Tax Strategies for Businesses

• • Trustees must ensure that income distribution resolutions are made and documented, including any separate streaming of franked dividends and capital gains.
  • Ensure any shareholder loan repayments required under loan agreements are made.
  • Reviewing your debtors and writing off any unrecoverable debts.
  • Review asset register and stock and consider:
    1. scrapping obsolete or badly damaged stock and assets
    2. reassessing effective lives of assets on hand.
  • Consider bringing forward any necessary repairs.
  • Ensure superannuation guarantee obligations have been met and that contributions have been received by the relevant fund.
  • Pay donations, if any.
  • Where year-end bonuses, director’s fees etc. are to be paid after year end, consider making appropriate resolutions committing to pay specific amounts to ensure deductibility in 2023/24.
  • Consider the timing of invoices for work in progress.
  • Consider pre-paying deductible expenses (small business taxpayers only).
  • Consider transferring any unearned revenue from the profit and loss account to the balance sheet to highlight its non-taxable status.  Any unearned revenue raised in the balance sheet must be refundable if the business does not provide the services paid for.
  • In relation to loans by shareholders to companies with turnover of more than $20M, ensure that loan agreements are in place so that the loans are not treated as equity
  • From 1 July 2021, 10,000 guarantees will be made available over four years to eligible single parents with dependants to build a new home or purchase an existing home with a deposit of as little as two per cent, subject to an individual’s ability to service a loan, and the government will guarantee up to 18 per cent of the loan.
  • From 1 July 2021, all eligible brewers and distillers will receive full remission (up from 60 per cent) of any excise they pay on the alcohol they produce up to a cap of $350,000 each financial year.

Superannuation Guarantee (SG) – 2024

• Contributions of 11% of gross salary (up to a maximum salary of $62,270 per quarter i.e., $249,080 p.a.) must be made for most employees for the year ended 30 June 2024.   There is no longer any upper age limit for superannuation guarantee contributions.  Superannuation is only deductible when paid.   Contributions for the June 2024 quarter must be received by the relevant fund by 30 June 2024 for a deduction to be claimed in 2023/24.
• Before 1 July 2022, you did not have to pay super guarantee for a worker earning less than $450 a month. You now have to pay regardless of their earnings.
• According to Taxation Ruling TR 2010/1, a contribution by electronic funds transfer (EFT) is not made until the amount is credited to the fund’s bank account.
• If superannuation contributions for the June 2024 quarter are not received by the relevant fund by 30 June 2024, they must be received by 28 July 2024 to be tax deductible.
• If contributions are not received by the fund within 28 days after the end of the relevant quarter, the employer will be subject to the SG charge, a non-deductible payment consisting of the contribution shortfall, interest and administration penalty. The employer is required to self-assess their liability and lodge a SG Statement with the ATO and pay the SG liability by the 28^th day of the second month following the end of the quarter.
• While late paid contributions may in some circumstances be offset against the SG shortfall amount, the requirement to lodge an SG Statement and pay the interest and administration penalty remains.
• The SG rate is 11% for 2023/24 and will increase to 11.5% on 1 July 2024.
• From 29 June 2012, directors became personally liable to pay penalties for any unpaid Superannuation Guarantee Charge, as well as PAYG amounts withheld but not remitted. This change in the law can prevent a director from escaping liability by placing the company into administration or liquidation.

Superannuation Payment by Employers

• • When an employer pays superannuation, it can be in the form of an in specie transfer of specific assets (e.g. shares or business real property) without incurring fringe benefits tax.
  • Employers receive a tax deduction for all superannuation contributions made on behalf of employees. Please note however, that tax penalties at the individual’s marginal tax rate plus an interest charge apply to concessional (pre-tax) contributions (from all sources) in excess of the following limits:

  Age in Years at year end	Concessional Contributions Cap 2021/22	Concessional Contributions Cap 2022/23	Concessional Contributions Cap 2023/24
  Any Age	$27,500	$27,500	$27,500

