2020/21 Year-end Checklist for Business

1 July 2021

2020/21 Year-end Checklist for Business


Many of our business clients like to review their tax position before the end of the income year and evaluate any strategies that may be available to legitimately reduce their tax. Traditionally, year-end tax planning for small businesses is based around accelerating deductions and deferring income. However, this year, consideration will also need to be given to the impact of the COVID-19 pandemic.
Small Business Entities ('SBEs') – i.e., those with an aggregated turnover of less than $10 million – often have greater tax planning opportunities due to certain concessions only applying to them. Further, SBE taxpayers generally have the flexibility of being able to pick the concessions that suit their circumstances.  
The following are a number of areas that may be considered for all business taxpayers.

Maximising deductions for non-SBE taxpayers
Deductions can be maximised for non-SBE business taxpayers by prepaying expenses, accelerating expenditure and/or accruing expenses that have been incurred.

Prepayment strategies (non-SBEs) 
Any part of an expense prepayment relating to the period up to 30 June is generally deductible.  
In addition, non-SBE taxpayers may generally claim prepayments in full for expenditure that is:
– under $1,000;
– made under a 'contract of service' (e.g., salary and wages); or
– required to be incurred under law.

Accelerating expenditure (non-SBEs)
Accelerating expenditure involves bringing forward expenditure on regular, on-going deductible items.  
This is a useful strategy because business taxpayers can generally claim deductions for expenses they 'incurred' during 2020/21, even if the expenses have not actually been paid by 30 June 2021.
The following may act as a checklist of possible accelerated expenditure for 2020/21:
 Depreciating assets - Non-SBEs with an aggregated turnover of (generally) less than $5 billion can fully expense eligible assets, regardless of cost, that were first acquired and used (or installed ready) for business use from 7:30pm (AEDT) on 6 October 2020 to 30 June 2021.  
 Note: Non-SBEs may choose to opt out of full expensing on an asset-by-asset basis.
 If full expensing does not apply to a particular asset (or an opt-out choice is made), non-SBEs with an aggregated annual turnover of less than $500 million can generally claim:
 – an immediate deduction for eligible assets costing less than $150,000 that were acquired from 7:30pm (AEDT) on 2 April 2019 to 31 December 2020; and were first used (or installed ready) for business use from 12 March 2020 to 30 June 2021; or
 – for assets costing $150,000 or more, a 50% accelerated depreciation concession for eligible new assets first held and used (or installed ready) for business use from 12 March 2020 to 30 June 2021 (unless an opt-out choice is made for an asset).
Additional possible accelerated expenditure could also include the following: 
 Repairs.
 Maintenance.
 Consumables/spare parts.
 Advertising.
 Fringe benefits – Any benefits to be provided, such as property benefits, could be purchased and provided prior to 1 July 2021.
 Superannuation contributions to a complying superannuation fund, to the extent contributions are actually made (i.e., they cannot be accrued but must be paid by 30 June).

  Accrued expenditure (for all business taxpayers - including SBE taxpayers)
Business taxpayers (including SBE taxpayers) are entitled to a deduction for expenses incurred as at 30 June 2021, even if they have not yet been paid.
Examples of expenses that may be accrued include:
 salary or wages and bonuses – the accrued expense for the days that employees have worked but have not been paid as at 30 June 2021;
 interest – any accrued interest outstanding on a business loan that has not been paid;
 commissions – where commission payments are owed to employees or other external parties;
 fringe benefits tax ('FBT') – for example, if an FBT instalment for the June 2021 quarter is due but is not payable until July, it can be accrued and claimed as a tax deduction in 2020/21; and
 directors’ fees – where a company is definitively committed to the payment of a director’s fee as at 30 June 2021, it can be claimed as a tax deduction.

Maximising deductions for SBE taxpayers
Deductions can be maximised for SBE taxpayers by accelerating expenditure and/or prepaying deductible business expenses (and also by accruing expenditure - refer above). 



Accelerating depreciation expenditure (for SBE taxpayers)  
In addition to accelerating expenditure on various business items, SBE taxpayers that use the simplified SBE depreciation rules may claim the following 2021 deductions (if applicable) in relation to depreciating assets:
 A full deduction for the cost of eligible assets (i.e., regardless of cost) first acquired and first used (or installed ready for use) for business purposes from 7:30pm (AEDT) on 6 October 2020 to 30 June 2021.
 Note that, SBE taxpayers choosing to use the simplified SBE depreciation regime cannot directly opt out of temporary full expensing (i.e., if it applies).
Where temporary full expensing does not apply:
 An SBE taxpayer may be entitled to claim an immediate deduction for eligible depreciating assets costing less than $150,000 that were first used or (installed ready for use) for business purposes by 30 June 2021 (i.e., with respect to the 2021 income year).
 Alternatively, assets costing $150,000 or more are allocated to an SBE taxpayer's general small business pool.
       Note that, SBE taxpayers using the simplified SBE depreciation regime cannot opt out of temporary full expensing with regards to their general pool. As a result, the closing pool balance (before current year deductions) will be fully claimed in the 2021 income year.

