An in depth look at business tax planning and what deductions you may be missing out on.
Download the Free EOFY Business Tax Checklist Below
The above webinar has an in depth look at business tax planning, and we would highly recommend you give it a watch and download the EOFY Business Tax Checklist. Both contain information about how you can reduce your tax liability and give examples to help you see if and how it can be applied in your business. Below is a short summary of some of the topics covered.
Temporary Full Expensing (TFE)
Previously known as Instant Asset Write-off, TFE allows businesses to immediately deduct the total cost of eligible capital assets from their profits for the year. It is available until June 30, 2023, and will be reduced to $20,000 per asset starting from FY2024.
To be eligible, businesses must have an annual turnover of less than $5 billion. The deduction can be claimed once the item is installed and ready for use. Small- and medium-sized businesses with an annual turnover of less than $50 million can also claim temporary full expensing for second-hand assets.
Compulsory Obligations for Superannuation:
Payment of super for employees is tax-deductible when actually paid and received by the employee’s fund, rather than when the liability is raised. To capitalize on this, paying the June quarter super early, before June 30, allows businesses to claim the deduction for the current financial year. Moreover, individuals have the opportunity to make additional super contributions before the year-end, up to their limit of $27,500, with potential tax benefits. However, be aware of Division 293 tax implications for individuals earning accessible income above $250,000.
Stock Valuation:
Conducting a thorough stock take and reassessing the valuation of stock can lead to significant tax savings. Instead of relying solely on cost-based valuation, consider alternative methods such as replacement value and net realizable value on a line-by-line basis. Applying appropriate valuation methods can result in a more accurate representation of stock value, potentially reducing taxable income and increasing tax savings.
Bad Debts:
Reviewing your debtors’ listings can help identify unrecoverable debts. By writing off these bad debts, businesses can claim a tax deduction for the written-off amount and a potential GST refund. Being realistic about the recoverability of debts and taking prompt action can result in tax savings and allow businesses to focus on more productive activities.
Fixed Asset Review:
Review any assets that aren’t pooled, to see if any of them should be written off
due to either being damaged, obsolete or having already been scrapped.
Note – does not apply to pooled assets – your accountant can tell you if you
are using the pool for tax depreciation.
Loss Carryback Initiative:
Another initiative that is coming to an end in FY2023 is the lost carry-back rules.
This rule allows you to offset current-year losses against prior-year profits and get
a refund of the income tax that was previously paid. This might affect the franking
account, so you need to check the franking account balance before applying the
offset.
Trustee Resolutions:
For businesses operating as trusts, it’s essential to understand the importance of trustee resolutions. A trustee resolution determines how the trust’s income will be distributed among beneficiaries. It must be completed and signed before 30th June of the financial year. Failure to meet this deadline can render the resolution void, leading to adverse tax implications. By ensuring trustee resolutions are completed on time, businesses can avoid potential tax liabilities and maintain tax-efficient operations.
Utilizing Borrowings to Pay Equity:
A strategy that has proven effective for many businesses involves utilizing borrowings to pay out equity. By taking on borrowings and using the funds to pay out owners’ equity, businesses can create tax deductions for interest payments. Check out the webinar from 33:17 for more information.
