Saving this financial year on business tax

Advance the acquisition of assets

You have until June 30, 2023, to utilise the temporary full expensing rules if your company has to purchase (or upgrade) any sizable assets. These regulations allow businesses with a combined annual revenue of up to $5 billion to immediately deduct the entire cost of an asset rather than spreading it out over the asset’s lifetime.

The temporary full expensing rules are advantageous if your company wants to pay less tax in 2022–2023 and the cost of purchasing the asset won’t affect cash flow. Although businesses have access to some loss carryback provisions for the 2022–2023 year, this will frequently result in a tax loss that can be carried forwards to future years if the business does not have any taxes owing.

Timing is crucial. By the deadline of 30 June 2023, the asset must be “first held and ready for use” in order to be eligible for an immediate deduction on your 2023 tax return. If you haven’t acquired ownership of the asset, just having a contract in place won’t be enough to qualify.

Remember that there are regulations that limit the deductions that may be claimed on a work vehicle (primarily used to carry passengers). if the cost of the car is more than the car limit ($64,741 in 2022-23).

The instant asset write-off will allow small firms with an aggregated revenue under $10m to immediately deduct assets that cost less than $20,000 in the year of acquisition from 1 July 2023 through 30 June 2024. Other businesses will use the standard depreciation standards to gradually depreciate their assets.

To settle any outstanding shareholder loan balances, declare dividends.

A shareholder or other related party may be considered to have received a taxable dividend if your business lent funds to them, paid their costs, or permitted them to utilise company assets. The regulators anticipate that once shareholders gain access to these profits, they will pay any applicable top-up tax at their marginal tax rate. Unless a compliant loan agreement is in place, that is.

If you have any shareholder loan accounts from earlier years that were covered by complying loan agreements, you must pay back the required minimum by June 30, 2023, for the 2022–2023 revenue year. To meet these loan repayments, the company might have to declare dividends before June 30, 2023.

Ensure that director fees and employee bonuses are paid.

If you have “definitely committed” to paying a specific amount by 30 June 2023, even if the fee or bonus is paid to the employee or director after 30 June 2023 (within a reasonable time), you may be entitled to deduct it from your business expenses for the 2022–2023 fiscal year. In principle, if the directors approve a duly permitted resolution to make the payment by year’s end, you are bound to do so. Before the end of the year, the employer must also inform the employee of their right to the payment or bonus. 

Have bad debts? Write them off

If you have given up all attempts to recover the debt, you can claim a bad debt as a deduction if the income is brought to account as assessable income. By June 30th, it must be removed from your debtors’ ledger. If you don’t keep a debtors’ ledger, it might be wise to have a director’s minute that attests to the write-off.   

Bring forward any needed repairs, trade gifts, consumables or donations. 

Consider making any necessary repairs, replacing worn-out supplies, exchanging presents, or making donations before June 30 in order to qualify for a deduction for the 2022–23 fiscal year.

Pay employee super contributions for the June quarter now. 

If you wish to claim a tax deduction for the current financial year, make super contributions in the June quarter. On July 28, 2023, the subsequent quarterly superannuation guarantee payment is due. Instead of waiting another year, some employers decide to make the payment sooner in order to accelerate the tax deduction.

Reduce gains and realise any capital losses

Realising any capital losses, that is, selling the asset and locking in the capital loss, will offset the tax impact of any capital gains you may have made during the year. To be valid for tax reasons, these transactions must be real. 

By June 30th, increase management costs between entities.

Make sure that management fees have been increased by June 30th in cases where they are charged between related entities. Where management fees are charged, ensure that they are appropriate from a commercial standpoint and that there is adequate paperwork to back up transactions. The transfer pricing regulations must be taken into account and the ATO will have significantly higher expectations for documentation if any transactions are conducted with related foreign parties. This area is under increased scrutiny by the ATO.

When you are ready to lodge your Gold Coast or Brisbane business tax, contact the team at MB Accounting and Business Services. Our Accountants in Ormeau are experienced and thorough and can help you to get the best tax return possible for your business.