With the end of the financial year fast approaching, engaging in one of our Tax Planning sessions is a great way to address future planning, cashflow management and preparing for tax liabilities. Further, we can provide you with a review of where your business is at and present strategies for tax minimisation. If you are interested in booking in a tax planning session with us, please contact the office by phone or email to arrange.
To ensure you are in the best position possible, please find below some tax planning tips and tricks.
Instant Asset Write-Off
The Instant Asset Write-Off (or Temporary Full Expensing rules) ends on 30 June 2023. For the current financial year you can still take advantage of the instant asset write off allowing eligible business to claim a full tax deduction for eligible assets acquired.
For the 2020–21,2021–22 and 2022-23 income years, if you are eligible you can claim in your tax return a deduction for the business portion of the cost of:
- eligible new assets first held, first used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023
- eligible second-hand assets where both
- the asset was first held, first used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023
- the eligible entity’s aggregated turnover is less than $50 million
You must account for the value of your trading stock at the end of each income year (closing stock) and at the start of the next income year (opening stock). Performing an accurate stocktake at end of financial year will ensure you account for any stock loss, damaged or obsolete items to ensure you aren’t paying too much tax. Advantages of stocktake also include improving cashflow, detecting gaps and theft and is a great time to review pricing strategies.
- Bringing forward necessary expenditure to the current financial year can be an effective strategy to reduce your tax liability sooner.
- Consider deferring income until after 30 June if possible, giving consideration to cashflow implications.
- Ensure any bad debts that won't be collected are written off before 30 June
- Pay your employer super contributions on behalf of your employees before 30 June to obtain a tax deduction in the current year
Making contributions to superannuation can be an effective strategy for reducing tax, however, it is important you seek financial advice to ensure this is the best overall financial strategy for you before proceeding.
Claiming a Tax Deduction for Personal Contributions
You may be able to claim a tax deduction for personal super contributions that you make from your after-tax income (you cannot claim a deduction for superannuation contributions paid by your employer directly to your super fund). For the 2021/22 financial year, the concessional contribution cap is $27,500.
Laws also permit taxpayers to bring forward their previously unused concessional contribution cap from prior years, allowing a larger one of contribution. This can be an effective way of reducing tax in a year when your income is higher, for example if you have a capital gain from a property sale.
Spouse Contribution Offset
Government legislation allows your spouse to make spouse superannuation contributions for you if you earn up to $40,000 and claim a tax offset. If you earn below $37,000, your spouse can claim the maximum tax offset of $540 when they contribute at least $3,000 to your super. The tax offset amount reduces when your spouse’s income is greater than $37,000 and completely phases out when your spouse’s income reaches $40,000.
If you are a low or middle-income earner and make personal (after-tax) contributions to your super fund, the government may also make a contribution up to a maximum amount of $500. The amount of government co-contribution you receive depends on your income and how much you contribute. You are not entitled to a super co-contribution for any personal contributions you have made that have been allowed as a tax deduction. For details on eligibility, please go to the ATO Website.
Disclaimer: This content provides general information only, current at the time of production. Any advice in it has been prepared without taking into account your personal circumstances. You should seek professional advice before acting on any material.