Your year-end tax planning manual for FY21 - Year-end tax planning issues and actions - Bentleys
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Your year-end
tax planning
manual for FY21
Year-end tax planning
issues and actions
1300 236 853 (1300 BENTLEYS)
bentleys.com.au
Contents 1. Introduction
The purpose of this 1. Introduction 03 2.4.4
2.4.5
Trust deeds and trust compliance
Tax governance / ATO review
2021 has been one of the most unusual years in terms of new announcements. Non
manual is to help preparation business-as-usual after-tax outcomes will be expected for most taxpayers.
2. Business 04 2.4.6 Aggregated turnover testing
You need to plan properly to mitigate tax impacts on the year-end results. You need to
you with your year- 2.4.7 Private company loans
2.1 Actions pre 30 June 2021 04 2.4.8 JobKeeper documentation understand strategies which are timing only and which create permanent tax savings.
end tax planning for 2.1.1 Asset acquisitions 2.4.9 Personal service income / contractor
documentation Things like asset write-offs generally just bring forward future deductions for a cashflow
the financial year of 2.1.2 Expense prepayments
2.1.3 Bad debt write-offs 2.4.10 Employee share plans benefit rather than a permanent benefit. The SME company tax rate reducing by one per
2020/21. 2.1.4 Trust resolutions
2.1.5 Dividend payments
2.4.11 Inter-entity agreements / minutes
2.4.12 Not-for-profit tax exemptions cent next year creates a potential permanent tax saving on company earnings deferred to
2.1.6 Private company loan compliance next year.
2.5 International issues 12
We outline the 2.1.7 Employee bonuses
2.1.8 Employee superannuation 2.5.1 Withholding taxes The strategies below are based on an entity reducing their taxable income to reduce their
key issues and 2.1.9 Employee super packaging
2.1.10 Employee single touch payroll
2.5.2 Anti-hybrid rules
2.5.3 Transfer pricing tax payable in the current year (which may increase tax payable in future). There may be
recommend actions 2.1.11 Foreign exchange realisations 2.5.4 Thin capitalisation
2.5.5 Permanent establishment
situations where this is not desirable due to tax losses or income expectations in future
2.1.12 Asset loss realisations
to help you and your 2.1.13 Inter-entity transactions (profit and 2.5.6 Offshore compliance years.
loss planning) 2.5.7 Non-resident employees
business get where 2.1.14 Personal service income review 2.5.8 Foreign tax offsets Your Bentleys advisor can help you step through the different opportunities, how they
should be implemented in your group, and the future tax cashflow consequences from
you want to be. and strategy
2.1.15 PAF contributions and distributions
2.1.16 Farm management deposits 3. Individuals 14 adopting the strategies.
Please contact 2.2 Actions post 30 June 2021 06 3.1 Actions pre 30 June 2021 14
The top-10 year-end planning issues that we recommend you pay particular attention to
your local Bentleys 2.2.1 Early stage innovation company 3.1.1 Superannuation contributions are:
notifications 3.1.2 Asset realisation - contract date
advisor for 2.2.2 New beneficiary TFN notifications
2.2.3 Tax instalment notifications
3.1.3 Donations
3.1.4 Prepayments Year-end issue Action
assistance. 2.2.4 Contractor reporting 3.1.5 Asset write-offs
1. Asset write-off and asset registers Maximise deductions through temporary asset write-offs.
2.3 Other year-end planning points 07 3.2 Other planning issues 14 2. Prepayment for
2. Business year-end tax planning Business
It’s important that 2.1 Actions that should occur before
30 June 2021
turnover, there may be certain prepayment
opportunities available where properly
SME businesses plan 2.1.1 Asset acquisitions
structured (e.g. prepaying rural products for
an agri operation1).
properly to mitigate tax Depreciating asset acquisitions which are
2.1.3 Bad debt write-offs
impacts on the year- installed ready for use (generally delivered
rather than merely ordered) prior to 30 June A debt will generally need to be considered
end results. 2021 may be fully deductible in this financial
year under asset write-off concessions.
‘bad’ before it can be written-off and
deducted. You need to document that you
Certain agri assets (e.g. fodder storage) have taken action to recover the debt to
You need to may be deducted before they are installed.
The recent Federal Budget extended the full
conclude it is reasonable the debt will not
be recovered prior to 30 June 2021. You
understand strategies expensing provisions until 30 June 2023. generally don’t need to have commenced
legal actions. Therefore, COVID-19 creditor
which are timing only We have attached asset flowcharts in the
Appendix to this document to help you work
protections will generally not impact the
and which create out your deduction entitlement.
assessment of whether the debt is bad.
