Tax planning considerations are as important as ever

With the end of the 2021 financial year drawing closer tax planning considerations are as important as ever. The government have introduced several new measures aimed at boosting new investment and providing relief for both businesses and individuals.  

Director Fees

Directors fees will now have to meet some additional requirements in order to be considered an allowable tax deduction. Although director fees are not technically classified as employee wages, amounts will now need to be paid to the ATO for Pay As You Go Withholding and reported in Business Activity Statements.  

Superannuation Guarantee contributions will now apply to director fees under SGR 2009/2. For the 2020-21 financial year the rate remains 9.5%, however this is set to increase to 10% from 1 July 2021 and will gradually increase up to 12% by 1 July 2027. The June quarter’s super payment will be due on the 28th of July however for a tax deduction to be recognised in the 2021 financial year payment will need to be received by the superannuation fund prior to 30 June.

Personal Superannuation Contributions

A deduction of up to $25,000 can be claimed in your Individual Tax Return for personal contributions that have been acknowledged by your superannuation fund. The concessional contributions cap will increase up to $27,500 for the 2021-22 financial year. For those that have a total super balance of less than $505,000 at 30 June of the previous year, any unused contribution cap balances can be carried forward to the following year, for up to five years (ITAA 1997 section 291-20). The first year eligible for the roll forward is 2019-20. The work test is no longer required for those under the age of 67 however it is important to note the restrictions imposed on those over the age of 75 and under the age of 18.

Temporary Fully Expensing

With the Treasury Laws Amendment (2020 Measures No.6) Bill 2020 now having received royal ascent the implementation of temporary full expensing will see an allowable deduction for small to medium sized businesses (those with an aggregated annual turnover of less than $50 million) who purchased new and second hand assets that were first held, used or installed and ready for use, between 7.30pm (AEDT) 6 October 2020 and 30 June 2022. For financial years during this time, the closing balance of a small business pool can also be deducted.

Businesses with an aggregated turnover between $50 million and $500 million will only see an outright deduction for new assets and eligible second-hand assets.

If you think believe any of the above concessions may apply to you or your business, or if you have any questions, please don’t hesitate to get in contact with us here at Cordner Advisory.

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