With the end of the 2020-21 financial year (EoFY), accountant and sessional lecturer in the Charles Sturt University School of Accounting and Finance Ms Liza Byrnes (pictured, inset) says taxpayers need to be aware of a range of tax issues.
“In 2020, Australians have been tested like never before. Flood, drought, fires and a global pandemic”. The Hon. Josh Frydenberg, MP, Treasurer of the Commonwealth of Australia (Budget Speech 2020-2021)
Many of the budgetary and taxation initiatives introduced during 2020 to help combat the impact of not only COVID-19 but the devastating effects of natural disasters continue to be available into the 2021 and even 2022 financial years.
As part of the economic stimulus measures, the Australian Government has ‘sweeteners’ for both Australian businesses and individuals to assist with the recovery.
What is there for business?
“Tax incentives will unleash a wave of investment across the country”. Treasurer, the Hon. Josh Frydenberg, MP.
In what is probably one of the boldest initiatives we have ever seen in relation to depreciation, the Government announced what is called ‘temporary full expensing’ in relation to the purchase of assets for business. Under this measure in the year ended Wednesday 30 June 2021:
- Eligible businesses with aggregated turnover of less than $5 billion can fully deduct the business portion of new depreciating assets purchased after 7.30pm (AEDT) Wednesday 6 October 2020, and up to Thursday 30 June 2022;
- Small and medium sized business with aggregated turnover of less than $50 million can also fully deduct the business portion of second-hand depreciating assets purchased during the same period;
- The balance of a ‘small business entity’ pool is to be fully deducted where the business has an aggregated turnover of less than $10 million.
This is in addition to the immediate write-off available for assets costing less than $150,000 that already applied from 1 July 2020 to 6 October 2020 for businesses with aggregated turnover less than $10 million.
Combined with the loss carry back rules, allowing corporate tax entities to carry back losses made in the 2020, 2021 and 2022 financial years to previous taxable years from 2019 onwards, temporary full expensing has the potential to create a significantly favourable tax outcome for business this year by creating losses and boosting cashflow.
What is there for individual taxpayers?
“And tax cuts will put more money into the pockets of 11 million hard working Australians and their families.” Treasurer, the Hon. Josh Frydenberg, MP.
While most of the big-ticket items are reserved for those in business, there are still some measures that will benefit individual taxpayers when preparing their 2021 income tax returns. These include:
- An increase in the maximum Low Income Tax Offset (LITO) from $445 to $700, for those with taxable income less than $37,500, with some offset still available up to $66,667. Offsets give a dollar-for-dollar benefit to the taxpayer by increasing a refund or reducing tax payable.
- Increases to the ‘low and middle’ income earner tax thresholds, which allows for a maximum tax benefit of $1,080 for those earning up to $90,000 and $2,430 for those over that. (Note, this is in addition to the Low and Middle Income Tax Offset (LMITO), which is still in place for 2021.)
- An extension of the ‘shortcut method’ for calculating home office expenses for those employees having to work from home. Under this method, a taxpayer can just claim $0.80 per hour for each hour worked from home. This rate covers all of your home office expenses such as telephone, internet, electricity, gas and cooling and depreciation of office furniture and equipment.
What are the key areas of focus for the ATO?
Compliance activity by the ATO will likely include ‘the usual suspects’, such as work-related expenses, rental property deductions, and omission of income.
However, one of the things that has been touted as being on the radar for 2021 is cryptocurrency.
In particular, taxpayers should be aware of how to treat any gains and losses and should be familiar with the Capital Gains Tax (CGT) implications of trading in cryptocurrency.
This is a relatively new space for the ATO, so it will be interesting to see the extent of their audit activity in this area.
Preparing your return
The information contained in this article should not be relied upon as legal authority when determining your eligibility to any of the tax concessions it contains.
You should therefore seek advice from a qualified Accountant or Registered Tax Agent in relation to your own personal tax affairs.