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Top 12 Tax Planning Tips for 2023

Written by Janet Ward on .

As the end of the financial year approaches, it’s now time to focus on tax planning before 30 June 2023 arrives.

Here are my top 12 tax planning tips:

1. Trust Distribution Major Update

The ATO has recently issued a series of documents that will have a significant impact on how family trusts operate, especially in relation to distributions to adult children who are on lower marginal tax rates.

You need to have your trust distribution minute in place and signed before 30 June.

Contact your Bizzness Buddy to discuss potential strategies for trust distributions.

2. Asset Disposals

Consider deferring the disposal of assets that will generate a capital gain until after 30 June.

When selling assets with potential capital losses, consider selling those assets before selling assets with potential capital gains. This will allow the capital loss to be used to offset the capital gain.

3. Company Tax Rate

The tax rate for a small business is 25% for the 2023 financial year, compared to 30% for large companies.

To qualify for the lower tax rate a company must have both:

  • aggregated turnover of less than $50 million, and
  • 80% or less of the assessable income is passive income.

4. Super Contributions

To receive a tax deduction for super contributions they must be paid and received by the super fund by 30 June.

Don’t forget to allow time for the contributions to be processed through the clearing house (if the contribution is not in the fund’s bank account, it is not treated as being received).

The contribution caps are currently:

  • Concessional Contribution: $27,500 pa
  • Non-Concessional Contribution: $110,000 pa
The ability for a member to contribute is dependent on their age and Total Superannuation Balance (TSB) at the previous 30 June. To make non-concessional contributions, a member’s Total Superannuation Balance must be less than $1,700,000 on the previous 30 June.

5. Instant Asset Write Off for Eligible Businesses

Currently, there are three temporary tax depreciation incentives available to businesses with a turnover of up to $500 million:

  • Temporary full expensing

  • Increased instant asset write-off

  • Backing business investment

In broad terms, depreciating assets purchased and installed ready for use before 30 June 2023 could be written off under one of the above rules.

Note: Be careful the amount that can be written off has been reduced in the May 2023 budget to $20,000 – so it might be worthwhile bringing forward capital purchases in certain circumstances. Also, take care of the exclusions and limits that apply to car purchases!

6. Wages or Divident

In certain circumstances, it may be beneficial for a business owner to receive fully franked dividends from the company rather than wages.

In particular, a dividend may be preferred when the company is in a break-even or loss situation. We encourage you to discuss this topic with Bizzness Buddy as soon as possible.

7. Bonuses/Director Fees

Bonuses/Directors Fees that have been incurred and committed to (by minute) by the business before 30 June (and are not subject to discretion) may be claimed as a tax deduction by the business, as long as they are promptly paid (ideally in the next quarter).

8. Company Loans to Shareholders

Company loans to shareholders (and their associates) may become a deemed unfranked dividend (resulting in additional tax to be paid by the shareholder) if not repaid before the end of the financial year or put on loan terms.

These rules also extend to:

  • trusts, where there has been a loan to a beneficiary/shareholder and the trust owes money to a company, and

  • distributions a trust makes to a company, which have not been paid.

These loans either need to be repaid or documented in an appropriate loan agreement (with repayments) to avoid the application of Division 7A rules.

If you already have a Div 7A Loan Agreement in place from prior years make sure the minimum loan repayment has been received by the company before 30 June.

9. Income in Advance

Where you have received income that relates in part or in full to services or goods you have not provided before 30 June, record that income so that it can be taken up as income in advance rather than as earned, taxable income. This will defer the recognition of the income until the next financial year.

10. Bad Debts

Analyse your list of debtors before 30 June to identify those debtors you consider unlikely to be collected. To claim a tax deduction for these bad debts, you need to physically write them off before 30 June.

11. Valuation of Trading Stock

Businesses can value their stock at the lower of the actual cost, replacement cost, or market selling value. In addition, different methods can be applied to different stock lines. A reduction in the holding value of the stock will reduce the profit of the business by the same amount.

12. Appropriate Structuring

One of the most effective and underrated tax planning tools is to ensure that your business operations are correctly structured through the use of companies, discretionary trusts, and individual beneficiaries. Call us to discuss whether your current structure is right for you.

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