Year End Tax Tips 2023

With 30 June fast approaching, it is now a good time to consider a few of the things below that will have an impact on your compliance and tax position for the year. A common EOFY strategy is to make some last-minute work expenses in June, so you can claim them as tax deductions in July. As good as it may sound, but it also means spending money when you really don’t need to, which is rarely a sensible plan.

If you are an Individual Taxpayer

1. Personal Tax Rates:

The personal tax rates remain as previously announced for the 2023-24 year as follows:

0 to $18,200                       Nil

$18,201 to $45,000            19 cents for each $1 over $18,200

$45,001 to $120,000         $5,092 plus 32.5 cents for each $1 over $45,000

$120,001 to $180,000       $29,467 plus 37 cents for each $1 over $120,000

$180,001 and over             $51,667 plus 45 cents for each $1 over $180,000

2. Low- and Middle-Income Tax Offset

The low- and-middle-income tax offset has not been extended past 30 June 2022. From 1 July 2022 you may be eligible for the low income tax offset only, if you earn up to $66,667.

3. Consider additional Super contribution up to the cap.

Both employees and self-employed individuals can claim a tax deduction for the Financial Year 2023 to a maximum of $27,500 for personal superannuation contributions. If the super contributions made by your employer on your behalf is under the $27,500 limit, if cashflow permits, you can make additional contributions up to the cap and claim the deduction for FY23. To be able to claim a deduction, your super fund should have physically received the contribution by 30 June 2023 and the individual has provided their superannuation fund with a notice of intention to claim.

4. Report Income from All Sources

Please note that you will need to report income from sources such as your Salary or Wage, Government Payments, Termination and Redundancy Payments, Online/Sharing/Gig Economy Income, Crypto and Share Capital Gains and Losses, Interest Income, Rental Income, Foreign Income, Personal Services Income and Sole Trader income, etc. in your tax returns.

5. Work Related Expenses

Ensure you keep a record of all the work-related expenses, so you do not miss out on deductions but please don’t buy any deductibles that you don’t need.

Taxpayers who are over-claiming work-related expenses are on ATO’s hit list again this year. Please always remember the golden rules:

  • You must have spent the money yourself and weren’t reimbursed.
  • The expense must be directly related to earning your income.
  • You must have a record to prove it.
  • If there was a private component, you can only claim a deduction for the work-related portion of the expense.

6. Elimination of $250 Self-Education Expense Threshold

As of 1 July 2022, the first $250 of self-education expense, which was previously non-deductible, has now been removed and is deductible.

7. Motor Vehicle Logbooks

Make sure your motor vehicle logbooks or work-related travel diary is up to date to substantiate any work-related expense deductions. If you claim a tax deduction for work related motor vehicle expenses, you should note your odometer records on 30 June each year so that you can calculate the kilometres travelled. Maintaining a logbook of work-related use of your vehicle will usually maximise the tax deduction you can claim. If your current logbook is 5 years old, you will need a new one for a continuous 12-week period.

8. Working From Home

The ATO has announced changes to the way taxpayers claim working from home deductions for the 2022-23 income year and onwards, with alterations to the deduction rate and the method of recording work from home hours. The revised rate method applies from 1 July 2022 and can be used when calculating deductions for 2022-23 income tax returns.

  • From 1 July 2022 to 28 February 2023, the ATO will accept a record which represents the total number of hours worked from home (such as a 4-week diary). However, from 1 March 2023, taxpayers will be required to maintain a record of the total number of hours in which they worked from home.
  • You can claim a deduction of 67 cents for each hour you work from home, as a representation of all additional deductible running expenses as a result of working from home. However, there are still some record keeping requirements.
  • The shortcut $0.80 per hour method, which was introduced during the pandemic, has ceased as of 30 June 2022.

9. Rental/Investment Properties

If you own one or more rental/investment properties, it is important to start assembling relevant documents such as statements and invoices/receipts for your 2023 tax return. It is also important to consider strategies to address tax implications arising from the sale of your rental/investment property if you are thinking of selling. Cashflow permitting, it is also a good idea to prepay interest and other expenses to claim a tax deduction in 2023 financial year.

If you haven’t reviewed your rental/investment property loan for some time, now may be a good time to review to get better rates and deals.

10. Consider Income Protection Insurance

Investing in income protection not only provides peace of mind that your family is taken care of should anything happen to you, but you can also claim it as a tax deduction.

For Businesses

1. New Company Tax Rate

The 30 June 2022 tax rate for companies with turnover of less than $50m is 25%. For these companies, any dividends paid during the year and before 30 June 2022 can be franked to 25%.

2. Perform Stocktake – Write off Obsolete Stock

Review your stock valuation and write-off any stock that is damaged or obsolete. Complete a stocktake and remember that stock can be valued at the lower of cost or net realisable value.

3. Payroll & STP

All employers are now required to run their payroll and pay their employees through accounting and payroll software that is Single Touch Payroll (STP) ready.

