Things to do before 30 June 2023
The end of the financial year is creeping up steadily and before it pounces there’s a few things you should consider doing. This blog outlines a checklist of actions for both individuals and businesses to take, if applicable, before 30 June 2023.
Prepare for your personal tax return
Record your home office expenses.
If you have been working from home, you may have expenses you can claim a tax deduction for. Our recent blog explains the two methods for claiming expenses in the 2023 financial year and what records you will need to have ready before 30 June 2023.
Make final superannuation contributions.
To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2023. The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75, although individuals over 67 need to pass a work test. The cap includes any super paid by your employer.
Carry forward contributions
Carry-forward contributions allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years. This means if you don’t use the full amount of your concessional cap ($25,000 from 2019 to 2021, and $27,500 for 2021 and 2022), you may qualify to carry-forward the unused amount and take advantage of it up to five years later. These carry-forward rules only relate to concessional contributions in super, not non-concessional contributions, as they have different caps.
Spouse super contributions
You can make super contributions on behalf of your spouse (married or de facto), provided you meet eligibility criteria, and your super fund allows it. Doing this not only helps to boost your spouse’s retirement savings, but it can also help you save tax if your spouse has limited income.
If you are on a lower income and earn at least 10% of your income from employment or carrying on a business and make a “non-concessional contribution” to super, you may be eligible for a Government co-contribution of up to $500.
Get a property depreciation report.
If you have recently built an investment property, a Property Depreciation Report (prepared by a Quantity Surveyor) will allow you to claim depreciation and capital works deductions on capital items within the property and on the property itself. This report should be completed before 30 June 2023 to get the deductions in this tax year.
Prepay expenses and interest.
Expenses relating to investment activities can be prepaid before 30 June 2023. You can prepay up to 12 months of interest before 30 June 2023 on a loan for a property or share investment and claim a tax deduction this financial year. Also, other expenses in relation to your investments can be prepaid before 30 June 2023, including rental property repairs, memberships, subscriptions, and journals.
Collect receipts for work-related expenses.
Find and store any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be tax-deductible. In the ATO app, myDeductions is a free tool to help record all your expenses, including keeping track of your work travel. Simply take a photo with your mobile phone of your work receipt and upload to the App. At year end the information can be prefilled into your tax return on MyGov or emailed to your accountant.
Realise capital losses.
Tax is normally payable on any capital gains. You should consider selling any non-performing investments you hold before 30 June 2023 to crystalise a capital loss and reduce or even eliminate any potential capital gains tax liability.
Defer investment income and capital gains.
If practical, arrange for the receipt of Investment Income and the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2023.
Note: The Low and Middle Income Tax Offset was not extended by the Government. This means individuals who received up to $1,500 in extra tax refunds last year will not receive them again in 2023.
Prepare for your business tax return
Purchase big ticket items.
Businesses with an aggregate turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciating assets. For businesses with an aggregate turnover of less than $50 million, temporary full expensing also applies to the business portion of eligible second-hand depreciating assets.
Temporary full expensing is ending on 30 June 2023. You should buy these assets and use them or have them ready for use before 30 June 2023 to qualify for a 2023 tax deduction. If a business sells or trades in an asset that was fully expensed in an earlier year, 100% of its sale price will be included in taxable income in the year.
For example, if a business trades in a vehicle (that was fully expensed) for $50,000 and purchases another vehicle for $60,000 in 2024, $50,000 will be included in its taxable income but only a portion of the $60,000 purchase price of the new vehicle will be allowed as a depreciation tax deduction. This may result in significantly higher tax payable by the business compared with previous years.
Repairs and maintenance.
Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2023.
Pay employee superannuation.
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 or the Small Business Superannuation Clearing House (SBSCH) by 23 June 2023 to allow time for payments to be processed. Avoid making last-minute superannuation payments as processing delays may cause them to be received after year-end.
If possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2023. This strategy pushes tax payable to future years.
Tools of Trade and FBT exempt items.
The purchase of Tools of Trade and other Fringe Benefit Tax (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 and mobile phones.
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. These items should be purchased prior to 30 June 2023.
Bring forward expenses.
Purchase consumable items before 30 June 2023 to get the deductions this year. These include marketing materials, consumables, stationary, printing, office and computer supplies.
Motor vehicle logbook.
Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date 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.
Investment Property Depreciation Report.
If you have recently built an investment property and haven’t already done so, arrange for the preparation of a Property Depreciation Report before 30 June 2023 to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
Repay private company loans.
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2023. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgment for the company return, or risk having it counted as an unfranked dividend in the return of the individual.
Do a stocktake.
If applicable, you need to prepare a detailed stocktake and/or Work in Progress listing as at 30 June 2023. Review your listing and write-off any obsolete or worthless stock items.
Write of bad debts.
Review your Trade Debtors listing and write-off all bad debts before 30 June 2023. Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2023.
Make prepayment concessions for your small business.
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) before 30 June 2023 and obtain a full tax deduction in the 2023 financial year.
Finalise trustee resolutions.
Ensure that the Trustee Resolutions are prepared and signed before 30 June 2023 for all Discretionary (“Family”) Trusts. The ATO has recently released a number of Tax Rulings that may affect trust distributions to adult children, so Tax Planning for 2023 will be vital for anyone using a Family Trust.
So, there you have it, a long list of things to consider before the end of financial year. If you’re still not confident feel free to reach out to our friendly team and we can support you through the process. You can also read through our tax return guides for business and personal tax strategies.
This is general advice only and doesn’t take into account your financial circumstances, needs and objectives. Before making any decision based on this information you should assess your own circumstances or seek advice from your financial advisor and seek tax advice from your accountants at Ipsum Advisors. Information is current at the date of issue and may change.