What's New From 1 July 2021?
Starting a new financial year often signifies the start of new things. This year is no different with a number of things set to change in the tax landscape from 1 July. Here is a summary of what you need to know coming into the new financial year:
Company tax rate is reducing
The company tax rate for base rate entities is reducing from 26% to 25%. A base rate entity has:
an aggregated turnover of less than $50 million
80% or less of their assessable income is base rate entity passive income, where passive income is:
corporate distributions and franking credits on these distributions
royalties and rent
interest income (some exceptions apply)
gains on qualifying securities
a net capital gain
an amount included in the assessable income of a partner in a partnership or a beneficiary of a trust, to the extent it is traceable (either directly or indirectly) to an amount that is otherwise base rate entity passive income.
In short, if you have a business traded through a company it is likely that you will qualify for the reduced tax rate.
Single Touch Payroll required for all employers from 1 July 2021
From 1 July 2021 all employers must be reporting payments to employees through single touch payroll (STP), including those with closely held payees. A closely held payee is an individual directly related to the entity from which they receive payments. For example: family members of a family business, or directors or shareholders of a company. Payments to closely held payees can be reported each pay day, monthly or quarterly.
STP reporting must be done electronically using a payroll software solution such as Xero or MYOB.
Exemptions to single touch payroll reporting will only be granted in exceptional circumstances to micro employees. Exceptional circumstances include no or unreliable internet connection. An exemption must be applied for with the ATO.
If you need assistance to comply with your STP reporting obligations please contact us.
Super guarantee levy increasing to 10% & other super changes
The super guarantee levy is increasing from 9.5% to 10% from 1 July 2021 along with the following thresholds:
Concessional contributions (employer contributions and tax deductible personal contributions) cap is increasing from $25,000 to $27,500.
Non-concessional contributions (non-deductible personal contributions) cap is increasing from $100,000 to $110,000.
General transfer balance cap (lifetime limit on the total amount of superannuation that can be transferred into retirement phase income streams, including most pensions and annuities) is increasing from $1.6m to $1.7m.
Low & Middle Income Earners Tax Offset
The low and middle income earners tax offset is set to continue for another 12 months to 30 June 2022. This was announced in the 2021/2022 budget and at the time of writing this, the legislation has not been passed. The tax offset amount is between $255 and $1,080 for those earning between $37,001 and $126,000. The offset is applied at the time you lodge your tax return. You do not need to do anything in order to get the offset.
If you are keen to learn more about what is on the horizon for 1 July 2022 you might like to read our Budget 2021/2022 blog.
If you would like specific advice tailored to your business and circumstances, Accounting Heart offers affordable service packages where you can work with Sonia one-on-one to help you get your business where you want it to be. Book your FREE Discovery Call to find out more.
Disclaimer: This is general information only and is not advice of any sort. No warranty or representation is provided by Accounting Heart Pty Ltd as to the accuracy, currency or completeness of the information contained in this blog. Readers of this blog should not act or refrain from acting in reliance upon any information contained herein and must always obtain appropriate taxation and / or other advice as may be appropriate having regard to their particular circumstances.