Where you are not able to show evidence
permanent tax savings. You should acquire assets in the right
entities to achieve the best tax advantage.
of recovery, it may be possible to determine
that the debt was doubtful when raised
There are several points to consider:
such that the income should not have
• If you are a small business (
Business Business
2.1.9 Employee super packaging
The superannuation guarantee percentage
is increasing to 10% from 1 July 2021.
Employers should make sure they review
employee contracts to determine whether
the employee is remunerated on a
superannuation inclusive or exclusive basis
and whether the additional cost will be
passed on to the employee.
2.1.10 Employee single touch payroll
Closely-held entities will need to adopt
Single Touch payroll from 1 July 2021 where
not already.
2.1.11 Foreign exchange realisations
Foreign exchange rates during the COVID
period fluctuated greatly with different
countries. Generally foreign exchange gains 2.1.14 Personal service income review 2.2 Actions that should occur shortly 2.2.4 Contractor reporting Stock which is consumed in the activities The rules depend on:
and losses are only taxed when realised. and strategy after 30 June 2021 (e.g. fuel and oil) is generally deductible
Where you have large unrealised foreign The ATO requires reporting of payments • The amount of the tax loss
when incurred. There are also other costs
exchange losses (e.g. foreign currency The ATO has recently released updated made to contractors in the following
2.2.1 Early stage innovation company which may be excluded from the tax value • The tax rate of the company in the year
denominated loans or bank accounts) you guidance in relation to the tax treatment of industries:
notifications of stock on hand at year-end. of making the loss
may need to take action prior to 30 June income from personal services. The ATO • Building and construction
has set new acceptable ‘risk’ levels where Where you operate a start-up innovation Where you account for work in progress as • The amount of tax paid in the earlier
2021 to see if an unrealised loss can be
personal service income is ‘alienated’ to an company and you have completed a capital • Cleaning services part of long term construction contracts, year, and
realised.
entity other than the person who provided raise during the 30 June 2021 financial year there are different tax accounting methods
• Courier services • The current franking account balance of
2.1.12 Asset loss realisations the service. you may be able to have your investors which may provide more favourable after-tax
the company.
access certain tax concessions. You • Information technology services outcomes. We can assist with this review.
Where you have made capital gains during Where you operate in a professional practice need to make sure you have made the
the year it will be worth considering whether business or operation we recommend • Security, investigation or surveillance 2.3.2 Asset write-off choices Talk to your Bentleys advisor to see if the tax
appropriate disclosures electronically with
there are realised capital losses which may you review your salary and distribution services loss carry-back may be available for your
the ATO by 31 July 2021. A business may choose that the new
be brought to account to offset these gains. policies to ensure the risk is mitigated within • Government entities. company. This may also impact the decision
We note there are various anti-avoidance You may also be entitled to Research and temporary full expensing rule (Div 40-BB)
acceptable ATO levels4. in which entity you acquire new assets to
provisions which impact this strategy so you Development tax concessions, employee The report is due by 28 August 20216. and 50% Backing business investment rule
generate tax losses before 30 June 2021.
should seek advice whether the losses are 2.1.15 PAF contributions and equity concessions and other government (Div 40-BA) do not apply for an asset. It may
available. distributions funding. We recommend you discuss these 2.3 Other year-end planning points choose to do this where tax losses created 2.3.4 Vacant land deductions
with your Bentleys advisor to make sure you may not be able to be used in future or
Where you have established a ‘Private 2.3.1 Stock valuations New provisions denying tax deductions
2.1.13 Inter-entity transactions (profit and are maximising your entitlements for you, when it could cause an issue with a future
Ancillary Fund’ for receiving and making for ‘vacant’ land held by non-companies
loss planning) your investors and your employees. There are three different methods for sale of a company. A business can also
deductible donations to manage your commenced in the 2020 financial
calculating the tax value of stock on hand at choose not to elect into the small business
The tax results of different entities in business gift programs you should ensure 2.2.2 New beneficiary TFN notifications year. These provisions can impact the
year-end: depreciation rules.
groups may be very different this year due deductible contributions are made prior deductibility of holding costs of land (e.g.
to the impact of COVID and COVID tax to 30 June 2021 and minimum mandated Where you have added new beneficiaries of You should talk to your Bentleys advisor interest) in the pre-development phase. You
• Cost
concessions. You should undertake a review levels of donations are made from the fund. trusts for the 30 June 2021 you will need to to consider which asset choices are may be able to structure your arrangements
prior to 30 June 2021 to determine whether notify the ATO with a TFN declaration by 31 • Market selling value appropriate for your business. You can to mitigate the impact of these rules. You
profits and losses in group entities can 2.1.16 Farm management deposits July 2021. • Replacement value. refer to the flow-charts in the Appendix to should talk to your Bentleys advisor if you
effectively be offset against each other. The Farm Management Deposits (FMDs) may be determine which concessions may apply7. incur costs in relation to holding vacant land.
