July 2021

Happy new financial year!

Its tax time, that’s like Christmas for us accountants!

We have already starting completing 2021 tax returns for our clients. Have your tax done early, send us your tax documents & information now. We love helping people, so please refer us to your family & friends who also need their tax return completed.

Its also time for Businesses to have their 2021 financials completed. Contact us now to receive your year end checklist of tasks to complete before we start working on your financials & tax return.

The start of the financial year is the perfect time create strong foundations upon which you can build financial success. Contact us to learn how we can assist, from money management to wealth creation strategies.

There are a number of changes occurring from 1 July, read the Important Dates below to learn more.

Important dates July 2021

Business

Company Tax Rate

1 July: Decreasing to 25% for base rate entities from 26%

5 tips to work productively remotely

In the current climate, many businesses are needing to make changes to accommodate staff working remotely. If you are able to work from home the ensuing changes to your work habits can be challenging to negotiate, however there are things you can do to ensure that you maintain productivity and motivation while you’re not in the office environment.

Here are five tips to help you effectively set up an office and work from home for what is looking like an extended period of time.

Create a clear working space

While it’s tempting to use your couch or bed as your ‘office’, set up your workstation at a table instead. Not only does this help you stay productive and focused on working rather than chilling, it also establishes clearer boundaries as to where work starts and ends. This can also signal to any family members also home that this space is where you go to work.

Whether you have the luxury of a spare room or just a small nook, ensure the space is clutter-free and well lit. Everything you need should be kept in this area so you don’t have to go searching for it.

Consider the ergonomics of your space

Just as working from your couch or bed isn’t great for productivity, it’s bad for your posture. This can lead to back pain, headaches and neck tension. You also want your wrists and hands to be supported.

Think about what your office space looks like and try to recreate this as much as possible. Use a pile of books or magazines to ensure that the top your laptop or monitor is at (or just below) your eye level. You can add a pillow as a backrest to your chair and a rolled up towel for lumbar support.

Create to-do lists and manage expectations

Studies have found remote workers tend to be more productive yet feel greater stress than those working from a traditional office.^{i, ii} It can be tempting to up your output to prove to your manager or colleagues that you’re working hard while at home.

If you have a manager, check what the expectations are for the day or week, and be open about your ability to achieve these. As your manager can’t see if you’re struggling, it’s important to communicate. Team check-ins or group chats can help to stay across how everyone is progressing. If you manage a team, set up channels such as these to support your team.

To-do lists (whether through Trello, a similar online system or simply written on a notebook) can help you stay on track and focused.

Keep to set working hours as much as possible

Working from home tends to be more flexible. Without a commute, you can start work earlier in the morning and wrap up sooner. Depending on your role and whether you work in a team, you may need to keep the same hours as your co-workers.

If you set your own hours, avoid the trap of working all hours of the day. In the State of Remote Work 2020 Report, 18% of respondents said they felt unable to ‘unplug’.ⁱⁱⁱ Having a desk away from your relaxation spaces can better delineate your ‘office’ and ‘home’, while your to-do list can help you allocate tasks to the next day when you need to switch off.

Look after yourself and your mental health

While remote work can improve workers’ mental health in certain situations, feelings of isolation are also common, especially if you’re unused to working alone. Staying connected to your colleagues, friends and family is important.

Make sure you take time away from your screen and give yourself lunch and tea breaks. Weather permitting, sit outside for your break, or call a friend or family member. As you’re less likely to get incidental exercise, go for a walk or run after you clock off or before you start, and stretch throughout the day (set a timer on your phone to keep to this) to relieve any tension.

Moving from a work environment to working from home is one significant change many are needing to make, as we work together in minimising the impact of the Coronavirus. Be gentle with yourself as you make the necessary adjustments to your routine, social life and work habits.

i https://academic.oup.com/qje/article-abstract/130/1/165/2337855

ii https://theconversation.com/its-not-just-the-isolation-working-from-home-has-surprising-downsides-107140

iii https://lp.buffer.com/state-of-remote-work-2020

Tax concessions for small businesses

Running a business keeps you pretty busy, so it’s easy to overlook the help that’s available. Many small businesses don’t realise the government offers a range of valuable concessions that can make a real difference to their annual tax bill.

Depending on your annual turnover, these can include reduced tax rates, asset write-offs, simplified depreciation rules and tax-free restructuring.

Lower income tax rates

A key concession for small business entities (SBEs) is lower company tax rates. If your business has an aggregate turnover threshold of under $50 million, you are eligible for a flat income tax rate of 27.5 per cent during the 2018-19 and 2019-20 financial years. In 2020-21, this tax rate will drop to 26 per cent, with a rate of 25 per cent applying in 2021-22 and later years.

These lower company tax rates represent a significant discount on the tax rates applying to personal income and sole traders and the full company tax rate of 30 per cent.

Another valuable concession is the instant asset write-off, which allows eligible businesses to immediately deduct the cost of a depreciating asset if the asset costs less than $30,000. This concession is currently available until 30 June 2020 for business entities with an aggregate turnover of less than $50 million.

Simplified asset depreciation

For SBEs with an aggregate annual turnover of under $10 million, another valuable tax concession can be the rules for simplified asset depreciation.

