The end of the financial year is nearly upon us: meaning it’s almost tax time once again! In order to help you prepare for the new financial year, we have put together a comprehensive list of actionable points and tax tips for the end of the financial year period.
Whether you’re operating a business or a hard-working tax payer, it’s safe to say that no one wants to be paying more tax than they need to.
While there are regulatory requirements and obligations that must be adhered to by every business and income earner in Australia, there are certainly things that you can do to help legally minimise the amount of tax that you or your business are liable to pay.
Seeking expert tax planning advice from qualified and experienced tax accountants, like the team at The Quinn Group, is the best way to ensure that you are utilising every avenue that is available for your individual situation.
Tax planning strategies can be undertaken at any time throughout the year, but with the end of financial year fast approaching, now is the perfect time to take prompt action. Seek professional advice from us and potentially reduce your tax liability for the current financial year.
Our tax tips and action points have something for everyone; so if you’re looking for small business tax tips, investment tax tips or tax effective strategies as an individual, keep reading to find out what you should consider before the tax year ends.
Of course, this is not an exhaustive list of all the possible ways to legally minimise your tax and prepare for the end of the financial year. Rather, it is a general compilation of the most common items to be considered. Be sure to contact the team of tax accountants and tax lawyers at The Quinn Group for personalised advice tailored for your individual situation.
Tax Tips for Small & Medium Sized Enterprises (“SME”)
- Purchase business assets – NO THRESHOLD: Temporary full expensing of depreciating assets allows for an immediate deduction for assets that are installed and ready for use from 6 October 2020 until 30 June 2023. The Federal Budget released on 9 May 2023 confirmed that temporary full expensing provision will cease on 30 June 2023. A temporary increase to the previous instant asset write-off threshold from $1,000 to $20,000 will be effective for the 2023/24 financial year. If you are looking to purchase business assets in the near future, it may be prudent to take prompt action in order to take advantage of the immediate deduction, whether the under temporary full expensing provision or the temporary threshold increase.
- Comply with Division 7A: The ATO is vigilant on businesses that use funds or assets of a company for their personal purposes. Any personal expenses that are paid by a private company in respect of a shareholder may be treated as a deemed dividend to the shareholder. Ensure that you understand Division 7A implication and are aware how to address it.
- Get rid of obsolete equipment: check your asset register and scrap any obsolete machinery or plant and equipment prior to June 30 and take advantage of an immediate write-off deduction.
- Conduct a stocktake: Take an inventory of your stock to identify slow moving or obsolete stock and write them off before June 30.
- Carry back tax losses: Loss carry back provides a refundable tax offset that eligible corporate entities can claim after the end of their 2020–21, 2021–22 and 2022–23 income years in the corresponding company tax returns.
Eligible entities get the offset by choosing to carry back losses to earlier years in which there were income tax liabilities. The offset effectively represents the tax the eligible entity would save if it was able to deduct the loss in the earlier year using the loss year tax rate. As it is a refundable tax offset, it may result in a cash refund, a reduced tax liability or a reduction of a debt owed to the ATO. - Pre-pay business expenses: small businesses can claim a tax deduction for certain business expenses that will be incurred within the next 12 months. You can pre-pay for expenses such as rent, insurance and subscriptions.
- Review your cyber security: A cyber security incident can have devastating impacts on an SME. Therefore, we recommend to familiarise yourself with the Essential Eight strategies developed by The Australian Cyber Security Centre (ACSC).
General Business Tax Tips
- Write off your bad debts: If you are carrying bad debts, now is the best time to review them. If you decide they are irrecoverable, write off any bad debts before June 30 so you can claim them as a deduction in the 2023 financial year.
- Review ATO Debts: review any outstanding debts that you have with the ATO and where necessary, engage with the ATO to manage those debts. Did you know that certain tax debts can now be made available on commercial credit reports, which could, in turn, negatively impact your credit rating?
- Pay your super contributions prior to June 30: Whilst your employee superannuation contributions are not due until 28 July 2023, pay them before June 30 so you can claim a deduction this financial year. Payment after this date means you won’t be able to claim them until FY 2024.