2.2.3 Tax instalment modifications You will generally get the best tax outcomes
new loss carry-back may also be available. assessable income when withdrawn. Given from choosing the lowest value. 2.3.3 Company loss carry-back
You may need to review inter-entity pricing tax losses available for assets, now might be Where you have completed your tax
arrangements and distribution arrangements the time to consider redeploying FMDs into estimates and you have overpaid tax Where stock has become obsolete you may The new loss carry-back measures apply
to ensure the most tax effective result. We productive capital investment where the net instalments you should look to vary also write-down the value of the stock. to companies to use current year losses to
can assist with this review. cost of the withdrawal is tax neutral. your final instalment in line with your tax obtain a refund of taxes paid in prior years,
It is therefore important that you do a
estimates. This should be done by the as per the diagram above.
stocktake at year-end to determine the value
lodgement date of the June 2021 BAS5.
of stock on hand from a tax perspective.
Year-end tax planning manual FY2020/21 page 6 Year-end tax planning manual FY2020/21 page 7
Business Business
2.3.11 Withholding taxes - cash economy 2.3.14 Financial reporting right circumstances these may be non-
taxable reductions in the cost of the land11.
Effective from the start of the 2020 financial The COVID tax concessions may represent
year, costs are no longer deductible where a significant departure from normal 2.3.16 SA land tax nominations
withholding tax requirements have not been accounting practice. In particular, it may not
met. A key area where this may occur is be normal accounting practice to write-off Where you have pre-16 October 2019
where you have paid consultants who have all valuable depreciating asset purchases South Australian property in a Discretionary
not quoted you their ABN. In these cases even though the tax rules may allow this Trust you have until 30 June 2022 to
you may have a withholding tax obligation. treatment. nominate a designated beneficiary.
If you did not comply with this obligation you
You should consider the users of your Where you have an increased land tax
are unable to claim an income tax deduction
financial reports and whether there needs to liability from the new SA land tax changes
for the expense.
be a departure from ‘tax’ prepared financial you may be eligible for transitional relief.
2.3.12 Employee v contractor statements where it may potentially mislead
Bentleys can assist you with this land tax
a user of the report. This may occur where:
The ATO continues to challenge the review to ensure you are not paying more
treatment of employees v contractors. • All fixed assets have been written-off as land tax than necessary12 .
In particular, whether superannuation accounting expenses
guarantee amounts and on-costs are 2.4 2021 housekeeping and
payable on contractor payments. • COVID deferrals or other provisions are documentation issues
not properly accrued in the financials,
You should ensure your systems and and/or 2.4.1 Tax asset registers
2.3.5 Lease incentives in relation to these amounts (subject to • Loan interest accruals
meeting conditions). processes for determining the classification The new temporary asset write-offs and the
The new asset write-offs add a new • Statutory cost deferrals offered during is appropriate. • Deferred tax liabilities for asset write-
offs are not reflected in the financials. interaction with future transactions means
opportunity to structuring lease incentives Likewise, where a tenant moves out of the COVID period (e.g. payroll and land
2.3.13 Company tax rate / change that you need to clearly identify on the tax
for tenants. Where you are looking to offer your property and leaves a fit-out in place tax), and You should discuss the scope of the asset register the specific provision you are
your tenants lease incentives you should you may potentially be able to access a The Base Rate Entity company tax rate is financial accounts preparation with your using to depreciate or write-off the asset. In
discuss how to structure the arrangement to deduction from demolishing their fitout even • Where work has been completed but
reducing to 25% for the FY2022 financial Bentleys advisor and the degree to which particular, it is important to identify whether:
benefit both the landlord and tenant. where you did not incur the building cost. A not yet invoiced to you.
year. There are several ongoing planning normal accounting principles and standards
Quantity Surveyor can estimate the costs points in relation to the lower company tax need to be adopted for this financial • The small business depreciation and
2.3.6.COVID revenue deferrals These costs may be deductible in the year
associated with the construction. rate: year-end for the users of your financial write-off provisions in Division 328-D
of accrual.
