Against a backdrop of continuing uncertainty, people reflect on the effect the coronavirus has had on their investments and continues to have them. But just because the environment is different, it is equally-if not more-important to look holistically at a financial strategy and take advantage of any future changes. EOFY ‘s requirements remain. Like always, it helps to be prepared when it comes to tax time.
Tax obligations do not stop because of COVID-19
Over the past few months, we have seen some of the most generous stimulus measures that federal and local governments have ever made available to Australian Private Businesses. Nevertheless, these measures are designed to assist those individuals and businesses directly affected by the current crisis. They are not a free pass for neglecting tax liabilities.
Each person and company – whether they have been approved for any stimulus programme – must continue to abide by tax law.
Reporting requirements do not stop, even though a person or company has been able to use one of the desirable ATO administrative exemptions, such as an extension of payment due date, flexibility in PAYG income tax instalments or low interest payment arrangements.
Single Touch Payroll
Tax time has been undergoing something of a makeover since the implementation of the Single Touch Payroll (STP). This new payroll process is much more streamlined, meaning EOFY will be a much simpler affair. But not only has STP transformed EOFY as we know it, the nature of its online reporting is a central component for companies seeking to qualify for the Job Keeper payments from the government. That all makes it more important than ever to stay on top of tax time.
How has STP affected the EOFY process?
In the end, business owners can expect STP to facilitate a smoother, more streamlined EOFY. It is because automated technologies have made sure that the entire process is now more effective, accurate and straight forward.
Where you would previously report payroll information once a year to the ATO, you will now send an automated report after each pay date using enabled accounting software. As a result, any payroll discrepancies within the accounting software are now identified during each pay running throughout the year. This means mix-ups are flagged before the crunch of tax time and a backlog of errors no longer slows EOFY down.
Cash-flow is still king
One of the government’s biggest tax-time changes was the expansion to the instant asset write-off scheme, and the acceleration of asset depreciation.
While previously, businesses were able to write off tax on assets worth up to $30,000, as a response to the COVID-19 pandemic that was increased to $150,000. The extended scheme is in place now, until 31 December.
Hence, now is not the time to take your eye off the ball for cash flow. One side of the coin is being prudent with your spending which helps slow down the amount of cash flowing out of your business. But exploring the options for further capital inflows is also important.
The early bird catches the tax refund
From corona-virus-related stimuli to new allowances, tax changes introduced by the government in response to the pandemic may mean that this financial year your business is eligible for additional tax relief. And the better the sooner you know what you are entitled to and make a claim. The downside is a little extra admin and more time with your tax consultant or accountant. But this is outweighed by the major upside of the business’ future extra cash flow as the economy embarks on its path into recession
During these unusual and difficult times, the ability of advisers to distil nuanced knowledge and principles to clients and construct suitable financial plans appropriately will underpin the true value of advice.
Please note this is not financial advice. Please speak to your accountant and/or financial adviser.
For more information please access some of the advice provided by Australian Government.
With the end of of financial year around the corner, one of our members can advice you on any tax benefits that your business can claim before the 30th of June 2020.
- Trudi Yip
Founder & Director, Numeric Eight
- Julie Hall
Director, Jach & Associates