  • Employers with 20 or more employees have been required to comply with the new SuperStream rules since 31 October 2015.  These rules require employers to make all super contributions and associated contribution data electronically.  Employers will need certain information from each employee’s superannuation fund for this purpose as well as payroll software that conforms to SuperStream. Information required includes the details of the fund’s ABN and bank account as well as an electronic service address.  Employees with SMSFs also need to apply for this.   Smaller employers needed to comply with these rules by 28 October 2016.
  • From 1 July 2018 employers with 20 or more employees were required to report to the Commissioner through Single Touch Payroll-enabled software. The following information must be reported on or before the day you withhold from a payment (the pay day):
    1. payment information, including salary or wages, allowances, deductions, etc.
    2. withholding amounts
    3. superannuation liability information or ordinary times earnings (OTE).
  • Employers who fully report all the information required through Single Touch Payroll do not have to comply with a number of other reporting obligations under the existing law. This includes providing certain payment summaries and the corresponding payment summary annual report. They will need to provide a finalisation declaration through the relevant software.
  • STP became mandatory from 1 July 2018 for employers with 20 or more employees. Once you are setup, the option to report a payment to the ATO will be presented for each pay run and your payroll information will be filed with the tax office. Please contact us to discuss this further if you have any questions.
  • From 1 July 2019, STP was broadened to include all employers (i.e., including employers with 19 or less employees).
  • The new reporting rules essentially require ‘real time’ reporting of salary and wages, PAYG withholding and superannuation information to the ATO directly from their payroll software, giving the ATO almost instant access to key tax-related information.

Superannuation for the Self-Employed

• • • From 1 July 2017, individuals earning[1] more than $250,000 have their concessional superannuation contributions taxed at 30% rather than 15%. Despite this increased rate, concessional superannuation contributions can still be a tax effective strategy for higher income earners.
    • A tax deduction for superannuation contributions was available to self-employed, or substantially self-employed, persons. Deductibility has been expanded to all taxpayers under age 75 from 1 July 2017.
    • Superannuation is only deductible when paid. Contributions for the June 2024 quarter must be received by the relevant Fund by 30 June 2024 for a deduction to be claimed in 2023/24.
    • Contributions for the self-employed are tax deductible.  Please note that unfortunately tax penalties apply if you exceed the contribution caps so be sure to confirm with us if you have any questions (the concessional contributions cap is $27,500 for the 2024 financial year and $30,000 for the 2025 financial year).
    • Please contact us prior to 30 June if you believe the above contribution limits have been exceeded.
    • Taxpayers aged 18 to 67 years do not need to pass a work test in order to be able to make personal concessional superannuation contributions.  Taxpayers aged 67 years to 75 years will need to have worked in gainful employment for at least 40 hours in a consecutive 30 day period in that same financial year, to claim a tax deduction for personal concessional contributions. Taxpayers aged 75 years or older are unable to make personal superannuation contributions.

    [1] For this purpose earnings includes taxable income, concessional superannuation contributions, adjusted fringe benefits, total net investment losses, target foreign income, tax free government pensions and benefits, less child support.

Business Tax Measures

• General

• In October 2018 the Government announced that the scheduled introduction of the 25% rate would be brought forward to start in the 2021-22 year.  This latest tax reduction schedule is now law and reflected in the final column of the table below:

• Tax Year	Aggregated Turnover Threshold	Tax Rate for Base Rate Entities under the Threshold	All other corporate entities
  2016-17	$10 million	27.5%	30%
  2017-18	$25 million	27.5%	30%
  2018-19 to 2019-20	$50 million	27.5%	30%
  2020-21	$50 million	26.0%	30%
  2021-22	$50 million	25.0%	30%
  2022-23	$50 million	25.0%	30%
  2023-24	$50 million	25.0%	30%
  2024-25	$50 million	25.0%	30%
  2025-26	$50 million	25.0%	30%
  2026-27	$50 million	25.0%	30%

  • • The corporate tax rate for entities with an aggregated turnover of $50 million or more remains at 30%.
    • Franking credits will continue to be determined by reference to the amount of tax paid by the company. We note that the drop in company tax rate will mean individual shareholders will pay more personal “top-up” tax when dividends are received as the attached franking credits are lower.
    • From the 2017–18 income year, a base rate entity is eligible for the lower company tax rate. However, you still need to be a small business to be eligible for other small business tax concessions. A base rate entity is a company that:
    1. has a turnover less than the turnover threshold – which is $50 million (increased from $25 million) from the 2018/19 income year, and
    2. operates a business for all or part of the income year.
    • To work out the rate you use when franking your dividends, you need to assume your aggregated turnover will be the same as the previous income year.
    • The company tax rate was progressively reduced for base rate entities with a turnover less than $50 million. From 2022/23, the lower company tax rate has been reduced to 25%.
    • The carrying on a business test is replaced with a passive income test, under which companies that are generating predominantly (i.e., 80% or more) passive income will not be eligible for the lower (less than 30%) corporate tax rate.
    • For vehicles acquired on or after 1 July 2019, eligible primary producers and tourism operators will be able to apply for a refund of any luxury car tax paid, up to a maximum of $10,000.
    • From 1 July 2019, net income generated from the forced sale of livestock will be exempted from the Farm Household Allowance payment assessment, when that income is invested into a farm management deposit.