Commercial property owners may have
2.3.8 Treatment of government grants statements. • The ordinary depreciation rules
offered rent deferrals or waivers during the 2.3.10 Travelling employees • Determining whether the company is
COVID period. You should review whether and concessions under the $50m aggregated turnover The preparation of your financial statements • The Instant Asset Write-off in section
the tax timing of the income from such The ATO has recently released updated test and able to access the lower may also impact other tax issues such as:
Different COVID concessions have different 40-82, or
arrangements can be deferred. Where you guidance on the tax treatment of costs company tax rate
tax treatments. The Cashflow Boost is • Whether the company is able to declare
are the tenant you should review whether incurred by travelling employees. This • The temporary asset write-offs in
specifically non-assessable income8, as are • Determining the character of income a dividend out of available profits, or
you can claim a deduction for the amount is particularly relevant for workers who Division 40-BA and 40-BB have been
certain government grants where they have within company groups as ‘active’ or
deferred. may be considered Living Away From applied to each asset.
been designated as tax exempt. ‘passive’ and which tax rate applies. • Whether the company has a
Home rather than travelling. COVID travel
2.3.7 Quantity surveyor reports restrictions may also have had an impact For example, income of an internal ‘distributable surplus’ under the private The flowcharts in the Appendix can assist
Other grants may only be assessable at a company loan rules.
later time or when conditions attached to on this assessment. It is also relevant for asset leasing entity is likely passive with this review. You should also ensure that
Where you acquire new or own existing
the grant are met. We can assist you to workers who live long-distances from their 2.3.15 Revenue v capital treatment of your procedures for adding new assets are
property you may be able to access • Managing trust distributions to
review the treatment of grants with your workplaces. receipts reviewed to ensure the correct information is
increased deductions for prior year companies to ensure the 80% passive
income tax compliance. entered by your accounting staff.
capital spend in relation to the property. In We recommend you pay particular attention income test is not breached, and
You may achieve significant tax advantages
particular: to your employee travel related costs to
2.3.9 Deductible accruals • Quarantining frankable profits at the from classifying a receipt as ‘capital’ rather
ensure the correct classifications and tax than ‘revenue’. Where you have received
• Building costs incurred by the previous 30% tax rate.
Expenses will generally be deductible treatments are adopted8. amounts outside the ordinary course of your
owner may continue to be deductible
when you are ‘definitely committed’ to the We can assist you with strategies to help business (e.g. from asset sales) you should
over a statutory period; and
outgoing rather than when you receive or access the lower company tax rate and, discuss with us the appropriate treatment
• Part of your acquisition cost may be pay an invoice for the work. You should pay where possible, preserve entitlement to and whether there is a benefit from forming
attributed to ‘depreciable’ fitout such as close attention to: pay dividends to shareholders at the higher a view the amount is capital. An example
air-conditioners. You may be entitled to franking rate10. is certain mining compensation receipts
• COVID payment deferrals offered by
access the temporary asset write-offs received by agricultural land owners. In the
commercial clients (e.g. landlords)
Year-end tax planning manual FY2020/21 page 8 Year-end tax planning manual FY2020/21 page 9
Business Business
2.4.2 Reportable tax positions
Companies with business income of
$250m or more, or with business income
of at least $25m and part of a group with
total business income of $250m or more,
are required to prepare a reportable tax
positions schedule for the year ended 30
June 2021 This schedule requires a more
detailed review in relation to prior period tax
positions adopted to be able to correctly
answer the questions.
We can assist with this review and in
preparing the schedule13.
2.4.3 Research and development
Documentation and records that support
your self-assessment of R&D activity
eligibility is not only fundamental to program
aware when it will occur ‘Next 5000 reviews’ relating to higher line with ATO expectations of a Next 5000 2.4.7 Private company loans key focus in a due diligence review as part
compliance but now central to a new
wealth groups (>$50m). This may also review to ensure you are ready to respond of a possible sale.
R&D Tax Incentive Application form for the • The vesting date of the trust is not The private company loan rules are complex
be extended to lower wealth groups. The quickly.
