Save Tax by using what you already have and need

Saving on tax can be as simple as smart planning by utilising expenses that you’re already incurring or going to incur anyway. Having a better than average year, pull expenses into the 2023 Financial year. This also applies if you think sales and profit are down in 2023, push expense forward into next year where you’re legally allowed to. So if your position swings from year to year, use those ebbs and flows to reduce and even out your tax with some simple and seamless process adjustments.

TOOLS OF TRADE / FBT EXEMPT ITEMS

The purchase of Tools of Trade and other FBT exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.

Items that can be packaged include Handheld/Portable Tools of Trade, Computer Software, Notebook Computers, Personal Electronic Organisers, Digital Cameras, Briefcases, Protective Clothing, Mobile Phones and now Electric Vehicles.

If structured correctly, the Employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive cost of the items purchased.

You should buy these items before 30 June 2023, so talk to your boss now to take advantage of this now before you miss out.

PAY EMPLOYEE SUPERANNUATION NOW

STP starts on July 1st 2023, so get in early and jump-start your new year process early too. To claim a tax deduction in the 2023 financial year, you need to ensure that your employee superannuation payments are received by the super fund by 30 June 2023.

You should avoid making last-minute superannuation payments as processing delays may cause them to be received after year end. If for any reasons you end up having to make last-minute payments and you would like to claim them as deductions for the current year, contact us immediately and before you make any payments for possible resolutions

Make sure you’re also not making employees super exceed $27,500 cap or you will cost them more too. We have ways to avoid this and still bump up your deductions this financial year.

DEFER INCOME

If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2023.  This strategy will be effective for companies who have a high income one year and expect it to be lower the next or seasonally different. So just push out invoices until next financial year and save tax this year.

BRING FORWARD EXPENSES

Purchase consumable items BEFORE 30 June 2023. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year. If you’re going to buy it in July or August, why not get it earlier or buy in bulk, especially if you have great cash flow and profit this year. Improve your cash flow next year if you expect it to reduce and free up cash flow by having prepaid various expenses.

REPAIRS & MAINTENANCE

Make payments for repairs and maintenance (business, rental property, employment) BEFORE 30 June 2023. If you’re looking at your Rental Property or business and it is in need of a lick of paint or some basic upgrades, now might be a great time to take advantage if you’re income is higher this year more than normal.

DEFER INVESTMENT INCOME & CAPITAL GAINS

If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2023.

The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date! If you get a bonus or have a higher income this year, then try and ensure you can reduce your income by deferring other income items until next year as well.

MOTOR VEHICLE LOG BOOK

Ensure that you have kept an accurate and complete Motor Vehicle Log Book for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2023. You should make a record of your odometer reading as at 30 June 2023, and keep all receipts/invoices for motor vehicle expenses.

An alternative (with no log book needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.

FARM MANAGEMENT DEPOSITS SCHEME

The farm management deposits (FMD) scheme is designed for primary producers to deal with uneven income flows by making deposits during the prosperous years and receiving repayments during less prosperous years.

Subject to certain conditions, you can deduct FMDs in the year in which you make them. If any FMDs that you have previously claimed as a tax deduction are repaid, the repayments are treated as assessable income in the year in which they are made.

This article is provided as general information only and does not consider your client’s specific situation, objectives or needs. It does not represent accounting advice upon which any person may act. Implementation and suitability requires a detailed analysis of a client’s specific circumstances. © Business Edge Advisors 2023