Key changes from 1 July 2021 to be aware of
Changes to increase the super guarantee to employees and changes to single touch payroll (STP). Please read this 2-minute article to ensure you keep up to date with everything tax-related that affects you. Also, as a business owner there are many obligations that you need to consider and action just before and after 30 June each year. Some of these will help to minimise your tax. Others will reduce your exposure to an ATO tax audit. We have outlined these key areas below to assist you:
Brief summary of key dates and actions over the next 2 months
Key changes you need to be aware of
Please carefully consider this information and contact us immediately if you have questions we can answer or if we can assist.
ACTION REQUIRED + UPDATES
Pre 30 June 2021
Trusts: Trustee resolutions need to be in place to be able to distribute trust income for the2021 financial year to beneficiaries and avoid being taxed at default tax rates.
Companies:Review shareholder loan accounts and make minimum loan repayments (may need to declare dividends).
Employee Superannuation: Pay this 24 June 2021 to deduct contributions in the current financial year. Please note that your super payment must clear your bank account by 30 June2021 for it to be a tax deduction in 2021.
Complete a stocktake where required.
Write off bad debts and scrap any obsolete stock or plant and equipment.
Ensure any inter-entity management fees have been invoiced in your accounting system with proper Agreements in place.
1 July 2021
Companies: Tax rate for base rate entities reduces from 26% to 25%.
Employee Superannuation: Super guarantee rate increases from 9.5% to 10%.
Single Touch Payroll: Commences for "closely held" employees (family members, Directors, etc).
Professional Firms: New guidance applies for tax treatment on profits of professional services firms.
14 July 2021 (on or before)
Single Touch Payroll Finalisation Declarations need to be made by 14 July 2021 (extensions can apply for "closely held" payees).
28 July 2021
Quarterly super guarantee payment due (1 April – 30 June 2021).
28 August 2021
Taxable payments annual report due for payments to Contractors.
Key changes to be aware of
Superannuation Guarantee Increases to 10%
This is the biggest change that will affect you this year.
From 1 July 2021, the Superannuation Guarantee rate will increase from 9.5% to 10%. It is planned to increase by 0.5% each year until it reaches 12% on 1 July 2025.
If any employees who are paid wages or salary plus superannuation, then their take home pay will remain the same and the 0.5% increase will be added to their superannuation payments.
ACTION STEP: All employers will need to give immediate action to managing this increase, and they will need to factor in this increase to their cash flow planning for 2022.
Single Touch Payroll Changes
From 1 July 2021, amounts paid to employees who are called "closely held" payees will need to be reported through STP. If you're a small employer you can report these amounts on or before each payday, or you can choose to report this information quarterly. All other employees need to be reported on or before each pay day.
A closely held payee is an individual directly related to the entity from which they receive payments (eg. a family member, a Director of a company or a beneficiary of a Trust).
Company Tax Rate Reduction
From 1 July 2021, the company tax rate for base rate entities will reduce from 26% to 25%. This will also reduce the maximum franking rate that applies to dividends paid by base rate companies.
Profits of Professional Service Firms
The ATO has released draft guidance (PCG 2021/D2) that is planned to begin from 1 July 2021. This is designed to prevent structures being set up to divert income away from professionals and reducing their tax.
The draft guidance includes a series of tests to identify a professional's risk level, looking at the structure of the business and how its profits are distributed, and whether the structure has any high risk features.
ACTION STEP: All professional service firms (eg. doctors, medical specialists, architects, etc) will need to review their existing structure and possibly make changes from 1 July 2021. Some arrangements that were previously considered low risk may now fall into a higher risk zone.
Please carefully consider this information and contact Collins Hume on 02 6686 3000 immediately if you have questions we can answer or if we can assist.