,000 in your superannuation account at 30th June 2020.
If you are over 65 years and you have recently sold your house or you’re about to sell your house that you have lived in for more than 10 years, you are able to make a downsizer contribution of up to $300,000 to your superannuation fund. The contribution is made from the proceeds of the sale of your house which you have owned for at least 10 years and is located in Australia. If you provide your superannuation fund with a form before/while making the contribution, the downsizer contribution won’t be accounted for under the concessional or non-concessional superannuation caps. You can only have $1.6 million in superannuation and retirement funds used to commence a retirement income stream.
• Superannuation Minimum Contributions - superannuation contributions have to be paid to all eligible employees who are paid, at least, $450 gross per month.
• Interest On Loan Funds - interest can be claimed on loans taken out for business purposes or to buy income producing properties and/or shares.
• Repairs and Maintenance - ensure that the work has been completed prior to 30th June 2021.
• Directors Fees - ensure cheques are drawn for payment may prior to 30th June 2021 and that the appropriate tax is deducted.
• Travel Deductions:
- Overseas - prepare a full itinerary and diary.
- Local - for more than 6 nights you are required to maintain a diary.
A ban on travel related tax deductions for most real estate investors now applies.
• Motor Vehicle Expenses - there are two methods available to calculate tax deductions for work-related motor vehicle expenses:
- Cents Per Kilometre - $0.72 per kilometre (you can claim up to a maximum of 5,000 business kilometres per vehicle per annum.
- Logbook Method - you can claim your actual business kilometres as a percentage of the total kilometres that the motor vehicle has travelled and then utilise that percentage as the claimable percentage of the total motor vehicle expenses incurred).
• Donations - any promised tax deductible donations should be made prior to 30th June 2021 to claim the deduction.
• Borrowing Costs - can be claimed over the shorter of 5 years or the term of the loan.
• Entertainment - entertainment is not deductible unless it is provided as a fringe benefit on the Fringe Benefit Taxes that have been paid.
• Gifts - ensure payment is made to a tax-deductible charity on or before 30th June 2021.
• Audit Fees - deductible if there is a contract that creates a presently existing liability before 30th June 2021.
• Salary Packages - ensure salary packages are negotiated and documented for 2021/22 prior to 30th June 2021.
• Legal Costs - review any legal costs that have been incurred. If the legal costs relate to regular business operations (e.g. debt collection), separate those legal costs from the remaining legal costs which will relate to capital items which are not claimable for income tax purposes.
• Luxury Car Tax - the Luxury Car Tax is 33% and applies to the GST inclusive value in excess of $68,740 (including GST). The Luxury Car Tax for fuel efficient vehicles applies from a cost of $77,565 (including GST).
• Research and Development - companies that incur research and development can claim additional taxation benefits. There are 2 components:
- Companies with turnovers under $20m
- Companies with turnovers over $20m
Companies must register their research and development projects with AusIndustry by 30th April 2022 or the date of lodgement of the company’s income tax return, whichever is the earlier.
• Research and development expenditure for companies with turnovers under $20m- a company will receive the benefit of a refundable research and development tax incentive calculated at 43.5% of the eligible research and development expenditure spent during 2020/21. The rebate can be paid to the company by the Australian Taxation Office within 30 days of lodgement of the company’s income tax return, if the company elects to receive this payment in the company’s income tax return.
• Companies with turnovers over $20m - the company will receive a 38.5% non-refundable tax offset of the eligible research and development expenditure. If you require further information of the treatment of research and development expenditure, please contact us.
Deductions on “Accruals” Basis:
(Subject to the income tax return being lodged on an “Accruals” Basis)
• Fringe Benefits Tax Payment (Accruals Basis) - if a Fringe Benefit Tax instalment is due on 21st July 2021, it can be accrued and claimed as a tax deduction in the year ending 30th June 2021.
• Commissions Owing (Accruals Basis) - where employees or another business are owed commission by your business for services rendered up to 30 June 2021, the accrued amount can be claimed as a tax deduction at 30th June 2021.
• Bad Debts (Accruals Basis) - actually write-off any bad debts prior to 30th June 2021 and prepare minutes authorising the write off.
• Interest (Accruals Basis) - any accrued interest outstanding on a business loan, that has not been paid at 30th June 2021, can be claimed as a tax deduction at 30th June 2021.
• Salaries and Wages (Accruals Basis) - the accrued expense for the days that employees have worked, but not paid at 30th June 2021, can be claimed as a tax deduction at 30 June 2021.
• Commercial Bills (Accruals Basis) - where the term of a commercial bill expires beyond 30th June 2021, the discount applicable to the period up to 30th June 2021 can be claimed as a tax deduction.
• Rent (Accruals Basis) - if rent is in arrears, the part that is owed up to 30th June 2021 can be claimed as a tax deduction.
