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Tax changes affecting every Aussie small business owner

August 14, 20195 min read

With the end of financial year finally over, this is a time for small business owners all across Australia to take stock of the past 12 months and to start preparing themselves for the coming year. But, before you finalise those budgeting forecasts and goals for the year, you need to be aware of the major tax changes coming into effect on July 1st and how they affect you.

To help you avoid any nasty surprises from the ATO, we’ve compiled together a list of the most important changes that every Aussie business owner needs to know about.

The lowdown on Single Touch Payroll (STP)

The biggest change that small businesses need to be aware of is the mandatory rollout of STP for all Australian businesses with 19 employees or less. However, many business owners are still in dark about STP, specifically what it is and how it affects them. With one recent

In short, STP is an initiative by the Federal government that aims to streamline the current payroll reporting process for employers to the ATO. The idea is that by adopting this new system, Australian employers will be able to eliminate common issues like double handling and keep better track of liabilities like PAYG and super contribution.

While there are a few steps involved with becoming STP-compliant, the good news is that most payroll and accounting software are already STP ready. All you need to do is enable STP on your existing payroll software, or sign up for a low-cost STP compliant accounting solution and you can get started.

If you’re worried about not being STP compliant already, don’t worry! The ATO has given a three-month grace period to get set-up, meaning that you have until the 30th of September to become STP compliant.

To find out how to enable STP on Quickbooks, make sure to check out our tutorial here. If you still have more questions about STP, then check out our answers to the top 10 most asked questions about STP here.

Claim up to $30,000 in tax deductions

Recently purchased some new office chairs? Perhaps a coffee machine? Or even some new storage space? Then you’re going to love the next big change from the ATO.

As of July 1st, the ATO has made significant changes to the instant asset write off scheme, increasing the limit to $30,000 and giving Aussies until the 30th of June, 2020 to make a claim. Meaning that any business that has a turnover of up to $50 million, they’ll be able to claim deductions on a variety of items as long as they have been bought, used or installed between April 2019 and June 2020.

“The instant asset write-off has recently been made even more generous, with all assets costing up to $30,000 each available for instant write off. In addition, thousands of additional businesses now qualify, as the qualifying turnover threshold has been raised to cover any business with a turnover up to $50 million,” says Mark Chapman, Director of Tax Communication at H&R Block.

“So, any small or medium business that’s looking to improve productivity, efficiency and profitability can now lock in an immediate tax deduction for items as diverse as laptops, office furniture, stationery, cars and coffee machines.”

Changes to wages

Something that all Australian employees need to take note of are the various changes to employee pay and salary.

Firstly, the minimum wage has been raised by 3% to $740.80 per week, or $19.49 an hour, with changes to penalty rates as well for workers in the retail, hospitality, fast food and pharmaceutical industries. If you need help working out the exact rates of your workers, take advantage of the FWO’s pay calculator.

Secondly, business owners who pay their employees in cash will need to become more diligent with their reporting. The ATO have made it very clear that employers who fail to comply will no longer be able to claim tax deductions for cash wages.

Finally, university graduates will be affected by the latest change to the HECS, with the repayment threshold dropping down to $45,581. Make sure to carefully look over what your current wages are as you may have to start factoring in your repayment costs towards your HECS debt.

The brand new banking code of conduct

For Aussies looking to take out a loan, make sure that you’re up to date with the latest round of changes by the royal banking commission. The Big Four banks have all signed onto the new Banking Code of Practice which aims to give small businesses more protection from unfair loan conditions.

The major changes include the implementation of simpler loan contracts, fewer conditions for loans up to $3 million, and banks will no longer be able to take enforcement action against those who meet all their loan repayments as long as the total value of their loans are under $3 million.

Other provisions also include any changes to loan conditions will be given more notice and contracts deemed to be “unfair” or “one-sided” will no longer exist.

ATO to pay extra attention

While not a change in tax law, Aussies should take into account the ATO’s pledge to crack down on “the black economy.”

Just last month the ATO revealed that there was a $50 billion shortfall between the tax small businesses are meant to be paying and the tax that is actually getting paid. The ATO has, so far, primarily focused on illegal phoenixing operations and introducing a new whistleblower hotline where people are encouraged to report any business owners engaged with black economic activity.

With plans to visit more than 10,000 small businesses nationwide in the coming financial year, Aussies are encouraged to ensure that their financial records are organised and up-to-date as possible.

Beyond in-person visits, the ATO are also hosting free information sessions in every state to help ensure that small businesses are keeping proper records, not making mistakes, and provide any other help attendees may need. You’ll be able to register for these information sessions through the ATO’s website here.

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