2020/21 year and beyond. inconsistent with other trusts in the to administer in private groups and require We recommend businesses which have
aim is to get broad coverage across this
group such that it impacts intra-group client population. Higher Wealth groups We generally find that clients who are careful consideration and documentation of: previously claimed JobKeeper take time
R&D claimants also need to be aware
distributions can expect a review over the next couple of well prepared and respond quickly and in for this year to undertake an internal due
that the Jobkeeper funded portion of R&D • Compliant loans under written loan
years. There are several critical items you detail to an ATO request will move faster to diligence review of their initial claims to
wages and salaries will not be eligible for an • The income definition is sufficiently agreements
need to have in place as part of this review: finalisation without a costly detailed review. make sure appropriate documentation is
R&D offset. flexible to define income in line with tax retained. This will assist with a future ATO
concepts or other amounts to ensure 2.4.6 Aggregated turnover testing • Effective repayment of loans, and
As the end of financial year approaches, • A current group structure diagram review or sale due diligence review.
distributions are tax effective with up to date corporate and owner
R&D claimants need to ensure that Many of the tax concessions available are • Analysis of flow-on issues with group
information 2.4.9 Personal service income /
transactions between associated entities • The trusts achieve asset protection and based on a common definition of group distributions.
contractor documentation
are constructively paid in the current year estate planning objectives of the group ‘aggregated turnover’. Entities which are
• Documentation relating to tax risks We recommend each year you prepare
in order for the R&D offset to be received ‘connected’ (generally >40% common The ATO has renewed its focus on entities
within your group and the processes appropriate minutes to evidence group
in that year or the benefit will be carried • Family trust elections have been ownership) or ‘affiliated’(general control which might be subject to personal service
and procedures in place to manage transactions to manage possible private
forward. reviewed and made where necessary relationship) with the business entity can income treatment. This treatment may
and communicate tax risk. We strongly company loan exposures. Non-compliance
recommend as part of each annual be included. This can include income of have the effect of mandating that income
Please contact our R&D advisors if you • Where the trust owns properties in with these rules can expose a business to
compliance engagement you undertake overseas entities. The relevant thresholds earned by an entity is taxed to an individual
have any questions as to how to optimise certain States (e.g. NSW) the deed is additional taxes of up to 29% on wealth
with us we provide you with a written where aggregated turnover is relevant are: at a higher marginal tax rate. An effective
R&D benefits whilst maintaining program drafted appropriately to avoid higher transferred from group companies.
communication in relation to the $2m, $10m, $50m, $100m, $500m, $1bn strategy to mitigate against the risk of
compliance. tax state tax charges relating to non-
material tax positions the group adopts or $5bn. An entity is under a threshold 2.4.8 JobKeeper documentation these rules applying is to ensure that
residents, and
2.4.4 Trust deeds and trust compliance in each year and our assessment where it meets any of the following: contractors are rewarded in compliance
• Proper minutes of meetings for trustee The JobKeeper measures were with the ‘independent contractor’ test16.
of the risk of the positions. This will
Various State tax measures and changes to • Aggregated turnover in the prior year is implemented by the government and This applies equally for services provided
resolutions are retained with tax form a key part of your governance
vesting conditions for trusts and changes under the threshold, businesses very quickly and relied on an between related parties.
documentation. documentation, and
to income streaming provisions mean that assessment of:
• Aggregated turnover for the current We can help you put in place agreements
existing trust deeds may become out of It is good governance practice to have • Consideration of, and documentation
year is likely to be under the threshold • Compliance with a ‘reduction in which document compliance with this test.
date. Where you have trusts in your group a rolling review of trust and corporate relating to, each key risk area the ATO
and was not over the threshold in each turnover’ test, and
you should ensure: compliance documentation (e.g. every has identified in relation to private
of the two prior years, or
three years) to ensure currency of the groups14.
• The class of beneficiaries is broad • Assessment of eligible employees.
documentation. • Aggregated turnover for the current
enough to capture all desired We recommend, if you are within the target The ATO has been increasing its compliance
year is under the threshold (worked out
distributions within the group 2.4.5 Tax governance / ATO review group for this review, you consider engaging activities in relation to erroneous JobKeeper
at the end of that year).
preparation your Bentleys advisor to prepare additional
• The vesting date of the trust has not claims and has highlighted lack of
documentation as part of the 2021 Therefore, this is a rolling test which needs documentation as a key issue, particularly
passed or is not due soon and you are The ATO is currently undertaken their
compliance preparation. This should be in to be continually monitored15. with the benefit of hindsight. This is also a
Year-end tax planning manual FY2020/21 page 10 Year-end tax planning manual FY2020/21 page 11
Business Business
2.4.10 Employee share plans
Effective remuneration strategies for key
employees can include sharing in the equity
of the business. It is critical that these types
of arrangements are properly documented
in compliance with the tax rules to be
effective for the company and the employee.