Employers should ensure their STP year-end finalisation reports are lodged by 14th July 2022.

You should also take time to review your staff pay rates and conditions of employment by referring to the Fair Work Commission’s current guidelines and make any changes required.

4. Pay June Quarter Super by 30 June

In order for small business owners to claim the tax deduction on super contributions made on behalf of employees, the super has to be paid before 30 June. Please note that you may have to process the Super payments by 23 June 2022 to ensure the payment reaches the employee’s funds by 30 June.

5. Super Guarantee (SG) Rate Change

From 1 July 2022, the SG rate is set to increase by 0.5% to 10.5% for all employees.

The $450 minimum threshold for SG Contributions will also be removed from 1 July 2022.

6. Write-off any Bad Debts

Review your debtors and write off any unrecoverable debts. These debts will come off your income in the year in which you write them off, regardless of the year you invoiced them.

7. Prepay Expenses if Cashflow Permits.

Prepaying some of your 2022-23 expenses (such as your rent, insurance, or subscriptions to professional associations) in the 2021-22 financial year. Up to 12 months of the following year’s expenses can be deducted in the current tax year.

8. Bring Forward Planned Maintenance if Profit/Cashflow Allows.

If your business is on track to make a profit this year and you have adequate cash balance, you can bring forward any planned maintenance that you were intending to do in later income years to claim the deduction this year.

9. Defer/Bring Forward Sale of Assets to Balance Profit/Loss.

Depending on how you are tracking to make a profit/loss this year, you can bring forward sales of assets to balance your profit or loss.

10. Temporary Full Expensing

Temporary full expensing allows eligible businesses to immediately deduct the full cost of eligible assets in the year 2022. The assets must be first held, and first used or installed ready for use for a taxable purpose by 30 June.

If you purchase a car for your business, the car limit is $60,733 for the 2021–22 income tax year. You cannot claim the excess cost of the car under any other depreciation rules.

11. Loss Carry Back Tax Offset

Eligible companies may utilise the loss carry back tax offset in their 2022 company tax returns. Additionally, the Government has extended this offset so it may be utilised in the 2023 financial year.

Choosing to carry back losses (made in the 2020 through 2022 income years) to earlier years (in which there were income tax liabilities) may result in a cash refund, reduced tax liabilities or a reduction of debt owing to the ATO. The availability of this offset for the 2022 income tax return is subject to taxes paid in prior years and limited to the franking account surplus as at 30 June 2022.

12. Manage Loans to Directors

Any payments, loans or debts forgiven from private companies to shareholders and their associates could be deemed to be an unfranked dividend. Ensure that such loans are either repaid or documented and made subject to minimum interest and repayment terms before the lodgement day of the company / trust’s tax return. Ensure that interest is charged, and minimum repayments are made before 30 June in relation to prior year loans.

13. Taxable Payments Annual Report (TPAR)

Businesses providing building & construction, cleaning, courier, road freight, IT and security need to lodge TPAR statements by 28 August each year to advise the ATO about payment made to contractors for providing services. It is a great time now to ensure you have the details of the contractors such as their ABN, name and address and the gross amount you have paid them for the financial year.

14. Bonuses

Bonuses are only deductible when they are actually incurred i.e. at 30 June the business must be committed to paying them and they are not subject to any discretion.

15. Trust Resolution

Prior to 30 June every year, the trustees of discretionary trusts are required to make and document their resolutions on how the income from the trust is distributed to its beneficiaries. If a valid resolution isn’t executed by this date, any default beneficiaries become entitled to the trust’s income, and are subject to tax. For any income that is derived, but not distributed by the trust, the trust will be assessed at the highest marginal tax rate on this income.

16. Director IDs

Obtaining a director IDs is now mandatory. All directors need to apply for a director ID, including directors of corporate trustees of self-managed super funds and of discretionary trusts. Individuals will need to apply for their director ID themselves to verify their identity.

17. COVID-19 Support Payments

Many businesses received COVID-19 or other disaster-related support from government during the year. The ATO has published information on the tax treatment of a range of federal, state, territory and local government assistance packages. You should also check the tax treatment of disaster assistance payments.

18. Business Health Checks

The end of the financial year is a good time to review how your business is performing and possible areas for improvement. Good accountants look at both short-term and long-term business and tax planning. Short-term planning looks at what you can do before 30 June to minimise your tax this financial year. Long-term tax planning looks at how you can utilise your business structure to minimise tax, and the type of investments you can make to minimise tax over the long term.

Please feel free to contact your trusted advisor at Vivid Partners should you have any questions about how these measures will affect you.

The team at Vivid Partners

08 6270 2876

Please note that the information provided above is general only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information provided above you should consider the appropriateness of the information having regard to your objectives, financial situation and needs. Before making any decision, it is important for you to consider these matters and to seek appropriate legal, tax, and other professional advice.