Published 27 April, 2022 Updated 22 June, 2023
When it comes to tax it’s always best to plan ahead and take some time at the start of the Financial Year to meet with your adviser and determine the strategy for the year. That said, there is still time now as the end of the 2023 financial year approaches to implement some clever strategies to impact your 2023 Tax. By taking some time now to focus on organising your tax affairs you could minimise your tax liability, boost your refund and be in a better position for planning next year.
Depending on your circumstances and goals, the measures outlined below could offer tax-saving opportunities.
1. Reduce tax by prepaying expenses
Prepaid expenses refer to expenditures made under an agreement for services to be provided in a later income year. Your small business can claim prepaid expenses if you have an aggregated turnover of less than $50 million. This also applies to individuals who have passive income like rental income and dividends.
Any prepayments made before June 30, 2023 that relate to your income or income-producing assets can be deducted from this year’s tax return, subject to prepayment rules.
- Deductible insurance like professional indemnity insurance
- Work-related subscriptions such as professional memberships and business magazines
- Interest on investment properties
- Expenses related to investment properties
- Upcoming training courses or conferences
- Business inventory
- Employee superannuation payments, including the Superannuation Guarantee
2. Pre-Book Your Travel
If you have business trips coming up, consider pre-booking flights and related expenses.
Flights will be deductible if they are for at least two consecutive days of work-related activity such as conferences and meetings. Pay ahead of June 30th and you can add the costs to this year’s tax return.
3. Time your income
If you don’t use accrual-based accounting, evaluate whether any income can be deferred until after June 30, 2023. This may mean setting invoice due dates for July instead of June.
4. Make your charity donations
Donations made to eligible charities with Deductible Gift Recipient (DGR) status will be deductible. Ensure the recipient organisation qualifies as a DGR to claim the deduction and don’t forget to share messages in your marketing about the charities and not-for-profits you support.
5. Put money into super
Australians can take advantage of the superannuation system to reduce tax. Concessional superannuation contributions allow you to contribute up to $27,500 per annum to your super, minus the value of contributions made by your employer.
These contributions are generally taxed at 15% within the superannuation fund, saving you the difference between your marginal tax rate and the super tax rate.
For example, if an employee earning $100,000 per annum receives $10,000 in Super Guarantee contributions from their employer, they can contribute up to $17,500 extra to their super ($27,500 – $10,000), potentially reducing their tax by $3,062.50 (17,500 X (32.5% – 15%)).
Additionally, low or middle-income earners making personal after-tax contributions to a superannuation fund by June 30, 2023, may be eligible for the Government co-contribution. The amount of the co-contribution depends on income and contribution levels.
6. Use the Instant Asset Write-Off Incentive
Under the Temporary Full Expensing rules, many businesses can claim an immediate tax deduction for depreciating assets purchased. Now is a great time to make this type of purchase because the incentive is set to end in the financial new year.
While it’s not official yet, new rules for asset write offs are expected to be the following after the financial new year:
- Small businesses, with an aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
- The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.
- Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
The end of temporary full expensing rules may change your plans for making purchases, so talk to your tax accountant before the end of the month.
7. Review work-from-home expenses
During the pandemic, the way you could claim work-from-home costs changed. They have been updated again for this financial year and what was used as the ‘short cut method’ no longer applies. However, it’s still worth paying attention to what you have spent in order to work from home so you can reduce your taxable income.
Even if you work from home full time, you can’t claim every single cost involved with running your house. Ideally, you will have records of expenses like electricity bills and other work from home costs so your accountant can figure out the best way to claim. You should also have kept a record of what hours you have spent working from home so you can back up any claims you make.
8. Check your capital gains and be clear on your income
Whether you are a business or an individual, you will need to be upfront with your accountant about the money your investments and assets have generated for you.
The ATO is able to use data-matching technology and even potentially gain access to your loan and bank accounts to cross-check your spending, so the more evidence you have to share of your income and expenses, the better.
One way to reduce the taxes you pay on investment property income is to have a depreciation schedule prepared. We can point you in the right direction to get this done ahead of tax time.
9. Review vehicle expenses
Where a vehicle is used for work purposes, other than just travel from home to work, you may be able to claim expenses or use a cents per kilometre approach. If you are claiming actual expenses, check that your logbook is current and that the details are correct. Please ensure year-end odometer readings are taken and all relevant receipts have been kept.
The other thing to think about is how a novated lease or electric vehicle purchase can help you or your business to save money.
- A novated lease allows you to make repayments from your pre-tax salary, so you earn less on paper.
- In terms of electric vehicles, from 1 July 2022 employers do not pay FBT on eligible electric cars and associated car expenses. Conditions apply, but if you have purchased electric vehicles or are planning to do so, make sure to mention this to us.
Not every item from the list above will be relevant for every person or business, but the more you can be aware of, the more you can be organised and reduce your tax bill.
Our team is here to help you figure out the best strategies to manage your tax. Reach out to us at 1300 526 336 or email us at firstname.lastname@example.org to determine your approach to spending over the last weeks of the financial year.
If you are on the edge about whether you need a tax agent, this article might be helpful: Why it pays to get a professional tax agent