This may also require making sure that
tax compliant valuations are retained. In
particular:
• Start-up concession: The start-up
concession allows an employee to
only be taxed on future realisation
of the equity provided under the
CGT provisions. Certain valuation
concessions and requirements apply to
this scheme;
• Deferred concession: An employee
share scheme needs to have certain 2.5.3 Transfer pricing 2.5.4 Thin capitalisation 2.5.7 Non-resident employees
requirements to enable an employee to • An expense paid overseas relates to
2.5 International issues
defer taxation until future realisation; a separate hybrid arrangement an Offshore related party transactions must The thin capitalisation rules limit the amount Where a business has non-resident
2.5.1 Withholding taxes overseas related party has with another comply with Australian and overseas of deductible debt which can be maintained employees located in Australia for extended
• Loan scheme: Employees made be related party. transfer pricing requirements to be in an Australian ‘global’ group. There is a periods due to COVID, it may mean there
offered loans to acquire equity which The nature of contracting arrangements tax effective. The ATO and overseas general threshold of $2m interest at which are tax obligations (PAYG, super, payroll
are paid down through future equity with overseas parties may have changed jurisdictions have certain safe harbors and the rules apply. However, where the rules tax, etc). You should make sure that these
returns. These loans need to be as a result of COVID. It is important that
you review the terms of cross-border
“You cannot be certain documentation concessions which make apply, COVID impacts on group balance employees are identified and compliance
properly documented to comply with this easier for SME entities to comply with sheets may impact thin capitalisation safe has been managed20.
tax and FBT requirements. agreements to ensure that withholding tax
obligations are met.
of the tax treatment in the rules. harbors. Therefore, this is a critical year to
2.5.8 Foreign tax offsets
review your thin capitalisation position to
The COVID period affected many existing
2.4.11 Inter-entity agreements / minutes
Payments may be non-deductible where Australia of amounts related party arrangements and it may
ensure debt deductions are not impacted. The ATO has released further guidance in
relation to eligibility for foreign tax offsets in
The 2021 year-end may require a closer withholding tax requirements have not been be necessary to review and document 2.5.5 Permanent establishment
emphasis on related party transactions to met. The ATO is also looking at structures paid overseas, unless this impact. For example, if an overseas
Travel restrictions for employees may impact
Australia. Foreign taxes on capital gains,
in particular, may be impacted21. There are
offset profits and losses in different group which seek to avoid withholding taxes17. operation was adversely impacted and
entities. These transactions will need to be 2.5.2 Anti-hybrid rules
you have a detailed generated a large loss, in may be possible
whether a permanent establishment of
an entity existing in Australia or overseas.
a number of considerations in determining
whether overseas taxes are eligible for credit
properly documented and reasonable to to transfer price some of this loss to the
ensure they remain tax effective. The anti-hybrid rules are a complex set understanding of the Australian operation, where they should
This may create a taxable presence of the
company here or overseas. You should
in Australia.
of new legislation which seek to align the have borne the financial risk of this loss. We can assist you with this review.
2.4.12 Not-for-profit tax exemption tax treatment of income and expenses in worldwide group and Likewise, the ATO does not accept that
review this as part of this year-end.
Australia with the tax treatment overseas. government funding (e.g. Jobkeeper) can 2.5.6 Offshore compliance
Announcements in the 2021 budget will
make it even more critical for not-for-profit
It does this by denying a tax deduction or the tax treatment in the merely be passed on overseas as a pricing
Most countries introduced COVID related
including an amount as assessable where adjustment19.
entities to assess their compliance with
income tax exempt status from year-to-year.
there is a mismatch overseas. This could overseas jurisdiction.” We can assist you to ensure that your
concessions. You should make sure these
have been correctly applied overseas and
occur in the following types of scenarios, for
The ATO has released a Self-Governance example: transactions continue to be compliant with there are no flow-on consequences for the
Checklist to help with this process. Therefore, you cannot be certain of the transfer pricing rules and you fit within Australian operation.
• Interest on a loan from a related tax treatment in Australia of amounts existing concessions.
overseas party is taxed at a low tax rate paid overseas, unless you have a detailed
in the overseas jurisdiction understanding of the worldwide group
• A US holding entity ‘ticks-the-box’ and the tax treatment in the overseas
on an Australian entity to treat it as jurisdiction. The ATO has set out a set
a flow-through such that inter-entity of minimum information requirements
transactions are not taxed in the US it expects taxpayers to keep to ensure
compliance with these rules18.
