The importance of tax planning in 2021
As we all know, 2020 was a year like no other. Which means your tax planning for 2021 may be wildly different as well.
Various stimulus packages made available by the Australian Government to support businesses during the pandemic are due to come to an end. As a result, your business tax planning has never been more important. It should involve three key things:
- Strategies to reduce your tax
- Planning for your upcoming tax payments over the next 12 months
- Ensuring you are maximising any tax opportunities available to you and your business
Depreciation rules
In response to the COVID-19 pandemic, the Australian Government allowed businesses with an aggregated turnover of less than $500 million in an income year to deduct capital allowances for depreciating assets at an accelerated rate. This measure is temporary and will end on 30 June 2021.
If you were eligible for the accelerated rate of depreciation, your deductable expenses for 2021 will be decreased. This will therefore increase your profits and potential tax liabilities.
PAYG instalments
Businesses that experienced a downturn during COVID-19 may have varied their PAYG instalments or exited the PAYG instalment system on their activity statement.
The Government did not penalise business owners who varied instalments that related to the 2020-21 income year if they made their best attempt to estimate their end of year tax liability. This change ends on 30 June 2021.
So, if you varied your PAYG, or exited the PAYG instalment system, and have not been paying instalment tax for 2021, it is crucial that you review your estimated income and tax liability and allocate funds in your cash reserves.
Stimulus packages
Instant asset write-off for small businesses
In July 2020, the Australian Government announced an extension for the instant asset write-off for small businesses. The write-off was designed to help businesses’ cash flow by bringing forward tax deductions for eligible business expenses.
Be sure you have correctly documented which assets have been written off during the instant asset write-off extension. You can read all about the details of the instant asset write-off here or read our break down on our blog here.
Get help with your tax planning for 2021
If you’re feeling overwhelmed by your tax planning for 2021, get in touch with our team. Our expert accountants can help prepare your tax return for 2020-21 and manage your finances for the coming financial year.
Don’t fall behind and miss out on the benefits and opportunities.
