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Tax Time Planning

Tax Time Planning

As we get closer to the end of another financial year we thought it’s a good time for you to consider some important tax time options and reminders:

SUPER CONTRIBUTIONS

For employers, Superannuation Guarantee of 10.5% of OTE must be paid on time and be received by the superfund before 30 June 2023 to be tax deductible in the 2023 year.

You can also make personal super contributions provided you are eligible. You must submit a Notice of Intent to your Super Fund to claim a tax deduction for personal contributions and receive an acknowledgement from your fund. If you are over 67 you need to meet the work test if you wish to claim personal super contributions.

Please ensure if you are going to make contributions in the month of June they are processed before the 26th June 2023.

As of 1 July 2023 the superannuation guarantee (SG) rate will increase to 11%

TEMPORARY FULL EXPENSING OF ASSETS – FINISHES 30.6.2023

An eligible business can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose. So if any business assets need updating or replacement now is a good time to ensure you can get the immediate write off. You must take possession of the asset in order to claim the tax deduction. As of 1 July 2023, normal depreciation rules will apply to assets.

It is also a good time to review your existing asset register(depreciation schedule) for obsolete/scrap items you no longer have that need to be written off.

REVIEW YOUR DEBTORS AND CREDITORS

Before end of year is a good time to review your debtors and creditors for any write offs or unrecoverable debts.

STOCKTAKE & LOG BOOKS

Make sure you have documented what stock you have on hand at end of financial year. You can review your valuation (lower of cost or net realisable value) and write off any stock that is damaged or obsolete. Its also a good time to check you have your log books complete and ready for tax time.

PREPAY EXPENSES

Small Business entities can claim an immediate deduction for prepaid expenditure if the payment is incurred for a service period that is not exceeding 12 months. This can be things like rent, insurance, subscriptions, etc.

TRUST RESOLUTIONS

Trustees of Trusts are required to document how the income of Trusts will be distributed for the 2023 financial year by way of a Trust Resolution. This ensures there is an effective “present entitlement” of trust income to the nominated beneficiaries. This includes where trustees may want to make beneficiaries specifically entitled to franked dividends and capital gains income. Trustees are required to estimate what the year’s income will be and make distributions decisions before 30th June 2023. These decisions should be made in line with your Trust Deed and documented in a minute before 30th June 2023. If a valid resolution isn’t executed any default beneficiaries or the trustee can be subject to tax at top marginal tax rates.  Please bear in mind that in most instances, where a trustee resolves to distribute to a particular beneficiary they need to be prepared to physically pay that amount to them in the future.

HECS DEBTS

On 1 June HECS Debts will increase by the annual CPI

You may want to consider paying it out prior to 1 June 2023 if you have the cash flow to avoid the increase. If you pay out your HECS early you will receive any HECS tax withheld from wages during the year back in your 2023 tax return.

INVESTMENTS

Selling Investments – such as shares, property, managed funds can have significant implications on tax. You need to consider the timing of the sale as this determines when the tax falls due. If there is a contract of sale, the event happens when you enter into and sign the contract, not the settlement date. The signing date is used to determine eligibility for the 50% discount if you have held the investment for more than 12 months. Any gain on your investment becomes taxable income and is taxed at your marginal tax rate.

Tips to help You Prepare for Tax Time:

  1. Gather all your documents in one place – List all income including income statements, rental income, interest, dividends, crypto currency, etc. List all expenses including work related expenses, log books, donations, self education, income protection insurance, private health insurance, etc.
  2. Every profession has a list of occupation-specific tax deductions. From car expenses and uniforms to mobile phone bills and union fees, chances are there are work-related expenses you can claim. Think about anything you have purchased that relates to your job or helps you do a better job. It could be equipment you use on the job or a subscription to an industry publication. If the expense relates directly to your job and your employer did not reimburse you, you may be eligible to claim it.
  3. Home Office Expenses- Record keeping requirements and methods for calculating and working from home deductions has changed for the 2022-2023 income year onwards. The methods available to calculate working from home deductions are the revised fixed rate method at 67 cents per hour worked from home or the actual cost method.
  4. Consider private health insurance – individuals and families on income above certain thresholds (Base tier $90,000 or $180,000 for family for 2023) will be liable to pay the Medicare Levy surcharge, an additional 2% tax on adjusted taxable income unless you have an appropriate level of hospital cover for the full tax year to avoid the surcharge.
  5. Know whats on the ATO watchlist – every year the ATO watches common items that get claimed wrong – home office expenses, motor vehicle expenses, reimbursed expenses, private expenses, etc
  6. Make use of the ATO resources – myDeductions App, myTax online lodgement for simple tax returns, link myGov to ATO online services, ATO Tools and calculators – https://www.ato.gov.au/Individuals/

Please contact our office if you have any questions or would like detailed advice.