Business EOFY Frequently Asked Questions

No deduction is available if a business does not meet the required PAYG obligations for payments made to employees. If engaging a contractor, an ABN should be quoted by the contractor, otherwise tax should be withheld by the business engaging the contractor. Failure to do so denies a deduction for the contractor payment. Businesses should be careful when making the distinction between employees and sole trader contractors.

Yes, the premium paid for audit insurance is tax-deductible. It also covers the cost of defence in the event of a claim. The ATO continues to benchmark businesses, with cash businesses become a major focus. Technology is becoming more advanced so be aware of information sharing and matching between government and non-government institutions.

From 6 October 2020 to 30 June 2023, most businesses should be able to deduct the full cost of depreciating assets that are purchased. The car limit still applies.

The instant asset The depreciation limit for 2020/21 is $59,136 – it applies to both the depreciation as well as the GST credits claimable.

The ATO continues to focus on the use of work vehicles for private use. Business owners may consider limiting the length per trip and total km per annum.

Yes, if the businesses accountant is using the income on a cash basis method. Delaying receipt until after 30 June, will delay the tax liability by a full tax year. If however the business uses the accrual method, it is important to hold back issuing of invoices for the deferral to apply.

If cash flow allows, creditors' accounts should be paid by 30 June to maximize deductions.
The 12-month rule will apply to prepayments for expenses such as registrations, insurances and subscriptions. Accounts under $1,000 are excluded from the 12-month rule.

Companies with a turnover of $50 mil or less will be taxed at 26% in 2021 FY. This reduces to 25% in 2022 FY. Please note companies that derive mainly passive income (i.e. interest, rent, dividends, royalties) are still taxed at 30%.

If a re-structure to a corporate entity is not feasible, consider making a distribution to a company to maximize tax at 30%.

Consider writing these off prior to 30 June to reduce the tax liability. We recommend talking to a Modoras Professional before taking action.

Yes. You can offset this tax loss against previously taxed profits and this can generate a tax refund when you lodge your 2021 tax return. The amount refundable will depend on the amount of previously taxed profits and the company's franking account balance as at 30 June 2021. Please contact a Modoras professional to discuss further.