It’s June which means winter has officially arrived. Following the Victorian state government’s circuit-breaker lockdown, businesses and families alike have been forced back into conditions that we are unfortunately well versed in. Whilst it’s a particularly contagious strain, it appears as though the lockdown is working, with case numbers stabilising and remaining low, confined mostly to already isolating primary close contacts. We will hopefully see ourselves back to business as usual in a “Covid-Normal” manner sooner, rather than later.
As we rug up and spend more time indoors (either by choice or by state government directive), it’s a perfect time to get your financial house in order as another financial year draws to a close. And what a year it has been!
The local economic news in May was dominated by the federal Budget, and better-than-expected economic data. Australia’s budget deficit is smaller than expected just six months ago, at $177.1 billion in April. This was underpinned by rising iron ore prices, up 22% this year, and higher tax receipts from more confident businesses and consumers.
The NAB business confidence and business conditions ratings hit record highs in April of +26 points and +32 points respectively. New business investment rose 6.3% in the March quarter, the biggest quarterly lift in nine years. Housing construction is also going gangbusters, up 5.1% in the March quarter while renovations were up 10.8% thanks to low interest rates and government incentives. Retail spending is also recovering, up 1.1% in April and 25.1% on a year ago. The ANZ-Roy Morgan weekly consumer confidence index rose steadily during May to a 19-month high of 114.2 points, well above the long-term average. As a result of the pick-up in economic activity, unemployment fell from 5.7% to 5.5% in April.
In response to all this, the Reserve Bank lifted its economic growth forecast to 9.25% for the year to June and 4.75% for calendar 2021. If realised, this would be the strongest growth in 30 years, albeit rising out of last year’s COVID recession. The major sticking point remains wages. Wage growth was 0.6% in the March quarter but just 1.5% on an annual basis, below inflation. The Aussie dollar finished May at around US77c after nudging US79c earlier in the month.
As the positivity in the economy grows, so does the growth of our team at King & Whittle, with not one, but two new starters commencing their journey with us. We are delighted to introduce Rose Erinjeri and Brina Zhang to you as the newest King & Whittle family members. Both come to us with a broad range of experience, and are both qualified Chartered Accountants. Please feel free to introduce yourself to both Rose and Brina should you become acquainted.
Until next month,
Your King & Whittle Team
SMSF member limit to rise
Tax Alert June 2021
The Government is continuing to support COVID-affected businesses by extending most of its pandemic inspired tax offsets and benefits. But at the same time the ATO has micro businesses like contractors who fail to declare all their income in its sights.
Here’s a roundup of some of the key developments when it comes to tax.
LMITO extended again
For individual taxpayers, an important tax change is the Budget announcement of another one-year extension to the current low- and middle-income tax offset (LMITO) for 2021-22.
This welcome decision will provide a valuable tax offset of up to $1,080 for individuals and $2,160 for dual income families as taxpayers repair their post pandemic finances.
Continuation of full expensing and loss carry-back
Business taxpayers should also be happy with the Budget announcement of an extension to the full expensing and loss carry-back measures. Under the full expensing rules, eligible businesses with an aggregate annual turnover of up to $5 billion are able to deduct the full cost of eligible depreciable assets until 30 June 2023.
Eligible companies can also carry-back tax losses from the 2022-23 income year to offset previously taxed profits as far back as 2018-19. This tax refund is available when you lodge your business tax return for the 2020-21, 2021-22 and 2022-23 financial years.
It’s been a year of change like no other and that extends to tax and superannuation. As the end of the financial year approaches, now is a good time to check some new and not so new ways to reduce tax and boost your savings.
With so many of us confined to our homes over the past year, the big deductible item this year is likely to be working from home expenses.
Home office expenses
If you have been working from home, the Australian Taxation Office (ATO) has introduced a temporary shortcut method which can be used for the 2020-21 financial year. This allows you to claim 80c for each hour you worked from home during the year.i
The shortcut method covers the additional running costs for home expenses such as electricity, phone, internet, cleaning and the decline in value of home office furniture and equipment.
Some people may get a better result claiming the work-related portion of their actual working from home expenses using the actual cost method.