The only constant about tax is change. Dr Adrian Raftery, principal of Mr Taxman and author of 101 Ways to Save Money on Your Tax - Legally! 2020-2021 edition (Wiley, May 2020, AU$25.95), provides us with some of the tax changes coming into play from 1 July 2020.

The corporate tax rate for small/medium companies (with turnover under $50 million) will reduce to 26 per cent in the 2020-21 year from the current 27.5 per cent. This rate will reduce further to 25 per cent in 2021-22. Note that companies which have passive income (such as interest income, rent, royalties, dividend income and net capital gains) constitutes more than 80 per cent of their assessable income are taxed at 30 per cent regardless of their size.

From 1 July 2020, foreign residents who own houses that they previously lived in whilst they were in Australia will no longer be able to claim the main residence CGT exemption when they subsequently sell. this means that a hefty capital gains tax bill will accrue from the time the owner purchased their home, rather than the point at which they moved overseas (plus up to a further six years that they rented the place after being their home).

From 1 July 2020, closely held payees — someone who is directly related to the entity (such as family members, directors or shareholders) — will need to start reporting through STP.

Previously earmarked to change on 1 July 2020, the $150,000 threshold for the immediate write-off for assets acquired by businesses with aggregated turnover of less than $500 million will revert back to $1,000 for small businesses with an aggregated turnover of less than $10 million on 1 January 2021.

From 1 July 2020, the age limit for spouse contributions into superannuation will increase from 69 to 74 years.

To assist retirees with minimising the amount of funds that they need to withdraw out of their retirement savings whilst the stockmarket is at its lows due to COVID-19, the government has temporarily reduced the minimum drawdown requirements for account-based pensions by 50 per cent for the 2019-20 and 2020-21 years.

For those who were financially affected by the COVID-19 pandemic and accessed up to $10 000 of their superannuation in the 2019–20 year, they can also access a further $10 000 in the 2020-21 year by 24 September 2020.

In changes proposed in the 2019 Federal Budget, the government plans on allowing people aged 65 and 66 will be able to make voluntary contributions into superannuation without having to meet the work test. Those aged between 67 and 74 years must work a minimum of 40 hours in a 30-day period in the income year if they wish to make a voluntary contribution into super. At the time of writing, this proposal is not yet law.

Like the superannuation work test, the Government has proposed that from 1 July 2020, people age under age 67 at any time during a financial year (eg age 65 or 66) will be able to trigger the non-concessional bring-forward rule. The ability to use the bring-forward rule will remain subject to the member's total superannuation balance on 30 June prior to the financial year of the contributions.  If your superannuation balance is no more than $1.4 million, you can bring forward two years’ worth of contributions, giving you a maximum non-concessional contributions cap of $300,000 in the current year (with nothing in the following two years if the whole amount is contributed in the first year of the period), rather than a $100,000 cap in each of the three years. At the time of writing, this proposal is not yet law.

In changes proposed in the 2018 Federal Budget, the government plans on reducing the R&D tax incentive reduced from 43.5 per cent refundable tax offset to a premium of 13.5 per cent above the claimant’s company tax rate (that is, 39.5 per cent) for companies with an annual turnover less than $20 million as well as placing a $4 million annual cap on cash refunds. At the time of writing, this proposal is not yet law.

… One proposed law change on 1 July 2020 that won’t happen - Division 7A loans from private companies

In changes proposed in the 2016 Federal Budget, the government planned on making substantial changes to the rules around private company loan arrangements from 1 July 2020 including a) changing the interest rate from the RBA’s ‘Indicator Lending Rates - Bank variable housing loans interest rate’ benchmark rate (currently 5.37%) to a Small business; Variable; Other; Overdraft - Indicator Lending rate published by the RBA at the start of each year (currently 6.57%); b) revising the term of loans to a maximum of 10 years (from 7 years for unsecured loans and 25 years for secured loans); c) changing to equal repayments over the term of the loan; d) changing the way that interest is calculated to the full income year regardless of any payments being made during the year (except in year 1); and e) no longer requiring formal written loan agreements. At the time of writing, this proposal is not yet law and likely to be deferred for another 12 months due to parliamentary delays caused by COVID-19.

This information is of a general nature only and does not constitute professional advice. You must seek professional advice in relation to your particular circumstances before acting.

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These tips were provided by Mr Taxman, Adrian Raftery, author of 101 Ways to Save Money on Your Tax - Legally! 2020-2021 edition (Wiley, May 2020, AU$25.95). @mistertaxman www.mrtaxman.com.au

101 Ways to Save Money on Your Tax – Legally! 2020-2021 edition

By Adrian Raftery

Published by Wiley May 2020

ISBN 9780730384625

AU$25.95 / NZ$28.99

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For further information or to request an interview, please contact: Adrian Raftery on 1800 TAXMAN (1800 829 626) or 0418 210 599 adrian@mrtaxman.com.au