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Taxable payments annual report (TPAR)

If your business makes payments to contractors or subcontractors, you may need to lodge a Taxable payments annual report (TPAR) by 28 August each year.

 

The taxable payments reporting system aims to create a level playing field – to prevent dishonest operators from gaining an unfair advantage over the majority. The information we collect in the TPAR allows us to identify contractors who are not meeting their tax obligations.

 

You need to know about TPAR if your business provides any of the following services, even if it’s just part of the services you provide each year:

 

  • building and construction services – this category is very broad; it includes plumbing, architectural, electrical, plastering, carpentry, engineering, and a wide range of other activities (for full list, see Examples of building and construction services)
  • cleaning services – this includes interior and exterior cleaning of structures, vehicles, machinery and cleaning for events.
  • courier services or road freight services – this includes delivery of items or goods (such as parcels, packages, letters and food) by motor vehicle, bicycle or on foot, the transportation of freight by road, truck hire with driver, and road vehicle towing services.
  • information technology (IT) services – this includes writing, modifying, testing, or supporting software to meet a client’s needs, whether on site or remotely through the internet
  • security, investigation, or surveillance services – this includes patrolling and guarding people, premises or property; watching or observing an area and monitoring security systems; and investigation specifically related to security and surveillance, not just information gathering.

The TPAR details payments made to contractors for providing services.

 

Contractors can include subcontractors, consultants and independent contractors. They can be operating as sole traders (individuals), companies, partnerships, or trusts.

 

The details you need to report about each contractor are generally found on the invoice you should have received from them. This includes:

 

  • their Australian business number (ABN), if known
  • their name and address
  • gross amount you paid to them for the financial year (including any GST).

 

ATO may impose penalties for late or non-lodgement of TPAR.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for lodgement of TPAR for your business.

 

 

 

Tax on superannuation contributions

 

The tax you pay on your super contributions generally depends on whether the contributions were made before or after you paid income tax, you exceed the super contribution caps or you are a high-income earner.

 

Before-tax super contributions (concessional)

 

Concessional contributions are contributions that are made into your super fund before tax. These include employer contributions, such as compulsory employer contributions and salary sacrifice payments made to your super fund and contributions that you are allowed as an income tax deduction. They are taxed at a rate of 15% in your super fund.

 

Annual contribution cap applies to the amount of contribution you can make each year. Excess contributions are taxed are marginal tax rates.

 

From 1 July 2021, the concessional contributions cap is $27,500. The increase is a result of indexation in line with average weekly ordinary time earnings (AWOTE).

 

From 1 July 2017 to 30 June 2021, the concessional contribution cap for each year is $25,000.

 

Excess contributions tax

 

There are limits on the amount of before-tax and after-tax contributions you can make each year, and these may vary depending on the financial year and your age.

 

If you contribute too much to your super, you may have to pay extra tax.

 

If you exceed the before-tax (concessional) super contributions cap, the excess is included in your income tax return and taxed at your marginal tax rate. You can choose to withdraw some of the excess contributions to pay the additional tax.

 

If you exceed the after-tax (non-concessional) super contributions cap, you can choose to withdraw the excess contributions and any earnings. The earnings are then included in your income tax assessment and taxed at your marginal rate.

 

If you do not withdraw the earnings, the excess is taxed at 47%.

 

Note – Concessional superannuation contributions can be used as an effective tax planning strategy.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further assistance.

 

 

EOFY last-minute tax planning strategies

 

Pre-pay investment loan interest

 

If you have some savings, then see if you can negotiate with your finance provider to pay interest on borrowings upfront for the investment property and make that deduction available this year. Most taxpayers can claim a deduction for up to 12 months ahead.

 

But make sure your lender has allocated funds secured against your property correctly, as a tax deduction is generally only allowed against the finance costs incurred for the purpose of earning assessable income from investments.

 

Bring forward expenses

 

Try to bring forward any other deductions such as the interest payments mentioned above into the 2020-21 year. If you know that next income year you will be earning less due to maternity or partner leave or going part-time, then you will be better off bringing forward any deductible expenses into the current year.

 

An exception will arise if you expect to earn more next financial year. In that case it may be to your advantage to delay any tax-deductible payments until next financial year, when the financial benefit of deductions could be greater.

 

Temporary full expensing

 

The temporary full expensing regime is now operable for depreciating assets acquired after 6 October 2020 and before 30 June 2023. The full cost of acquiring depreciating assets is deductible in the year of income in which the asset is first held, provided the item is first used, or installed ready for use, by 30 June 2023. Some exclusions apply. Passenger cars are excluded.

 

The cost of improvements made to a depreciating asset is also deductible in the year of income the improvements are made (no later than 30 June 2023). In contrast to the instant asset write-off rules, there is no upper limit on the amount that can be fully deducted in respect of any asset.

 

This may enable some effective tax planning between the 2021 and 2023 tax years where there are assets you have been looking to acquire or improve.

  

Use the Capital Gains Tax (CGT) rules to your advantage

 

If you have made any capital gain from your investments this financial year, you may consider selling any investments on which you have a chance of making a loss before 30 June. Doing so means the gains you made on your investments can be offset against the losses, reducing your overall taxable income.

 

You should be aware that the deliberate realisation of capital losses for the purpose of reducing capital gains in some circumstances may trigger a response from the ATO.

 

Keep in mind that for CGT purposes a capital gain generally occurs on the date you sign a contract, not when you settle on a property purchase or share transaction. When you are making a large capital gain toward the end of an income year, knowing which financial year the gain will be attributed to can be a handy tax planning advantage.

 

Tread carefully and don’t let tax drive your investment decisions –check to determine whether this strategy will suit your circumstances, and whether you risk attracting the attention of the ATO in any way.

 

Investment property

 

Expenses on your rental property can be claimed in full or in part, so, if possible, it can be helpful to bring forward any expenses that can be undertaken before June 30 and claim them in the current financial year. If you know that your investment property needs some repairs or maintenance or repainting, see if you can bring the maintenance and (deductible) payments into the 2020-21 year.

 

It should also be noted that deductible rental property expenses remain deductible even if the property is not rented as long as it is genuinely available for rent (which is relevant in the current COVID-19 environment).

 

Above mentioned points are non-exhaustive list of strategies that can be used as an effective tax planning strategy. It may or may not apply to your personal circumstances. No consideration has been given to target audience’s personal circumstances whilst drafting this article.

 

It is prudent to seek professional advice before taking further action after reading this article. Expert Tax will not accept any liability arising because of relying on this article.

 

Contact Expert Tax on 0449 952 855 or 1300 869 829 for further assistance.

 

 

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