Best to pay your employee super now?

Most businesses pay tax on an accruals basis.  That means that income is recognised when an invoice is raised; likewise expenses when the bill is received.  Those assessed on a cash basis pay tax based on when income is received and expenses paid.

Accrual taxpayers can deduct bills received by 30^th June and other liabilities incurred.

However this doesn’t apply to employee super. 

An employer can only deduct the super it has actually paid during the year.

TIP

Whilst employers have to 28^th July to pay the June quarter super, it may be best to pay it now.  Paying it now will allow a tax deduction to be claimed within the 2021 Tax Return.  You will pay less tax.  You will also pay less PAYG Instalments next year.

It’s common sense – might as well pay it now for what is due before the end of next month anyway.

But if covid business life is tough and you are in a loss situation, there is no point in accelerating the cash flow.  Mind you, if cash is not the problem, corporate taxpayers may still wish to do so as they can claim back more 2019 and/or 2020 tax under the new loss carry back rules.

As with all years, proper tax planning takes all these considerations and matters into account to deliver you the best result.

We have a great process and one that delivers a plain English report.  That report sets out what you need to do and what the tax and cash flow benefits will be.  Call us now – it’s best not left to the final days of June.

At MRS, we will spend today planning for your success.