These allow you to pool the business portion of higher cost assets (those not eligible for immediate write-off), and claim a 15 per cent deduction in the year you start using them. You can then claim a 30 per cent deduction each year after that and deduct the balance of the pool at the end of the year if the balance is less than the instant asset write-off threshold.

If the difference between the value of your trading stock on hand at the start and end of an income year is less than $5,000, an SBE can also choose not to account for its trading stock in that income year.

SBE restructure roll-overs

Another useful tax concession permits SBEs to access a rollover where – as part of a genuine restructure – ownership of its assets are transferred without a change in ultimate economic ownership.

This means any gains and losses arising from transfer of capital gains tax (CGT) assets, depreciating assets and trading stock to a new business entity are not counted, so tax is not payable on the restructure.

When you first start-up an SBE, there is also a tax concession for some of the costs involved. Fees for professional advice and government fees, taxes and charges are all immediately tax deductible.

The ATO also has a shorter time period (two years) to amend a business tax assessment for an SBE, rather than the normal four years.

Small business income tax offset

A valuable tax concession for SBEs operating as unincorporated entities (such as sole traders) with an aggregate turnover of less than $5 million, is eligibility for the small business income tax offset.

This concession provides a discount on your income tax liability for business income and comes in the form of a tax offset (capped at $1,000 per taxpayer per year). In 2019-20 the discount rate is 8 per cent, rising to 13 per cent in 2020-21 and 16 per cent in 2021-22.

When it comes to disposing of assets, there are valuable CGT concessions if an SBE has an annual turnover under $2 million. These concessions can limit the amount of CGT payable when business assets are sold and represent significant tax savings if you are eligible.

In addition, many SBEs also qualify for concessions allowing them to use the Simpler BAS rules, account for GST on a cash basis and pay GST in instalments. They can also make an annual apportionment of their input tax credits.

SBEs may also qualify for exemptions on car parking and work-related devices under the FBT rules, and can pay their PAYG tax obligations in instalments.

If you would like more information about the tax concessions available to your SBE, call us today.

New tax shortcut for employees working from home

With many people now working from home because of COVID-19, some of the expenses your employer normally covers – such as electricity, heating and cooling – are coming out of your pocket instead.

Some employers provide a daily allowance to help with these additional costs, but if not it’s important to claim your extra expenses at tax time.

To simplify things, the ATO has announced shortcut rules if you find yourself working from your kitchen table or sofa for the first time.

New shortcut rules

Under these temporary measures, if you are working from home due to COVID-19 you can claim a simplified tax deduction of 80 cents per work hour for your running expenses.

Your running expenses include things like lighting; heating and cooling; cleaning; and office supplies like printer paper and stationery. The shortcut rate also covers the cost of your internet, phone and computer equipment.

The decline in value (or depreciation) of the furniture and fittings you use in your home office is covered too.

Items such as tea, coffee and toilet paper, can’t be claimed. Neither can expenses such as rent, mortgage interest, property insurance, rates and land tax.

Substantiating your claim

Before you get too excited, you are only entitled to a deduction for expenses related to earning income. You must have actually spent the money and not been reimbursed.

Fortunately, the shortcut method only requires you to keep a record of the number of hours you worked from home as evidence of your claim. This can be in the form of a time sheet, or an Outlook calendar or diary entry.

If you are audited by the ATO, it’s likely you’ll also be asked for supporting evidence from your employer.

The shortcut arrangements are in place for running expenses incurred from 1 March to 30 June 2020. The ATO intends to review the arrangement for the next financial year as the COVID-19 situation progresses.

Eligibility for the shortcut rules

The simplified rules are only available to employees working from home. If you are a sole trader or run a small business from home, you must use the normal business deduction rules.
The shortcut rules allow multiple people living in the same house to claim the new 80 cents rate, so both members of a couple can claim a deduction at tax time. You’re not required to have a dedicated work area, which is a requirement under the normal rules.

If you normally work from home a few days a week, you need to keep two sets of records – one covering the period from 1 July 2019 to 29 February 2020 and a second one covering the period from 1 March to 30 June 2020 if you decide to use the shortcut method.

Current rules for working from home

Although the simplicity of the shortcut method is attractive for claiming your running costs, you can choose to use the pre-existing rules if you prefer.

Currently there are two ways to calculate your running expenses: claiming a fixed rate of 52 cents per work hour, or calculating your actual expenses.

Under the fixed rate method, you claim 52 cents an hour for your running expenses. You then work out separately your costs for phone and internet usage, computer consumables and stationery, and the depreciation on your computer. To claim, you need to keep records of actual hours worked, or a four week diary to show your usual working pattern.

Dedicated home offices

If you have a dedicated work area at home, you can choose to calculate your actual running expenses. These costs (plus depreciation on your equipment, furniture and furnishings over $300) need to be apportioned into personal and work related amounts.

For your phone and internet expenses, you can claim up to $50 with limited documentation, or calculate your actual expenses and apportion them.

Before opting for the new shortcut, it’s worth having a chat, as the best method depends on your individual situation. Although there is less administration with the shortcut, it may not provide you with the biggest tax deduction.

Call us to discuss how working from home will affect your tax preparations this financial year.