Stock:
• Stock On Hand - review stocktake list in June 2021. Determine whether to conduct “sales” prior to 30th June 2021. Conduct stocktake as at 30th June 2021. If you are conducting regular “rolling” stocktakes throughout the year, it may not be necessary to conduct a stocktake as at 30th June 2021.
• Value Of Stock - stock can be valued at different individual methods for each item of stock:
- Cost
- Sale Value
- Lower of Market Value or Replacement Cost
• Obsolete Stock - identify any obsolete stock and decide whether to clear or dump that stock prior to stocktake.
Assets:
• Fixed Assets - determine if there are any benefits in scrapping any fixed assets to obtain the tax write off prior to 30th June 2021.
Employment / Contractor Issues:
• Payment Summaries - if you are not using Single Touch Payroll, payment summaries have to be prepared and sent to all employees by 14th July 2021.
• PAYG Withholding Tax - if you are not using Single Touch Payroll, the annual summaries are due to be lodged with the Australian Taxation Office by 14th August 2021.
• If you have made payments and withheld amounts from businesses which did not quote their ABN to you, the PAYG Withholding Where ABN Not Quoted Annual Report lodgement date is 31 October 2021.
• Payroll Tax (if you are liable - this is a State/Territory government tax - if you have any questions, please contact us) - you have to prepare a reconciliation of total payroll for the year showing the total amount of payroll tax payable and then reconciled this with the remittances that you have forwarded to your State/Territory government agency during the year.
• WorkCover - a WorkCover declaration is due by 31st August 2021 certifying wages paid for the year ending 30th June 2021.
Income Issues:
• Government Grants - if your business has received a grant from an Australian, State or Territory government department, other than the “cashflow boost payments”, it is most likely paid to you on the basis that it is taxable income and therefore you need to disclose the receipt of the government grant in your income tax return.
If you are lodging your income tax return on a cash basis, this highlights the desirability of ensuring that all of the government grant funds have been expended on tax deductible items prior to 30th June 2021 (if possible).
Please note: The “Job Keeper Payments” provided by the government are to be treated as taxable income by the business receiving the payments.
• Bad Debts Recovered (On An Accruals Basis) - if a debtor owed an amount which has been written off, subsequently pays that amount you have to bring the amount paid to account as assessable income in the year of recovery.
• Personal Services Income - taxation laws include measures that are designed to limit the deductions available to certain contractors, whether operating as a sole trader or through a company, trust or partnership; these are known as the “Personal Services Income (PSI) Measures”. A taxpayer, who meets certain specified tests, will be treated as carrying on a personal services business and will be able to claim a wider range of deductions. If you are operating a personal service business you need to be aware of the Australian Taxation Office’s strict approach to income retention and income splitting. If you have any questions relating to this item, please contact us.
• Non-Commercial Losses - for a business to be commercial, under the “Non-Commercial Losses Tests”, the business needs to meet certain prescribed tests. If the tests are not met, any losses, arising from the activities, have to be carried forward as an offset in a later year against future income from the same type of source. If you have non-commercial losses, please contact us for advice on the treatment of the losses in 2020/21.
• Trust Distributions - the Australian Taxation Offices indicated that it will be enforcing the full measure of the law, whereby trustee distributions/resolutions have to be made by 30th June each year.
K Primary Producers
(In addition to small business entities [Section D] and entities not defined as small business [Section J])
Deductions:
• Non-Commercial Losses - for a business to be commercial, under the “non-commercial losses tests”, the business needs to meet certain prescribed tests. If the tests are not met, any losses arising from the activities have to be carried forward as an offset in a later year against future income from the same type of source. If you have non-commercial losses, please contact us for advice on the treatment of the losses in 2020/2021.
L Companies
• Franking Account - a company’s dividend payments and franking profile should be reviewed before year-end to ensure sufficient credits are available. If you have any questions, please contact us for a review.
• Company Loans - the Law requires that a loan to a shareholder is properly documented. If there is no security offered, the term of the loan should not exceed 7 years. If security is offered, the loan should not exceed 25 years. The minimum rate to be charged during 2020/21 is 4.52% (this is the rate advised by the Reserve Bank). If loans being made to shareholders haven’t been supported by a properly documented loan agreements, then the Australian Taxation Office can treat these payments as being dividends, which are assessable to the shareholder.
M Capital Gains Tax
• Matching Capital Losses and Capital Gains - capital losses are not directly deductible. Capital losses have to be offset against any capital gains generated during 2020/2021.
• 50% Capital Gains Tax Discount - you should check your eligibility for the general 50% Capital Gains Tax discount for individuals. If you are a small business operator and are able to meet the $6 million net value asset test or have turnover of less than $2 million, you might be entitled to further Capital Gains Tax concessions. If you have any questions on the operation of these concessions, please contact us.
