Tax cuts pass Parliament

The budget has passed and some of the main changes relevant to you as a medical professional are below:
Tax relief for individuals

The Government brought forward ‘Stage two’ of their Personal Income Tax Plan by two years, so that, from 1 July 2020:

 the low income tax offset increased from $445 to $700;
 the top threshold of the 19% tax bracket increased from $37,000 to $45,000; and
 the top threshold of the 32.5% tax bracket increased from $90,000 to $120,000.

This will mean a decrease in tax you pay but it is not something to write home about.
Tax relief for business

Medical business can now deduct the full cost of eligible depreciable assets as long as they are first used or installed by 30 June 2022. The timeframe is now long so if you are looking to purchase medical equipment or assets you do not have to rush to do it.

In addition, if your medical business is a company and has made a loss it will be allowed to offset tax losses against previous profits on which tax has been paid.

Also, medical businesses with an aggregated annual turnover between $10 million and $50 million will, for the first time, be able to access up to ten small business tax concessions. If you are in this position speak to us because there are some great tax opportunities to reduce long term Capital Gains Tax.

Employers need to apply recent tax cuts as soon as possible

The ATO has now updated the tax withholding schedules to reflect the 2020/21 income year personal tax cuts — the updated schedules are available at ato.gov.au/taxtables.

If you pay wages to family members or have a medical practice paying wages you now need to make adjustments in your payroll processes and systems in order for the tax cuts to be reflected in employees’ take-home pay.

Medical Professionals and medical practices must make sure they are withholding the correct amount from salary or wages paid to employees for any pay runs processed in their system from no later than 16 November onwards.

If we run your payroll or you have a payroll software system, this should be done automatically. If you are unsure, please contact us on 1800 281 038

Deferrals of interest due to COVID-19

Many lenders have recently allowed borrowers with investment property loans to defer repayments for a period of time.

While repayments are being deferred, interest (and fees) will usually be added to the loan balance (i.e., the deferred interest will be ‘capitalised’).

However, it is important to recognise in such situations that, while repayments are not being made during the relevant period, borrowers continue to ‘incur’ the interest during that time.

Further, interest will continue to be calculated and will accrue on both the unpaid principal sum of the loan and the unpaid (i.e., capitalised) interest. The interest that accrues on the unpaid or capitalised interest is referred to as ‘compound interest’.

This means interest expenses (including any compound interest) will be deductible to the extent the borrowed monies are used for income producing purposes (such as where the borrowed funds are used to purchase a rental property). But not for personal items.

We will check interest paid and ensure you get the maximum deduction but if we do not do your taxes you may wish to check with your accountant they are claiming this for you.

Simplified home office expense deduction claims due to COVID-19

Given that many Medical professions continue to work from home especially using telehealth or generally spending less time at work due to COVID-19, the ATO allows taxpayers working from home to claim a rate of 80 cents per hour, by keeping a record of the number of hours they have worked from home, rather than needing to calculate specific running expenses.

The application of the Guideline has been extended so that it now applies from 1 March 2020 until 31 December 2020.

If you would like more information please call us on 1800 281 038 or email hitesh@medisuccess.com.au