MHP NEWS

March 2021

The first three quarters of the financial year are almost done. This time last year, our March newsletter was about Covid-19 and turbulent times it presented- so much has happened in a year!



March brings with it the start of interim tax planning, quarter end obligations and the end of JobKeeper payment. We cover these topics and other important ATO snippets in our March newsletter .

Tax Time 2020/2021

Have you been working from home? 

While you might not be able to claim your active wear (or inactive wear!), you can still claim 80c per work hour on working-from-home expenses until 30 June 2021!

All you need is a record of how many hours you've worked from home such as a timesheet, roster, diary or similar document.

For more info on claiming working-from-home expenses, visit http://www.ato.gov.au/.../deduction.../home-office-expenses/

What's New and Changing from 1 July 2021?

Super Guarantee rate to increase to 10%

On July 1 2021, the Superannuation Guarantee (SG) rate will rise from 9.5% to 10%.

So if you are a business with employees, you will need to ensure your payroll and accounting systems are updated to incorporate the increase to the superannuation rate.

The below link will provide you more information on the increase and tools to determine if your employees are eligible for super (including contractors treated as employees for super purposes).

SG will increase at a rate of 0.5% over the next 5 years to reach 12% by 1 July 2025.

https://www.ato.gov.au/Business/Business-bulletins-newsroom/Employer-information/Super-Guarantee-rate-rising-1-July/

Please also note also from 1 July 2021, where an employee does not have a superannuation fund, you can no longer set up a default fund. You will first need to contact the ATO to see if the employee has any existing superannuation funds to connect to. Only when the ATO confirms that there are no existing super funds connected to the employee, can you you use your default fund.

Company Tax Rate Reductions

*aggregated turnover less than $50m and no more than 80% of the company's assessable income is base rate entity passive income.

Single Touch Payroll (STP)

From July 2021 Single Touch Payroll (STP) will apply to most businesses. This will now include small businesses (those with fewer than 19 employees) and business with closely held employees ie directors of family companies, salary and wages for family employees of a business).No further extensions will be granted.

However, employers with closely held employees, some concessions on how you report is being offered. Employers in this category can report in actual real time, report actual payments quarterly or report a reasonable estimate quarterly.



If you fit in to this category and need assistance please contact us to assist you with the transition.

Superannuation Concessional & Non-Concessional Contribution Caps

From July 2021, the superannuation contribution caps will increase. This means you are able to contribute more to your superannuation fund (as long as you have not already reached your cap). 

The concessional contribution cap will increase from $25,000 to $27,500.

A reminder that concessional contributions are contributions made to your superannuation fund before tax (like superannuation guarantee). 

The non-concessional cap will increase from $100,000 to $110,000. Remember, non concessional contributions are after tax contributions made to your superannuation fund.



The 'bring forward' rule allows those under 65 years to contribute three years worth of non-concessional contributions to their superannuation fund in one year. So, from July, people in this category can contribute up to $330,000 in one year (Superannuation balance rules will apply).

Federal Budget Summary

Personal Income Tax Changes

Low and Middle Income Tax Offset (LMITO)

The Government has proposed it will retain the LMITO for one more income year. Therefore, it will be available for the 2022 income year. 

The LMITO is a non-refundable tax offset that provides relief for low and middle income taxpayers and is available in addition to the Low Income Tax Offset ('LITO').

Below are the proposed LMITO changes from the 2022 year.

Increasing the Medicare Levy Low Income Thresholds

Medicare low income thresholds for singles, families and seniors and pensioners will increase for the 21 income year as follows;

Singles threshold will increase from $22,801 to $23,226.

Family threshold will be increased from $38,874 to $39,167.

Single Seniors and pensioners threshold will increase from $36,056 to $36,705.

The family threshold for seniors and pensioners will be increased from $50,191 to $51,094.

For each dependent child or student, the family income thresholds increase by a further $3,597.



Individuals Claiming Self-Education Expense Deductions

The first $250 of a specified course or education expense (self education expense) is currently not tax deductible. The Government will remove this omission and it will apply from the income year after the date of legislation being passed.

Changes Affecting Business Tax Payers

Temporary Full Expensing Extension

Temporary full expensing that the Government announced amendments to in the last budget became law on 14 October 2020. The Government have now announced that temporary full expensing will be extended for a further 12 months.