• “Wash Sales” - the Australian Taxation Office has issued a ruling that relates to “wash sales”. This is a situation where shares, in companies listed on the Stock Exchange, are sold to crystallise the capital loss and then shortly thereafter the taxpayer, or an associate of the taxpayer, purchases shares in that same corporation on the Stock Exchange.
N Reportable Payment Report
• If you are operating the following industries, you are required to submit a Summary of Payments made during 2020/2021 to the Australian Taxation Office by 28th August 2021:
- Building and Construction Industries
- Couriers Services
- Information Technology
- Road Freight
- Security, Investigation and Surveillance Services
- Cleaning
O Superannuation Funds
• Contributions to Superannuation Funds - for taxpayers with adjusted taxable income (ATI) less than $250,000 are taxed at 15% of the contribution by the superannuation fund. But taxpayers with ATI over $250,000 the contributions are taxed at 30%.
• Earnings Made In A Superannuation Fund - are taxed at 15% and paid by the superannuation fund.
• The people 60 years or over who have started drawing a pension, payments from the superannuation fund are, in the majority of cases, tax-free.
• Generally, monies invested in superannuation funds cannot be accessed until 55 years of age.
P Early Stage Innovation Company Report On Shares Issued
• Companies are required to complete an Early Stage Innovation Company Report if they issue new shares to one or more investors during 2020/21 that could lead to an investor being entitled to access the Early Stage Investor Tax Incentives.
• The report must be submitted to the Australian Taxation Office by 31st July 2021.
Q Property Investments
Deductions:
• Interest On Investment Loans - taxpayers who have borrowed money for a non-business investment (e.g. rental property) can check with their lenders to see if they can prepay interest prior to 30th June 2021.
• Building Allowance - the construction costs of income producing buildings may be written off at 2.5% or 4%, depending on the date of construction. Please contact us if you require additional details.
• General expenses - can include real estate agents fees; building allowance; depreciation of fixtures, fittings, plant and equipment; share of depreciation of common property in a strata-titled property; repairs and maintenance; pest control; interest on monies borrowed for investment in the property; bank charges on the property bank account; cleaning; electricity; rates; land tax; insurance.
• Negative Gearing - the net loss, which may include interest, borrowing costs, etc., may be deductible.
• Travel Expenses - a ban on travel related tax deductions for most real estate investors now applies.
Income Issues:
• Income Splitting - income splitting can be highly tax effective, especially if investments have been placed in the name of a lower income earner. This can be applicable where a spouse is not working and the income in the spouse’s name would therefore be taxed at a lower rate.
• All income from a rental property - should be declared.
R End Of Financial Year Review
If you have any queries on any other items not discussed in this newsletter, or you have general matters that you would like to discuss with us relative to your taxation affairs for the year ending 30th June 2021, please contact us urgently so that a convenient time for a meeting can be arranged.
S Business Review
Now is an ideal time to talk to us about Business Development Strategies for your business in 2021/22, particularly relating to:
• Developing a Strategic Plan to navigate the challenges of 2021/22.
• The establishment of a series of regular monthly or quarterly business review meetings to discuss your business' performance.
• What we could offer by performing a 'Chief Financial Officer' service for your business.
• Reviewing your business financing position and giving consideration to the possibility of raising capital via:
- Crowd Sourced Funding Equity Raising; or
- Section 708 of the Corporations Act capital raising; or
- Early Stage Innovation Company Capital Raising
• A business health check.
• An analysis of risks relating to your business particularly a Personal Property Securities Register Due Diligence Review.
• Cashflow including:
- debtors
- stock
- work in progress
• Business Plan development for 2021/2022.
• Budgets & Cashflow Forecasts for 2021/2022.
• Setting retail prices to achieve budget targets.
• Setting trades charge out rates to achieve budget targets.
• Setting professional fees to achieve budget targets.
• Accessing government grants.
• Analysing gross profit being achieved in your business.
• “What If” calculations relative to sales.
If you would like us to undertake a business review on your business, please contact us.
If you have been undertaking research activities and you would like to be able to claim expenditure as part of the Research and Development Tax Incentive Rebate please contact us prior to 30th June 2021.
If you are contemplating undertaking research activities in the future and you would like to understand how you could qualify for the Research and Development Tax Incentive Rebate please contact us for a discussion.
T Individuals
• Superannuation Co-Contribution - individuals with assessable income of below $54,838 may qualify for the government co-contribution of up to $500 if they make a non-concessional contribution of $1,000 before 30th June 2021. To qualify for the co-contribution:
- At least 10% of assessable income must be received from employment or a self-employment arrangement.
- The individual must be below age 71 at the end of the financial year.
- They must have a total superannuation balance of less than $1.6 million on 30th June 2020 and they must lodge a tax return for the 2020/21 income year.