- Reconsider your business structure: Tax time is a good time to re-evaluate your current business structure. If you think you’re paying too much tax or are wanting to take on another partner, speak to us before June 30 so that we can advise you of the advantages and disadvantages of each structure.
- State Payroll Tax: Under Payroll Tax legislation, all payments to subcontractors are subject to payroll tax unless an exemption applies. You should review your subcontractor payments to ensure that you are meeting your payroll tax obligations.
- Get ready for changes to superannuation guarantee: From 1 July 2023, the rate of compulsory superannuation contributions is increasing from 10.5% to 11%.
Tax Tips for Trusts
- Review your trust deeds: Make sure you comply with the requirements of your trust deed in declaring distributions to ensure the distributions are valid. Also, check your trust is still working as you expect it to, including making sure the person or entity that has the power to replace the trustee, known as the Appointer, is still the right person.
- Consider distributing up to $416 to minors (under the age of 18): You can distribute $416 tax free money to your child who is under 18 years of age for the 2023 financial year.
Investments & Capital Gains Tax (CGT) Tips
- Get your rental deductions right: It’s critical that rental property owners have their books up to date and in order before June 30. Make sure you are only claiming deductions for expenses incurred for the period when the property is rented or available for rent and in the year of the tax return.
- Arrange tax depreciation schedule: to increase deductions for your rental property engage a registered quantity surveyor to prepare a tax depreciation schedule for the property. We can help you with this.
- Minimise the CGT you pay on investments: When calculating the value of assets for CGT purposes, be sure all relevant costs of acquiring the asset – purchase price, capital improvements, stamp duty, legal costs, advertising expenses and commission fees – are taken into account to ensure the assessment is as low as possible.
- Timing of Capital Gains Tax (CGT) Events: If you are planning to sell an asset, you should consider whether to defer the sale until after 30 June. Depending on your individual circumstances, the timing of the disposal could have significant tax implications.
- General 50% CGT discount: When selling an asset, be aware of the 50% CGT discount that is available for assets that have been held for at least 12 months.
- Transfer ownership of investment: Put income earning investments like term deposits and shares into a family member/spouse’s name with a low income.
Individual Tax Tips
- Appointment of tax agent: If you don’t already have a tax agent, be sure to appoint one before 31 October 2023. We can help you in this regard.
- Additional Superannuation Contributions: Consider making voluntary contributions to your superannuation in addition to the compulsory payments made by your employer. Any additional payments that you make are tax deductible. Be aware of the concessional superannuation contribution cap of $27,500.
- Reduce your taxable salary by packaging FBT exempt items: Consider salary packaging a laptop, iPad or phone if you are using them predominately for work-related purposes.
- Gifts and Donations: Is there a registered charity that is particularly close to your heart? Make your donation of $2 or more to a charity that is registered with the ATO before June 30 as it’s tax deductible!
- Deduct working from home expenses: Tougher guidelines came in to effect at the beginning of 2023 so make sure that you are aware of the new requirements for claiming work from home deductions to ensure that you are able to correctly make your claim.
- Reconsider income protection insurance arrangements: Review your current level of protection and determine whether an increase may be appropriate in regard to a pay increase or additional business profits. This is tax deductible.
- Optimise your tax offsets: It pays to know what offsets you are entitled to, as they directly reduce your tax payable and can add up to a sizable amount. Depending on your circumstances, you may be eligible for the following offsets:
- low income offset
- offset for superannuation contributions made on behalf of a low income spouse
Schedule a Tax Planning Meeting – Legally Minimise your Tax
As both an accounting and legal firm, The Quinn Group offers a range of taxation, accounting and legal services in one convenient location. Our taxation specialists can provide tailored tax, and tax planning, advice to legally minimise the amount of tax that you are required to pay.
Call us on 1300 (QUINNS) or + 61 2 9223 9166 or submit an online enquiry form to schedule a tax planning appointment.