This means that eligible businesses with aggregated annual turnover or total income of less that $5 billion can deduct the full cost of eligible depreciable assets of any value acquired from 7.30pm 6 October 2020 and first used or installed ready for use by 30 June 2023.

This can be fully deductible upfront rather than being claimed over the asset's life.

For businesses with an aggregated turnover under $50 million, the full expensing also applies to second-hand assets.

From 1 July 2023, normal depreciation rules will apply and the instant asset write-off threshold for eligible businesses will revert back to $1,000.

Temporary loss carry-back extension



The 2021/22 federal budget release also saw the extension of the loss carry back measure. Companies with aggregated turnover of less than $5 billion can carry back (utilise) tax losses from the 2021 income year to offset previously taxed profits as far back as the 2019 income year when a tax return is lodged for the 2021 income year.

Superannuation Related Changes

Removing the $450 per Month Threshold Superannuation Guarantee eligibility.

Currently employees need to earn $450 per month to be eligible to be paid superannuation guarantee from an employer. This threshold will be removed so all employees will be paid superannuation from their employer regardless of the income earned.

This will come into effect from the start of the income year the legislation is enabled.

Financial Housekeeping for Year End

Before rolling over your accounting software for the new financial year, make sure you: 



• Do not perform a Payroll Year End function until you are sure that your STP finalisation declaration is correct and printed. Always perform a payroll back-up before you roll over the year.

Employee reporting

Single touch payroll



Where payments to employees have been reported to the ATO through single touch payroll, a finalisation declaration generally needs to be made by 14 July 2021 for employers with 20 or more employees and 31 July 2021 for those with 19 or fewer employees.

Payment summaries do not have to be provided to employees. Instead, employees will be able to access their Income Statement through myGov.

Reportable Fringe Benefits

Where you have provided fringe benefits to your employees in excess of $2,000, you need to report the FBT grossed-up amount. This is referred to as a `Reportable Fringe Benefit Amount' (RFBA).

Do you need to do a stocktake?

Businesses that buy and sell stock generally need to do a stocktake at the end of each financial year as the increase or decrease in the value of stock is included when calculating the taxable income of your business.

If your business has an aggregated turnover below $10 million you can use the simplified trading stock rules. Under these rules, you can choose not to conduct a stocktake for tax purposes if the difference in value between the opening value of your trading stock and a reasonable estimate of the closing value of trading stock at the end of the income year is less than $5,000. You will need to record how you determined the value of trading stock on hand. 

Claiming Tax Deduction for Quarter End Super payments to Employees

If you use the Small Business Superannuation Clearing House (SBSCH) and are intending to to pay your employees quarter end superannuation prior to 30 June to claim a tax deduction then you need to be aware of the following.

Payments made must be accepted by the SBSCH on or before 23rd June 2021. This allows processing time for the payments to be received by the employees superannuation funds before the end of the 20/21 income year.

This tax time, the ATO are putting the spotlight on cryptocurrency. The ATO are concerned that many taxpayers think their cryptocurrency gains are tax-free or only taxable when the holdings are cashed back onto Australian dollars. If you fall into this category you need to keep good records of all your cryptocurrency transactions.

If you have traded in cryptocurrency, please ensure you let us know so we can treat it appropriately in your 2021 income tax return.

Work Related Expenses- Getting it Right 

Another focus area for the ATO this tax time is work related expenses. You need to get it right! If you are claiming any work related expenses, you need to remember these three very important rules:

Knowledge Shop. (May 2021). Updates. Budget 2021-22: The Balancing Act, 1-32.        NTAA. (May 2021). Alerts & Updates. 2021.22 Budget Handout, 1-6.

Business: 

• Accounts data file (MYOB, Quickbooks, access to Xero)
•  Debtors & creditors reconciliation
•  Stocktake if applicable (or, if your business is a Small Business Entity, use the simplified trading stock rules mentioned)
• 30 June bank statements on all relevant loan documents
• Documents on new assets bought or sold, including the date you entered the contract and the date the asset was first used or installed ready for use
• Payroll reconciliation
• Superannuation reconciliation
• Bank statements on operating accounts
• Cash book (if applicable)
• 30 June statements on any investment or operating accounts 

Please contact us for any clarification on any tax matters or issues pertaining to your individual circumstances.

Be sure to check out the links below and keep up to date with the due dates for your tax obligations.

See you in September 2021

Kind Regards

The Team
McDonnell Hume Partners