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Posts Tagged PAYG

Businesses

20th Jun, 2018

Lower company tax rates and imputation

Company tax rates are falling in Australia. Companies carrying on a business with turnover of less than $25 million will pay a rate of 27.5% in 2018 – the rate of 30% only applies if turnover is $25 million or more,
or the company is not carrying on a business.

By 2027, the tax rate will reach a low of 25% for companies carrying on a business with turnover up to $50 million.

TIP: The dividend franking rate for 2018 may be different from a company’s tax rate, depending on whether turnover in 2017 was less than the current year’s turnover benchmark ($25 million for 2018).

Deductions for small business entities

Small business entities (companies, trusts, partnerships or sole traders with total turnover of less than $10 million) will qualify for a raft of tax concessions in the 2018 income tax year:

  • the $20,000 instant asset write-off – an immediate deduction when buying and installing depreciating assets that cost less than $20,000.
  • the simplified depreciation rules – accelerated depreciation rates of 15% or 30% for depreciable assets that cost $20,000 or more;
  • the small business restructure rollover;
  • an immediate deduction for start-up costs;
  • an immediate deduction for certain prepaid expenses;
  • the simplified trading stock rules – removing the need to do an end-of-year stocktake if stock value has changed by less than $5,000;
  • the simplified PAYG rules – the ATO will calculate PAYG instalments;
  • cash basis accounting for GST – the ATO will calculate the GST instalment payable and annual apportionment for

    • input tax credits for acquisitions that are partly creditable;

  • the FBT car parking exemption (from 1 April 2017); and
  • the ability for employees to salary-sacrifice two identical portable electronic devices (from 1 April 2016).

    • These concessions are very powerful for small businesses, and can lead to substantial tax savings.

    Small business CGT concessions

    If you’re selling a business that has an aggregated turnover of less than $2 million (a “CGT small business entity”) or the value of its net CGT assets is $6 million or less (it satisfies the $6 million “net asset value” test), you may be able to access the small business CGT concessions.

    These concessions include:

    • a 15-year exemption – no CGT is payable;
    • a 50% active asset reduction – a 50% CGT discount in addition to the 50% general discount;
    • the retirement exemption – up to $500,000 lifetime tax-free limit; and
    • the active asset rollover – minimum two years’ deferral.

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Court finds pay-as-you-go amounts “withheld” from salary payments

18th Apr, 2018

The Federal Court has ruled that pay-as-you-go (PAYG) amounts were “withheld” from a taxpayer’s salary payments so that she was entitled to a tax credit, despite the amounts never being remitted or notified to the ATO by her employers.

This case illustrates the importance of records and documentation in tax matters. The Court examined evidence such as the taxpayer’s offer of employment, payslips, bank statements and payment summaries, which suggested that the salary payments she received were “net pay” amounts (and not “gross”).

The Court noted that where an employer has not remitted PAYG withholding amounts to the ATO, this will raise questions about whether amounts were really withheld. However, adequate documentation can – as in this case – be used to prove that PAYG has in fact property to withhold an amount from the purchase price (for remission to the ATO) if the vendor is a foreign resident. This regime is designed to assist the ATO in collecting CGT payable by foreign residents.

If the vendor is an Australian resident, they must provide an ATO-issued clearance certificate to the purchaser on or before the day of settlement to ensure no withholding occurs. The ATO has released some guidance for trusts and superannuation funds about specific information they must provide when applying to the ATO for a clearance certificate. Contact our office for further assistance.

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