Thinking Tax Edition 7

20 October 2020

Thinking Tax is an initiative from Findex to provide you with a short overview of specific tax issues that may affect you or your business, with a focus on practical issues you may face on a day to day basis.

1. The full expensing instant asset write-off

One of the biggest announcements and legislative changes to come from Australia’s first COVID-19 Federal Budget was the new full expensing of depreciable assets measure to encourage businesses to spend money to help stimulate the economy.

Under the new legislation, businesses with an aggregated turnover of less than $5 billion can claim an instant asset write-off for depreciable assets bought, and first used or installed ready for use from 7 October 2020 to 30 June 2022. This measure is relevant for any business owner, regardless if the business is operated through a company, partnership, trust or sole trader.

Over the last ten years, there have been a number of instant asset write-off regimes, all with different rules. As the various instant asset write-off regimes can sometimes overlap, it can be challenging to determine exactly how much of a specific write-off you are entitled to at a specific point in time.

If you have purchased equipment for your business in the past financial year or intend to buy equipment for your business in the near future, we recommend you speak to your adviser to understand how to correctly apply the instant asset write-off rules.

2. New PAYG withholding tax tables released

To incorporate the changes to the personal income tax thresholds for 2021 that were announced in the Federal Budget, the Australian Tax Office (ATO) released new PAYG withholding tax tables that will apply from 13 October 2020. Employers and other payers have until 16 November 2020 to implement these rate changes into their payroll.

As the changes apply from 1 July 2020, any overpayments before 13 October 2020 will be brought to account when employees or payees lodge their 2021 income tax return.

3. Reminder to keep records for five years after the sale of a Capital Gains Tax (CGT) asset

Due to the ATO’s wide use of data matching, it is very important to keep the correct records for any capital gains or losses from selling CGT assets such as shares, property or cryptocurrency for at least five years after the year in which the sale occurred. Note: for CGT purposes a property sale occurs when the sale contract is signed.

CGT gains and losses are determined by looking at records relating to the CGT asset. So, the records you need to hold onto may include documents that show the nature of the transaction, event or circumstance, the date of the transaction, or the parties to the transaction.

Furthermore, if a taxpayer has made a capital loss which has been offset against a capital gain in a later year, records of the event that resulted in a loss should be kept for either two years (for individuals and small businesses) or four years (for other taxpayers).

Roelof van der Merwe, National Tax Director (Melbourne)

Mark Reynolds, Partner, Tax Advisory (Brisbane)

Alex Duonis, Partner, Tax Advisory (Geelong)