End of financial year is approaching, what do you need to do?
You probably hear a lot about end of financial year, but why? Why is it important? Well, there’s still time before 30 June 2023 to make some changes that could give you some tax savings, and in our experience, everyone wants to pay less tax. Here are some quick tips to help with this, no matter who you are.
Business Owners
Instant asset write off. The rules are changing come 1 July 2023. So before then, if you need any equipment, tools, or other business assets, then they are a full tax deduction before 30 June 2023. After then, assets costing more than $20k will need to be depreciated which means they’ll be tax deductible over the life of the asset, not immediately.
Electric vehicles. Cars qualify for point 1 above - up to the car limit, about $65k, so don’t get the Ferrari just yet. But electric vehicles are Fringe Benefits Tax exempt so you don’t need to worry about any private usage for them, which you would have to for normal cars. Electric vehicles still have the car limit though.
Superannuation. Have you had a good year? Is there surplus funds available in the business? Consider paying yourself additional superannuation. It won’t affect your personal income and tax, but will be tax deductible to the business and boost your super balance. Be careful with superannuation caps though.
Restructuring. Now is a good time to think about whether you have the right business structure and ownership structure. Perhaps you’ve always had the same structure for years now because thats hows it's alway been. There are many options out there to change things up which can result in great outcomes like better asset protection, lower tax, and an eye on the future.
Owners wage. With Single Touch Payroll (thanks very much ATO), once 30 June 2023 concludes, your wage is pretty much whatever it is at that time. So maybe you should think about whether your wage is too low or too high and maneuver one way or another now so as to make the most out of your personal tax rate and the business tax rate.
Leave payout. Some businesses have all the luck. They have long term loyal staff. What often comes with that is large annual leave balances. Start a discussion with these employees. When are they going to take this? Maybe they might want some leave paid out now, which would reduce their balance and is tax deductible to the business, cash flow permitting of course. Stay within HR rules though.
Accounting fees. Talk to your accountant about these ideas and more. Remember, accounting fees are tax deductible, and small businesses can actually prepay accounting fees for the next 12 months now and it’ll be tax deductible now. Accountants love this one.
Individuals
Superannuation. Yeah this was on the list above, but it’s relevant for individuals and employees too. If you have any extra cash, you can put it into super and it’ll be a personal tax deduction. There are even avenues now whereby you can put in more than your yearly limit, $27,500, and supercharge (pun intended) your super balance and tax savings. You don’t need to figure out salary sacrifice anymore, you can just make the payment. Pay attention to your respective superannuation limits though.
Novated lease. If you need, or want, a new car, think about getting it via a novated lease. This is like a loan whereby the payments are taken out of your wage, but the best part is this is your pre-tax wage, whereas you’d buy or pay off a car normally out of post tax money. The result is you get the car and save tax. The tax savings are even bigger on electric vehicles - but again, consider the car limit.
Prepay costs. These are tricky times. One way to combat higher cost of living and increasing interest rates is to prepay these now. Some financial institutions will allow you to prepay the interest on a loan on a share portfolio or investment property. This would be tax deductible now and also cover you from further living cost increases.
Working from home. One benefit of putting up with endless Zoom meetings from your living room is you can claim a portion of your home running costs if you actually do work from home. There are a few ways to do this, but the most important thing is to keep records on hours spent working from home, and tally up your running expenses like electricity, and other utilities.
Private health insurance. Everyone pays the Medicare Levy. Did you know there is also a Medicare Levy Surcharge which is different to the Medicare Levy? And the Surcharge is an extra tax! You can avoid this if you have private health insurance, typically hospital cover, not just extra’s. But if you earn over about $90k and you don’t have private health insurance, you are up for more tax.
By making informed decisions and leveraging the available tax deductions and strategies, you can potentially minimise your tax liability and maximise your financial well-being. Unsure about what might work for you or your business? Get in touch with the team today.
This is brief and generic advice only. Tax legislation is complicated and you should seek further advice on any of these items.