Therefore, if appropriate, SBE taxpayers should consider purchasing and using (or installing) these items by 30 June 2021.
Prepayment strategies – SBE
SBE taxpayers making prepayments before 1 July 2021 can choose to claim a full deduction in the year of payment where they cover a period of no more than 12 months (ending before 1 July 2022).  
Otherwise, the prepayment rules are the same as for non-SBE taxpayers.
The kinds of expenses that may be prepaid include:
 Rent on business premises or equipment.
 Lease payments on business items such as cars and office equipment.
 Interest – check with your financier to determine if it’s possible to prepay up to 12 months interest in advance.
 Business trips. 
 Business subscriptions.
 Training courses that run from 1 July 2021.

Information Required
This is some of the information we will need you to bring to help us prepare your income tax return:
 Stock-take details as at 30 June 2021.
 Debtors listing (including a list of bad debts written off) as at 30 June 2021.  
 Note: In order to claim a deduction, the debt must be written off on or before 30 June.
 Creditors listing as at 30 June 2021.

Personal super contribution and deductions

11 February 2025
Personal super contribution and deductions

January 2025

18 December 2024
Don’t let taxes dampen your holiday spirit! Just like Santa carefully checks who’s naughty or nice, businesses need to watch the tax rules when spreading Christmas cheer. Hosting festive parties for employees or clients can lead to Fringe Benefits Tax (FBT). FBT is a tax employers pay when they provide extra perks to employees, their families, or associates. It’s separate from regular income tax and is based on the value of the benefit. The FBT year runs from 1 April to 31 March, and businesses must calculate and report any FBT they owe. With a bit of planning—just like Santa’s perfect delivery route—you can celebrate while keeping your tax worries in check! FBT exemption: A little Christmas gift from the taxman The tax rules include a “minor benefit exemption”—like a small stocking stuffer. If the benefit given to each employee costs less than $300 and isn’t a regular thing, it’s exempt from Fringe Benefits Tax (FBT). Christmas parties fit perfectly here because they’re one-off events. Businesses can avoid FBT hassles if the cost per employee stays under $300. Remember: the more often you give out perks, the less likely they’ll qualify for this exemption. Thankfully, Christmas only comes once a year! Christmas parties at the office If you host your Christmas party at your business premises during a regular workday, costs like food and drinks are FBT-free, no matter how much you spend. However, you can’t claim a tax deduction or GST credits for those expenses. If employees’ family members join and the cost per person is under $300, there’s still no FBT, but again, no tax deduction or GST credits can be claimed. However, FBT will apply if the cost is over $300 per person. The good news is that you can claim both a tax deduction and GST credits in that case. FBT check for Christmas parties at the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyUnlimitedNoNoEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Think of it like this: at your Christmas party, the food and drinks are like Santa’s bag of gifts – no dollar limit exists for employees enjoying them on business premises. But if you add a band or other entertainment, the costs can add up quickly, and if the total cost per employee exceeds $300, FBT kicks in. Keep it under $300 per person, and you’re in the clear. Christmas parties outside the office If you hold your Christmas party at an external venue, like a restaurant or hotel, it’s FBT-free as long as the cost per employee (including their family, if they come) is under $300. But remember, you can’t claim a tax deduction or GST credits in this case. FBT will apply if the cost exceeds $300 per person, but you can claim a tax deduction and GST credits. Good news: employers don’t have to pay FBT for taxi rides to or from the workplace because there’s a special exemption. FBT check for Christmas parties outside the office Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Employees onlyLess than $300NoNoMore than $300YesYesEmployees and their familyLess than $300NoNoMore than $300YesYesClientsUnlimitedNoNo Clients at the Christmas party If clients attend the Christmas party, there’s no FBT on the expenses related to them, no matter where the party is held. However, you can’t claim a tax deduction or GST credits for part of the costs that apply to clients. Christmas gifts Many employers enjoy giving gifts to their employees during the festive season. If the gift costs less than $300 per person, there’s no FBT, as it’s usually not considered a fringe benefit. FBT check for Christmas gifts Who attendsCost per personDoes FBT applyIncome tax deduction/Input Tax Credit available? Entertainment giftsLess than $300NoNoMore than $300YesYesNon-entertainment giftsLess than $300NoYesMore than $300YesYes However, FBT might apply if the gift is for entertainment. Entertainment gifts include things like tickets to concerts, movies, or holidays. Non-entertainment gifts—like gift hampers, vouchers, flowers, or a bottle of wine—are usually FBT-free if under $300. So spread the festive cheer, but keep an eye on the taxman to avoid surprises!

Christmas hours

28 November 2024
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