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Remember the flood levy…
For the coming financial year (and only that year we are told), a flood levy will apply to many Australians. The levy is to help rebuild the infrastructure for the communities hurt in the floods, fires and Yassi earlier this year.
Everyone with a taxable income over $50,000 will pay the levy – unless you are exempt because you are receiving a Government Disaster Recovery Payment for a 2010-11 natural disaster. You can find out how much the levy will be for you on the Treasury’s flood rebuilding site.
If you are self-employed, you probably pay tax via the PAYG system rather than regular deductions from your pay. Your annual letter outlining your PAYG instalments for the year will include the levy in those calculations. If you are an employee then your employer will deduct the levy along with your normal tax. You need to inform your employer or the ATO if you are exempt but earning over the threshold.
If you also employ people, you will need to add the levy to your usual deduction schedule. That is, for employees earning over $50,000, you will need to deduct an extra 0.5% or 1.0% with their tax – starting with the first pay after 1 July 2011. Businesses do not pay the levy, it is only for individuals.
So are you prepared for this levy? CE2DTMFHHKHT
Small business tax help
As part of the Government’s attempt to reduce the impact of the global financial situation on Australia, they announced some cashflow relief for small businesses. It was announced in December but applies to payments due, in the main, at the end of February (or late January for some.)
In short, if you have a PAYG installment due for the October to December quarter, you only have to pay 80% of the amount requested by the ATO.
However, it is very important to note that the 20% discount only applies to payments due now – the actual amount of tax you need to pay for the year is not being reduced. If you pay less now, you will have to pay the remaining 20% as part of your annual tax return.
So in choosing whether or not to take the discount this month, remember
- it is 20% off your Oct-Dec quarter IAS/BAS
- it is not a tax cut so you will have to pay it eventually
- it may help your cashflow
If you are very organised and will not overspend, you could take the discount and keep the 20% earning interest or paying off loans. If there is a risk you will forget to put aside money for a larger tax bill later this year, consider carefully before taking up this opportunity.
What do you think – are you likely to take up this offer? Do you need help with your cash flow at this time of year?
P.S. Your business must turnover less than $2million p.a. to qualify for the reduction. And you have a couple of extra days to pay, too – it is due on 28 February but as that is a weekend, you have until 2 March.
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