How do tax changes affect your startup?

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// This month saw tax cuts and some changes to tax laws which affect startups. Here’s four things you should know…

Startups are typically small businesses and there are multiple changes that may affect how you pay employees or what you buy over the next few months.

Chartered Accountants Australia and New Zealand recently released their top four tax changes for small business.

If you are unsure about single touch payroll, or pondering the purchase of new assets, these four tips may help…

1. Single Touch Payroll (STP)

From July 1st 2019, STP is now required of all employers, including (for the first time) those with less than 20 staff.

What this means is that every time you pay your employees, you now need to report pay, super and PAYG (tax) to the ATO. How you do this is called ‘Single Touch Payroll.’

Most online accounting systems like Xero and MYOB can be set up to do STP.

As a small business you may need time to transition to STP, and the Australian Taxation Office recognises this.

The ATO is offering a number of concessions for small businesses, including a deferral to 30 September 2019 if requested.

Also available from the ATO are ways to transition to a low or no cost STP solution if cost is a factor in your business.

2. Restrictions on Deductions for Certain Payments of Cash Wages

Substantial changes are being made on how cash wages are treated.

Although cash is uncommon amongst startups – you might even be paying in Bitcoin – the changes are to help ensure a level playing field.

Businesses paying cash but don’t report these payments or don’t remit the tax associated with these cash wages will no longer be able to claim a tax deduction for the cash wages paid after 1 July.

Image: rawpixel

3. Instant Asset Write Off

If you’re pondering the purchase of a new 3D printer or a laptop, now’s the time to do it.

The Federal Budget allows businesses to claim immediate deductions for asset purchases up to the value of $30,000, but only up to 30 June 2020.

So if you’re considering new assets, make sure they’re acquired and installed before the 30 June next year.

4. Reduced Company Tax Rate for Active Small Businesses

The tax cuts being spruiked by the government for active small businesses see an overall 2.5% reduction over several years.

The first reduction from 27.5% to 26% is in the 2020/21 financial year. For 2021/22 financial year, it will be reduced from 26% to 25%. Franking rates are also headed down.

Source: Chartered Accountants Australia and New Zealand

DISCLAIMER: The information provided in this article is for general use only and does not constitute financial or taxation advice. For more information, please contact the Australian Taxation Office, or a qualified taxation professional.

Main Photo by rawpixel from Pexels.