Small Business Tax Concessions

• • • The small business entity threshold was increased from $25m to $50m of aggregated turnover (ex-GST) from 1 July 2017, increasing the number of businesses that can potentially access small business tax concessions (refer below).

    The company tax rate is reduced to 25% from 1 July 2022 for small businesses (turnover less than $50m).

    • The small business tax discount available to unincorporated small businesses increased from 5% to 8% from 1 July 2016. The discount will be 8% of income tax payable on business income received from an unincorporated small business entity, capped at $1,000 per individual per income year and delivered as a tax offset in the end of year tax return.
    • An immediate write off is available for all eligible business assets per the table below. Eligible assets include cars, machinery, vans, equipment etc. A choice to immediately write off an asset can be made on an asset by asset basis.

  Date range	Threshold for each asset
  12/03/2020 to 30/12/2020 (where business turnover is less than $500m aggregated turnover)	$150,000
  06/10/2020 to 30/06/2023 (where business turnover is less than $5bn aggregated turnover)	100% of eligible depreciable assets of any value (i.e., the temporary full expensing rules)
  01/07/2023 to 30/06/2025 – PROPOSED (where business turnover is less than $10 million aggregated turnover) NB: This measure has not yet been legislated as at 14 June 2024	$20,000

  • In addition, if the balance of the small business simplified depreciation pool is less than $150,000 over this period, it can be written off immediately.
  • Small businesses that provide employees with more than one qualifying work-related portable electronic device in a year can claim an FBT exemption on each device, even where the devices have similar functions.
  • The main concessions currently available for taxpayers meeting the small business entity test are:
    1. Depreciable assets are pooled and depreciated at 30% (15% in the year an asset is first added to the pool).
    2. Ability to change legal structure without attracting a CGT liability with effect from 1 July 2016.
    3. Simplified trading stock rules – in certain circumstances small business entities do not have to account for changes in trading stock or conduct a year end stock take. This is available where the reasonably estimated value of trading stock at year end is within $5,000 of the opening stock value;
    4. Deduction available for prepaid expenses incurred up to 12 months in advance;
    5. A potential reduction to two years from the standard four years that the ATO can audit and amend the taxpayer’s assessments;
    6. Eligibility for the desirable CGT small business concessions without having to satisfy net asset eligibility criteria (but note that the existing $2m turnover threshold will remain in place for this concession i.e., the $10m threshold does not apply);
    7. Annual apportionment of GST input tax credits for acquisitions and importations that are partly creditable;
    8. Accounting for GST on a cash basis;
    9. Paying GST by quarterly instalments;
    10. Exemption from the FBT car parking rules;
    11. Eligibility to pay PAYG instalments based on GDP adjusted notional tax;
    12. Immediate deductibility for various start-up costs
  • In the lead up to 30 June 2024, small business entities may consider strategies such as prepaying expenses (for no more than twelve months) or deferring the receipt of income.
  • The Skills and Training boost provides small or medium businesses (i.e. aggregated turnover less than $50 million) with 20% bonus deduction for eligible expenditure incurred on external training for employees provided by registered training provider. The deduction is available for eligible expenditure incurred between 29 March 2022 until 30 June 2024

Prepayments

• There is no advantage to prepayment of large expenses for non-small business entities, being entities with aggregated turnover of greater than $50m from 1 July 2018. Prepaid expenses are solely deductible on a pro rata basis depending on the period to which the prepayment relates.
• Please note that a deduction is still available for prepayments of less than $1,000 and prepayment of expenses required under government legislation (e.g., worker’s compensation insurance).

Private Company Loans

• Amounts paid, lent or forgiven by private companies to shareholders or their associates are generally taken to be unfranked dividends (to the extent they represent realised or unrealised profits of the company), unless the loan is repaid or a complying loan agreement is put in place prior to the due date or the actual lodgement date of the company’s income tax return (whichever is the earlier) for the year in which the loan was made.
• These rules also apply to the provision of company assets (e.g., houses, cars & boats) to shareholders and their associates at less than market value rental, subject to certain exemptions.
• Interest and capital repayments in respect of loans in existence at 30 June 2022 (and covered by a complying loan agreement), must be made prior to 30 June 2024. Please contact our office should you require further information.