• Spouse Tax Offset For Superannuation - couples with one spouse earning a low income or no income, may benefit from the spouse tax offset if the high income earner makes a spouse contribution into the low income earner’s spouse’s superannuation, the maximum offset that can be claimed is $540 where the low income earner’s spouse’ is below $37,000 or less. The offset reduces when the spouse’s income is more than $37,000 and phases out completely when the spouse’s income reaches $40,000.
• Individuals Saving For Their First Home - Voluntary Superannuation Contributions - individuals saving for their first home may benefit from making voluntary contributions to superannuation before 30 June. This scheme allows first home buyers to make voluntary contributions of up to $15,000 to superannuation per financial year while saving towards the deposit in a tax effective environment. After contributing for a couple of years, they can withdraw these contributions (up to $30,000 per individual) and use the proceeds towards the acquisition of their first home.
• Taxation Advice - fees payable to an accountant or registered tax agent for taxation advice can be claimed.
• Expense Substantiation - ensure that you can justify all employment-related expense amounts incurred.
• Working from Home Expenses - expenses can be claimed for working from home (as distinct from having a home office) but full records need to be kept so that the claim can be substantiated. The Australian Taxation Office has issued a ruling relating to people working from home during the COVID-19 crisis. The temporary simplified method applicable, known as the "shortcut method", is $0.80 per hour for all additional running expenses.
• Expenses for Shareholding Investments - expenses incurred in gaining income from shares are a tax deduction.
• Sickness and Accident Insurance - premiums for Sickness and Accident Cover are tax deductible. Payments can be made by the employer without incurring Fringe Benefits Tax.
• Home Office Expenses - if you use an area in your home, you can claim the expenses of a home office. Items that could be claimed include:
- electricity (proportionate)
- rent (proportionate)
- cleaning (proportionate)
- repairs and maintenance for the office
- depreciation of fixtures and fitting and plant and equipment for the home office
• Work-Related Expenses - items such as travel (other than travel to and from work), uniforms, laundry of work clothes, subscriptions, union fees and self-education - but you must be able to substantiate your claim. A ban on travel related tax deductions for most real estate investors now apply. If you have used your own motor vehicle for business related purposes you can claim motor vehicle expenses:
- Cents per kilometre
- Logbook method
• End of Year Tax Schemes - the Australian Taxation Office produces product rulings on various investment products that are marketed particularly around 30 June each year. To avoid confrontation with the Australian Taxation Office, it is best to consider investing in products that have obtained a product ruling. Whilst these product rulings are not a guarantee or government endorsement on the likely success, or profitability, of the investment, you will have improved your prospects of being able to make these claims then if the product ruling had not been made. It is important that you abide by the wording within the product ruling.
• Managed Investment Schemes - it is recommended that you have a meeting with your professional accountant prior to committing to a Managed Investment Scheme (MIS) investment.
Social Security Issues:
• Social security recipients wishing to gift an amount or an asset within the allowable disposal amount can do so before 30th June 2021. These individuals can gift up to $10,000 before 30th June 2021 and another $10,000 after 1st July 2021.
• Individuals in receipt of government benefits can gift up to $10,000 on a single financial year or up to $30,000 over 5 rolling financial years. However, the amount gifted in any given financial year cannot exceed $10,000 or the deprivation rules will be applied.
Income Issues:
• Interest Earned - declare interest earned on bank accounts, loans, etc.
• Employee Share Schemes - if you are a member of an employee share scheme, you should ensure that any income earned is included in your income tax return.
• Scheme Formed After 1st July 2015 - Employee Share Scheme interests provided by eligible start-up companies will not be subject to up front taxation if the investment is held by the employee for at least three years. An eligible start-up company is one with aggregated turnover of less than $50M unlisted and incorporated for less than ten years.
• Scheme Formed After 1st July 2009 - the discount on Employee Share Schemes are taxed either upfront or on a deferred basis. For 'qualifying' schemes, if the employee is earning less than $180,000 taxable income plus reportable fringe benefits, reportable superannuation contributions and total investment losses, then the employee can claim a $1,000 exemption from the inclusion of the assessable discount.
• Dividends, Interest, Managed Funds Distributions, etc. - the ATO matches information provided in tax returns with information received from external sources, such as public companies, banks, managed funds etc.
Offsets:
• Zone Offset - This offset is based upon where you are considered to reside for the tax year, so your Zone Tax Offset is limited to where your main residence or home is considered to be.
• Salary Packaging - salary packaging can assist in the minimisation of income tax, particularly in the areas of voluntary superannuation contributions and acquisition of assets that are not subject to Fringe Benefit Tax. Your employer is required to report the value of fringe benefits in your payment summary. That may have an effect on other government payments you receive.
If you have any questions relating to planning your taxation affairs at 30th June 2021, please do not hesitate to contact us.
MIHC Accounting
Mobile Number 0414495057
Email Address : info@mihcaccounting.com.au
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