Year-end tax planning manual FY2020/21 page 12 Year-end tax planning manual FY2020/21 page 13
2. Individual year-end tax planning Individuals
COVID had a 3.1 Actions that should occur before 30
June 2021
3.1.5 Asset write-offs 3.2.3 Treatment of COVID related receipts 3.2.7 Rental property depreciation
New rules introduced
significant impact on 3.1.1 Superannuation contributions
Individuals not carrying on a business
(e.g. employees) are not entitled to the
Ensure receipts for early release of super are
not included as assessable income and the
Building costs of a rental property and
depreciation on new assets may be for the 2020 financial
our ability to travel. The Superannuation contributions need to be
instant asset write-off or temporary full
expensing measures. Employees are
treatment of other COVID related receipts is
correct23.
additional non-cash costs you can claim
against your rental property. You may
year mean that, where
received by the fund before 30 June 2021 to
ATO is looking closely be deductible. The concessional (deductible)
limited to expensing assets costing less
than $300. Where employees wish to 3.2.4 Vehicles and log books
need to engage with a quantity surveyor to
assess the amount of eligible costs.
a supplier does not
limit for superannuation is generally
at travel expenses, $25,000. The fund will need to be notified
access the full expensing measure for larger
Patterns of travel during the COVID period 3.2.8 Rental property expenses - interest
provide an ABN and
purchases (e.g. work vehicles) they may
particularly where of the deduction and the individual should
receive confirmation and retain this with their
need to consider acquiring assets in related
may not be reflective of normal use. Make
sure vehicle log books properly reflect The ATO, through its rental property
the property owner
business entities or packaging with an
employees may be tax records.
employer.
business-as-usual travel arrangements and
adjustments are appropriately made for the
program, has been looking closely at the tax
treatment of interest on loans. In particular,
does not withhold
living away from home 3.1.2 Asset realisations - contract date
3.2 Other planning issues
COVID period. it is focussing on arrangements which seek tax, no deduction will
Where an individual has made taxable to inflate ‘deductible’ interest and reduce
rather than travelling capital gains it may be tax effective to 3.2.1 Varying PAYG instalments
3.2.5 Travel expenses ‘non-deductible’ interest through structuring be available for the
consider whether unrealised capital losses of loan facility arrangements24.
on work. This should can be realised. Capital gains and losses
Consider varying the 4th quarter PAYG COVID had a large impact on the ability to
travel. The ATO is looking closely at travel
outgoing.
instalment in line with tax estimates where We can assist you to review and properly
be a focus for this are generally brought to account when
sale contracts are signed rather than when
forecast tax is lower than instalments. expenses, particularly where employees
may be living away from home rather than
implement and document deductibility of
interest on your rental property loans.
year-end. transactions settle. 3.2.2 Working from home deductions travelling on work. This should be a focus
for this year-end. 3.2.9 Rental property expenses - no ABN
3.1.3 Donations Consider whether the ATO short-cut 80c
per hour method or the normal 52c per hour 3.2.6 Private health insurance The ATO, through its rental property
Donations to deductible gift recipients may with actual expenses for related home office program, has been looking at payments
be deductible where paid and receipted equipment and internet costs will result in a Acquiring a compliant private health policy which property owners make to entities
prior to 30 June 2021. better home office claim. There should be may mitigate future Medicare levy surcharge who do not provide their ABN. New rules
an expectation that home office claims will amounts. It is important to check the introduced for the 2020 financial year mean
3.1.4 Prepayments
be higher during the COVID period where amount of rebate claimed through the fund that where a supplier does not provide
Individuals may claim an immediate you were working from home22. and whether a catch-up payment may be an ABN and the property owner does not
deduction for prepayments not exceeding necessary on the income tax return. withhold tax, no deduction will be available
12 months. for the outgoing. This could include ‘cash-
in-hand’ repair work on a rental property.