Loans to Private Companies (“At Call loans”)

• Under the debt/equity provisions, a loan that has no fixed term, is repayable on demand by the lender and has no interest, or a low rate of interest, can be deemed to be an equity interest in the company rather than a debt interest.
• Where a loan is deemed to be an equity interest, payments of interest are non-deductible to the company but frankable in the manner of a dividend.
• From 1 July 2005, related party “at call loans” to companies with less than $20 million turnover in that year are deemed to be debt for the purpose of the debt/equity provisions.
• For related party “at call loans” to companies with more than $20 million turnover in that year we recommend obtaining certainty by putting a loan agreement in place which sets out the terms of the loan in such a way that it will not be deemed to be an equity interest. Please contact our office if you require more information on this topic or wish to discuss loan documentation.

Distributions From Trusts

• Please ensure that a distribution resolution is made prior to 30 June 2024. Where resolutions are not made by year end, trust income may, depending on the circumstances, become taxable to the trustee at 47%.
• Taxation Ruling, TR 2010/3 (Div 7A: trust entitlements) sets out the Commissioner’s view that, broadly, a loan will usually arise where a distribution has been declared to a private company beneficiary of a trust and that distribution remains unpaid.  It is possible for the Commissioner to deem the unpaid distribution to be a dividend assessable to the shareholders of the company or their associates.  In order to prevent the loan being deemed to be a dividend, there are a number of courses of action.  Please contact us for further details if required.
• Consider whether a family trust election is required if planning to distribute franked dividends to beneficiaries.  If a family trust election has previously been made, ensure that distributions are not made outside the family group otherwise Family Trust Distribution Tax may be payable.

Taxable Payments Annual Reporting

• Businesses in the building and construction industry need to report the total payments they make to each contractor for building and construction services each year on the Taxable payments annual report by 28 August each year. Accordingly, the next report will be due 28 August 2024.
• The details required to be reported for each contractor include name, ABN, address, gross payments for the year & the total GST included in the gross payments.
• If this is relevant for your business you should ensure that appropriate systems are in place to enable the business to report the required information.
• From 1 July 2018 businesses that supply courier or cleaning services also need to report payments made to contractors if the payments are for courier or cleaning services.
• From 1 July 2019 businesses that supply Road freight, IT or security, investigation or surveillance services also need to report payments made to contractors by 28 August each year.

EMPLOYEE PAYSLIP OBLIGATIONS – SUPERANNUATION PAYMENTS

• The Fair Work Ombudsman requires that you report on employees’ payslips the amount of super contributions for that pay period

Living away from home allowance (LAFHA”) Changes

• Changes were made to the LAFHA rules that, with the exception of “fly in fly out” arrangements:
  • Limit LAFHA availability to employees who maintain a home available for their own use in Australia, which they are required to live away from for their work;
  • Limit LAFHA availability to a maximum of 12 months
• The changes applied from 1 July 2012 for new arrangements and from 1 July 2014 for arrangements entered into prior to budget night 8 May 2012.
• Please note that an employee’s usual place of residence cannot be rented or sublet during the employee’s absence.

Employee Share Plan Changes

• • • The following changes took effect from 1 July 2015, effectively repealing some of the more onerous 2009 provisions in relation to stock rights/options.
    • Share rights will now be subject to tax at the earliest of:
      • When the employee ceases the employment in respect of which the right was acquired;
      • Fifteen years after acquisition;
      • When there are no longer any genuine restrictions on disposal of the right (i.e. the right can be sold) or real risk of forfeiture of the right; and
      • When the right is exercised and shares acquired which are not subject to restrictions.

    These changes mean that rights schemes, which contain a real risk of forfeiture, can access tax deferred treatment to the time of exercise of the right where the scheme rules state that tax deferred treatment applies and the scheme genuinely restricts an employee from disposing of the right.

    • Certain small start-up unlisted companies may be eligible for the start-up concession which provides that an employee does not include a discount on ESS interest in assessable income at grant and that any gain is taxed under the CGT provisions on disposal.

Director Identification Number regime

• • Recent amendments introduced a director identification number (Director ID) requirement.
  • Newly appointed directors are required to have a Director ID before their appointment since 1 November 2022
  • Transitional arrangements were in place as follows:

  Date Appointed	Date Director must apply
  On or before 31 October 2021	By 30 November 2022
  Between 1 November 2021 and 4 April 2022	Within 28 days of appointment
  From 5 April 2022	Before appointment

  • Please contact us for information on how to apply