Key tax considerations:
Loss Carry Back (NOTE 2023 IS THE LAST YEAR WE CAN ACCESS THIS) – for those clients operating as a company, there is also the Loss Carry Back measure which may be utilised. This means if your company had a tax payable in 2019, 2020, 2021 and 2022 and you made a loss in 2023 we may be able to claim back the taxes paid in previous years. You could also purchase an asset and contribute additional amounts to super to create a loss in 2023 and there is scope to claim back this prior year tax.
IF YOUR COMPANY IS CLOSE TO A LOSS OR BREAKEVEN THERE MAY BE OPPORTUNITIES TO UTILISE OTHER MEASURES BELOW TO CARRY BACK LOSSES AND CLAIM BACK PRIOR YEAR TAX PAID.
Temporary Full Expensing – this means where a business buys a depreciating asset we should be able to write it off completely for tax rather than depreciate over a number of years. For businesses with turnover under $50m this applies to second hand assets as well. Please note that the car threshold remains in place so we can only claim up to $64,741 for non-commercial vehicles (a truck would not be subject to this threshold)
PLEASE NOTE THAT FROM 1 JULY THIS WILL END AND THE INSTANT ASSET WRITEOFF WILL KICK IN MEANING ONLY ASSETS WORTH UP TO $20K CAN BE IMMEDIATELY WRITTEN OFF.
Prepayments – small businesses should be able to deduct prepayments they make before 30 June. e.g. prepaid marketing or insurance
Superannuation – you only get a deduction for superannuation once paid. Please ensure you have paid your superannuation for all staff before 30 June (usually 10 days before)
Personal superannuation – owners may wish to catch up super under new rules that allow you to carry forward unused contributions (you usually get a $27.5k cap of deductible contributions each year – note this includes employer contributions). You can carry forward any unused cap up to five years and these rules began from the 2019 year
Writing off stock and bad debts – clients should look to see if stock is obsolete or any debts may be bad so we can look to write these off before 30 June
Upcoming changes to personal income tax rates – the tax brackets should change from 1 July 2024
Company tax rates – for companies turning over less the $50m, the company tax rate this year is again 25% in most cases.
Company A has taxable income of $200,000 ahead of 30 June 2023. It paid tax of $26,000 in the last financial year. The two directors and shareholders are currently each earning $80,000 per year.
Ahead of 30 June 2022 the following decisions are made:
– An asset for the business for $100,000 was bought which could be immediately expensed
– Prepayments of $5,000 were paid
– All superannuation for the business was up to date but directors each caught up $20,000 each to superannuation through payroll
– Wage increases and bonuses were made to top each director up to $120,000 personal taxable income
The effect of the above is below:
– Taxable income for Company A is reduced from a $200,000 profit to a loss of $25,000 which is carried back to claim back tax paid from a previous period of $6,250 and no tax payable in the 2022 financial year
– Directors pay tax on their $40,000 top up payments at up to 32.5% (plus Medicare levy) but have personal access to the money rather than it sitting in the company
– Super contributions are taxed at a lower 15% rather than in the company at 25%
Each client will have their own considerations and structures but the above is an indicative guide only as to some of the things we can look to achieve pre 30 June.