Year-end tax planning manual FY2020/21 page 14 Year-end tax planning manual FY2020/21 page 15
4. References 5. Appendix: Asset flowcharts
1. Australian Taxation Office, Product 14. Risk areas for HWIs (external website)
Ruling PR 2020/12 ‘Income Tax:
15. Related document: JobKeeper
taxation consequences for a customer
payments and aggregated turnover
entering into a Rural Prepayment
(external website)
Program with Elders Rural Services
Australia Ltd’ (9 December 2020) 16. TR 2021-D2: Personal services income
and businesses (external website)
2. For example, PBR: frankable
distribution from reserve (external 17. Offshore entities interposed to avoid
website) interest withholding tax: ATO Taxpayer
Alert (external website)
3. Related links (external websites):
18. Related documents (external websites):
• PSLA 2020/D1: Remission of additional
SG charge • Integrity rule Law Companion Ruling
finalised
• Super guarantee amnesty
• PCG 2021/D3: Imported hybrid
4. PCG 2021/D2: Allocation of firm profits
mismatch rule
ATO compliance approach (external
website) 19. Transfer pricing arrangements and
JobKeeper payments
5. Varying PAYG instalments (external
website) 20. Related document: Notice of data-
matching program (external website)
6. ATO reminder for businesses which pay
contractors and need to lodge taxable 21. TD 2020/7: Capital gains not included
payments annual report (external in FITO limit (external website)
website)
22. Related document: PCG 2020/3
7. Related examples (external website): COVID-19 and working from home
(external website)
• PBR: instant asset write-off
23. Related document: Exclude COVID-19
8. Tax consequences of cashflow boost
ERS payments reminder (external
(external website)
website)
9. Related documents (external websites):
24. Related document: PBR Interest
• Taxation ruling TR 2021/1: deductibility deductibility on linked offset account
of employee transport expenses (external website)
• Draft taxation ruling TR 2021/D1:
accommodation, food and drink
expenses and allowances
• Draft Practical Compliance Guideline
PCG 2021/D1
10. Company tax rate change (external
website)
11. For example, PBR: Mining
compensation payment (external
website)
12. Related links (external websites):
• SA Land Tax guides
• SA Land Tax transitional fund
13. RTP schedule expansion to large
private companies (external website)
Year-end tax planning manual FY2020/21 page 16 Year-end tax planning manual FY2020/21 page 17
Appendix Appendix Year-end tax planning manual FY2020/21 page 18 Year-end tax planning manual FY2020/21 page 19
Our team Appendix Year-end tax planning manual FY2020/21 page 20 Year-end tax planning manual FY2020/21 page 21
6. Your tax experts 7. Disclaimer
Bentleys is a network of advisory and accounting firms, with over 700 talented staff delivering solutions from 18 locations across Our tax comments are based on current taxation law as at the date of this document is provided. You will appreciate that the
Australia, New Zealand and China. We work with aspirational businesses and entrepreneurial people to help them achieve their tax law is frequently being changed, both prospectively and retrospectively. A number of key tax reform measures have been
objectives and get where they want to be. implemented, a number of other key reforms have been deferred and the status of some key reforms remains unclear at this
stage.
We take this opportunity to introduce you to some of our tax, R&D incentives, and business advisory specialists.
Unless special arrangements are made, this document will not be updated to take account of subsequent changes to the tax
legislation, case law, rulings and determinations issued by the Australian Commissioner of Taxation or other practices of taxation
authorities. It is your responsibility to take advice if you are to rely on our advice at a later date.
The income tax law includes various anti-avoidance provisions including a general anti-avoidance provision. We do not warrant
or make any assertions that the ATO will not seek to apply these provisions to a tax planning strategy you implement. All
strategies must be based on commercial reality and have regard to the various anti-avoidance provisions which might apply.
We are unable to give any guarantee that our interpretation will ultimately be sustained in the event of challenge by the Australian
Simon How Nicole Black Mike Burfield
Commissioner of Taxation.
Partner, Tax (Chair of Tax Committee) Associate Director Managing Director
Bentleys SA/NT Bentleys Queensland Bentleys R&D Services The comments in this report are general in nature only and do not constitute advice based on your particular circumstances.
show@adel.bentleys.com.au nblack@bris.bentleys.com.au mburfield@bentleysrdi.com.au Accordingly, neither the firm nor any member or employee of the firm undertakes responsibility in any way whatsoever to any
+61 8 8372 7900 +61 7 3222 9777 +61 8 8372 7900 other person or company for anyone seeking to rely on the comments in this report as advice.
Vicki Cremona Darren Lee Tomas Mackay
Senior Manager, Tax Director, Tax Manager
McLean Delmo Bentleys Bentleys NSW Bentleys Tasmania
vcremona@mcdb.com.au darren.lee@bentleysnsw.com.au tmackay@bentleystas.com.au
+61 3 9018 4666 +61 2 9220 0700 +61 3 6242 7000
Sonia Mascolo Ross Prosper David Spurritt
Director, Tax Partner, Tax and Business Services Partner, Tax
Bentleys SA/NT Bentleys WA Bentleys SA/NT
smascolo@adel.bentleys.com.au rprosper@perth.bentleys.com.au dspurritt@adel.bentleys.com.au
+61 8 8372 7900 +61 8 9226 4500 +61 8 8372 7900
Dean Steer
Partner, Tax
Bentleys Queensland
dsteer@bris.bentleys.com.au
+61 7 3222 9777
Year-end tax planning manual FY2020/21 page 22 Year-end tax planning manual FY2020/21 page 23Where you want to be.
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business and ambitious about
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