HAVING TROUBLE WITH TAX DEBT
If you are having trouble paying your tax liability, please let us know as soon as possible so we can negotiate a deferral or payment plan with the ATO on your behalf.
REPORTING PAYMENTS TO CONTRACTORS
The taxable payments reporting system requires businesses in certain industries to report payments they make to contractors (individual and total for the year) to the ATO. ‘Payment’ means any form of consideration including noncash benefits and constructive payments. Taxable payments reporting is required for:
- Building and construction services
- Cleaning services
- Courier services
- Information technology (IT) services
- Road freight services
- Security, investigation or surveillance services
- Mixed services (providing one or more of the services listed above)
The annual report is due by 28 August 2022
SHAREHOLDER LOAN AGREEMENT MINIMUM REPAYMENTS
Division 7A captures situations where shareholders access company profits in the form of loans, payments or forgiven debts. If certain steps are not taken, such as placing the ‘payment’ under a complying loan agreement, these amounts are treated as a deemed unfranked dividend and taxable at the taxpayer’s marginal tax rate.
The ATO provided an extension for COVID-19 impacted taxpayers who were unable to meet their minimum loan repayments under a Division 7A loan agreement in the 2020-21 year until 30 June 2022 (where they applied for an
extension). These loans will need to be brought up to date by 30 June 2022 to avoid a deemed dividend being triggered.
BEFORE YOU ROLL-OVER YOUR SOFTWARE…
Before rolling over your accounting software for the new financial year, make sure you:
- Prepare your financial year-end accounts. This way, any problems can be rectified and you have a ‘clean slate’ for the 2022-23 year. Once rolled over, the software cannot be amended.
- 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.
SINGLE TOUCH PAYROLL
For payments to employees through single touch payroll, a finalisation declaration generally needs to be made by 14 July 2022. However, there are some exceptions to this.
If the entity has 20 or more employees and some of them are closely held employees, then the finalisation declaration for the closely held employees needs to be made by 30 September.
For entities with 19 or fewer employees and which only have closely held employees the finalisation declaration should be made by due date for lodgement of the tax return of the relevant employee.
Employees will be able to access their Income Statement through their myGov account.
CLOSELY HELD PAYEES
Payments to closely held payees can be reported through STP in one of Three ways:
Reporting actual payments in real time – reporting each payment to a closely held payee on or before each pay event (essentially using STP ‘as normal’).
- Reporting actual payments quarterly – lodging a quarterly STP statement detailing these payments for the quarter, with the statement due when the activity statement is due.
- Reporting a reasonable estimate quarterly – lodging a quarterly STP statement estimating reasonable year-to-date amounts paid to employees, with the statement due when the activity statement is due.
Small employers that have arm’s length employees must report STP information on or before each payday regardless of the method that is chosen for reporting payments to closely held payees.
If your business has closely held employees, it will be important to plan throughout the year to prevent problems occurring at year end.
REPORTABLE FRINGE BENEFITS
Where you have provided fringe benefits to your employees in excess of $2,000, you need to report the FBT grossedup 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 $50 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.
If you do need to complete a stocktake, you can choose one of three methods to value trading stock:
- Cost price – all costs connected with the stock including freight, customs duty, and if manufacturing, labour and materials, plus a portion of fixed and variable factory overheads, etc.
- Market selling value – the current value of the stock you sell in the normal course of business (but not at a reduced value when you are forced to sell it).
- Replacement value – the price of a substantially similar replacement item in a normal market on the last day of the income year.
A different basis can be chosen for each class of stock or for individual items within a particular class of stock. This provides an opportunity to minimise the trading stock adjustment at year-end. There is no need to use the same method every year; you can choose the most tax effective option each year. The most obvious example is where the stock can be valued below its purchase price because of market conditions or damage that has occurred to the stock. This should give rise to a deduction even though the loss has not yet been incurred.
The material and contents provided in this article are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.