Question:
Accrual Vs. Cash accounting
Answer:
Recent changes are outlined below:
July 1, 2022
- Loss carry back for eligible companies extended to cover 2023 income year.
- Professional firm profits diverted to the professional's spouse or other associates to be reviewed under new Tax Office guidance.
- Corporate collective investment vehicle legislative regime introduced.
- Temporary full expensing of depreciating assets extended to include 2023 income year.
- Depreciable assets of a company joining a tax consolidation group have tax costs setting rules modified for assets depreciated under temporary full expensing rules.
December 9, 2021
- Reduced Pandemic leave disaster payment of $750 per week made available through to 30 June 2022.
August 5, 2021
- COVID-19 Disaster Payments are non-assessable non-exempt income in 2021 income year and later. Payments phasing out as vaccination rates increase.
July 1, 2021
- New Investment Engagement Service launched for businesses planning significant new investments in Australia.
- Tax Office small business independent review service made permanent for businesses with turnover < $10m, for income tax, GST, exercise, luxury car tax, wine equalisation tax and fuel tax credits. Requested before amended assessment issued.
- Small business income tax offset for individuals increased to provide a reduction of 16% for a tax payable up to $1,000.
- Self-managed superannuation funds can now have six members, increased from four members previously.
July 1, 2021
- Some COVID -19 state and territory business grants received by small and medium enterprises are non-assessable, non-exempt income for 2021 and 2022 income years.
- Certain state, territory and local government financial support for individuals and businesses suffering COVID-19 impacts made exempt where businesses have turnover less than $50 million and only in eligible programs.
March 31, 2021
- JobKeeper payments scheme ended.
October 5, 2020
- Boosting apprenticeship commencements subsidy (up to 50% of apprentice's wages) is assessable income.
June 4, 2020
- Homebuilder grant for new home or substantial renovation construction is not subject to income tax.
April 1, 2020
- COVID-19 cash flow boost payments are not subject to income tax
Question: We have been running and accrual-based accounting process but feel that, given the size of our entity, this is somewhat onerous administratively.
We acknowledge that we must continue accruals for leave, depreciation and other related items, but are enquiring if we can revert to a more cash-based process for standard income and expenditure items.
Our entity has approximately $2 million turnover but the net result of our accruals can be as low as $5000. Can we alter our approach to monthly accounts?
Answer: You can make your own decision about your monthly accounts. You must, however, meet Tax Office requirements in relation to your quarterly BAS and annual tax returns. If you meet the $2 million aggregated turnover test, you will be eligible for the small business concessions which include accounting for GST on a cash basis. You will also enjoy the benefit of concessional depreciation and trading stock rules and deductible pre-payments.
To be eligible for these benefits, the aggregated turnover of your entity together with any affiliated all connected entities must be less than $2 million. If your entity is not eligible for the small business concessions we do not think you can arbitrarily change to a cash basis of accounting. If not eligible for the small business concessions, your quarterly BAS must be completed on accrual basis. It would therefore seem little benefit to change to a cash basis of accounting as too many adjustments would be required each quarter and at the end of the financial year.
