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Tax Planning 2023 – What You Need to Know

It’s tax time, and there are a few things to think about before June 30.

While our guide highlights some standout topics to be aware of for this year’s tax planning opportunities, for more information and requirements to suit your personal situation, please contact Hood Sweeney Accounting & Business Advisory on 1300 764 200.

Temporary Full Expensing for Eligible Businesses
Temporary full expensing remains in place until 30 June 2023 for eligible businesses.
This means that a business with an aggregated turnover of less than $5 billion or a corporate tax entity that meets the alternative income test, can get an immediate tax deduction for the purchase or improvement of an eligible new or second-hand asset.
It’s important to note that as announced in the Federal Budget, from 1 July 2023 the instant asset write off is once again available with an immediate write off limit of $20,000.

Deferring Assessable Income
Services under an agreement that provides for payment on completion of the job can possibly defer derivation by deferring the rendering of the invoice until next financial year.
Review whether amounts taken up as income are in fact assessable income for the current year.
It is also worth considering whether any bad debts can be written off before 30 June 2023; these must have been previously included in assessable income.

The concessional contribution cap for 2023 remains at $27,500. Unused concessional contributions can be carried forward and claimed as a personal tax deduction if an individual meets the relevant eligibility requirements. Deductibility of personal superannuation contributions must meet certain conditions: Those between the ages of 67-74 must satisfy the work test, where an individual must be gainfully employed for at least 40 hours over 30 consecutive days in the financial year.
Those who experience high taxable income in 2023 but expect low taxable income next year can, in certain cases, employ the ‘double deduction strategy’.

Contributions up to the concessional contributions cap are made at any time during the year, while an additional contribution is made in June 2023 but not allocated to the member until July 2023.
You can claim a personal tax deduction for two years' worth of contributions in a single year, as both contributions were made in the same year. However, the additional contributions count towards the 2024 cap thereby avoiding excess concessional contribution issues.

Superannuation For Employers
The superannuation guarantee rate is due to increase from 10.5% to 11% on 1 July 2023. This means that employers will be required to pay an additional 0.5% superannuation on all wages paid after this date. To secure a tax deduction in the 2023 income year, ensure the June 2023 quarter employee contributions are paid by 30 June, subject to cash flow. While the due date is 28 July 2023, it is recommended to make the payment earlier to ensure it is received by the fund in time.

Farm Management Deposits
Investing in Farm Management Deposits (FMDs) can help primary producers reduce fluctuations in taxable earnings caused by economic and seasonal changes to primary production income.
Interest is paid on such FMDs, and they must be held for at least 12 months; otherwise, the tax benefit of investing in an FMD will not be retained.

If you meet the eligibility criteria, Farm Management Deposits are tax deductible in the financial year they are made and are taxable income when that FMD is withdrawn. FMDs are limited to $800,000 per person. FMDs are a tax-effective strategy and taxpayers can consider whether FMDs would be useful to reduce this year’s taxable income or whether they have any FMDs to withdraw if income is lower than average.

Home Office Deductions
There have been changes made to the method of calculating work from home deductions for the 2022-2023 income year. While the ‘Actual Cost Method’ remains unchanged, the ‘Fixed Rate Method’ has been revised, allowing a 67 cent per hour tax deduction up from 52 cents. This new rate covers energy expenses including electricity and gas, phone usage (both mobile and home), internet usage, computer consumables and stationery.

Other changes to the Fixed Rate Method include:

  • Removing the requirement to have a dedicated home office space.

  • The ability to separately claim the work-related portion of the decline in value of depreciating assets, such as furniture and computer equipment, as well as any repairs or costs associated with cleaning.

It’s important to consider which method will best suit you; regardless of which you choose, remember that to claim a deduction for working from home you must:

  • Have incurred additional expenses because of working from home.

  • Have kept a record for the full year to prove the hours worked from home (such as a timesheet, roster, or diary).

  • Have kept a record for each expense claimed.

Trust distributions and reporting
It is essential that you ensure a valid trust distribution resolution is in place by 30 June 2023, and takes into consideration the anti-avoidance provision, Section 100A.
This provision seeks to prevent a tax benefit arising where a beneficiary of a trust is made presently entitled to the share of trust income, but someone other than the beneficiary receives the benefit in some way. It is also important to ensure that if capital gains and franked distributions are to be streamed to beneficiaries, it is allowed by the Trust Deed.

Investment Properties
If you have bought or sold an investment property during the year, consider whether the arrangements are in the form of an investment or business. You may also consider a quantity surveyor report to assess tax depreciation on an investment property.

Don’t Forget Donations
If you have made donations in the past 12 months, make sure you find your receipts and provide them to your accountant. Donations of $2 or more to Deductible Gift Recipients may be tax deductible.

If you have any questions or need assistance coming into tax time, be sure to get in touch with the Hood Sweeney Accounting team on 1300 764 200 or send us a message by clicking here.

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