Key Tax Minimisation Strategies  

CONSIDER THE FOLLOWING OPPORTUNITIES

    1.    Delay Deriving Assessable Income

One effective strategy is to delay deriving your income until after June 30, 2023 by:

a. Delaying the Timing of the Derivation of Income until after June 30.

b. Timing of Raising Invoices for Incomplete Work (Businesses)

Where this strategy will not adversely affect your cash flow, consideration should be given to deferring the recognition of income until after 30 June 2023. Please note, not banking amounts received before June 30 until after June 30 does NOT qualify because the income is deemed to have been earned when the money is received or the goods or services are provided (depending on whether you are on a cash or accruals basis of accounting).

  • Cash Basis Income - Some income is taxable on a cash receipts basis rather than on an accruals basis (e.g. rental income or interest income in certain cases). You should consider whether some income can be deferred in those instances.
  • Consider delaying your invoices to customers until after July 1 which will push the derivation of the income into the next financial year and defer the tax payable on that income. If you operate on the cash basis of accounting you simply need to delay receiving the money from your customers until after June 30.
  • Lump Sum Amounts - Where a lump sum is likely to be received close to the end of a financial year, you should consider whether this amount (or part thereof) can be delayed or spread over future periods.

2. Bringing Forward Deductible Expenses or Losses

Prepayment of Expenses - In some circumstances, Small Business Entities (SBE) and individuals who derive passive type income (such as rental income and dividends) should consider pre-paying expenses prior to 30 June 2023. A tax deduction can be brought forward into this financial year for expenses like:

  • Employee Superannuation Payments including the 10.5% Superannuation Guarantee Contributions for the June 2023 quarter (that have to be received by the Superannuation Fund by June 30, 2023 to claim a tax deduction).
  • Superannuation for Business Owners, Directors and Associated Persons.
  • Wages, bonuses, commissions and allowances
  • Contractor Payments
  • Travel and accommodation expenses
  • Trade creditors
  • Rent for July 2023 (and possibly future additional months)
  • Insurances including Income Protection Insurance
  • Printing, Stationery and Office Supplies
  • Advertising including Directory Listings
  • Utility Expenses - Telephone, Electricity & Power
  • Motor Vehicle Expenses - Registration and Insurance
  • Accounting Fees
  • Subscriptions and Memberships to Professional Associations and Trade Journals
  • Repairs and Maintenance to Investment Properties
  • Self Education Costs
  • Home Office Expenses – desk, chair, computers etc.
  • Donations to deductible gift recipient organisations
  • If appropriate, consider prepaying any deductible investment loan interest. This could include interest payments on an investment loan for either an investment or commercial property or an investment portfolio you hold.

A deduction for prepaid expenses will generally be allowed where the payment is made before 30 June 2023 for services to be rendered within a 12-month period. While this strategy can be effective for businesses operating on a cash basis (not accruals basis), we never recommend you spend money on items you don’t need. Of course, this only works if you have sufficient cash flow.

 Superannuation Contributions - some low or middle-income earners who make personal (after-tax) contributions to a superannuation fund may be entitled to the government co-contribution. The amount of government co-contribution will depend on your income and how much you contribute. (Refer to the Superannuation Section for more information)

Capital Gains/Losses – Note that the contract date (not the settlement date) is often the key sale date for capital gains tax purposes and when it comes to the sale of an asset that triggers a capital gain or capital loss, you need to consider your overall investment strategy when making the decision to sell. Here are several important points regarding the management of capital gains and capital losses on sale of your assets from a tax planning perspective:

  1. If appropriate, consider deferring the sale of an asset with an expected capital gain (and applicable capital gains tax liability) until it has been held for 12 months or longer. By doing so, you could reduce your personal income tax. For example, if you hold an asset for under 12 months, any capital gain you make may be assessed in its entirety upon the sale of that asset.

        The Capital Gains Tax (CGT) Calculation Method*
    Individual Taxpayer Date of CGT event   
    CGT payable on an asset held < 12 months
    CGT payable on an asset held ≥ 12 months
    From 21/09/1999
    Tax on 100% of nominal gain
    Tax on 50% of nominal gain

    * A capital gain will be assessable in the financial year that it’s crystallised.

  2. If appropriate, consider deferring the sale of an asset with an expected capital gain (and applicable capital gains tax liability) to a future financial year. By doing so, you could help reduce your personal income tax for the current financial year. This could also be of benefit if, for example, you expect that your income will be lower in future financial years compared to the current financial year.
  3. If appropriate, consider offsetting a crystallised capital gain with an existing capital loss (carried forward or otherwise) or bringing forward the sale of an asset currently sitting at a loss. By doing so, you could reduce your personal income tax in this financial year. Note that a capital loss can only be used to offset a capital gain.

Accounts Payable (Creditors) - If you operate on an accruals basis and services have been provided to your business, ensure that you have an invoice dated June 30, 2023, or before so you can take up the expense in you accounts for the year ended 30th June 2023.
 


Other 2023Year End Tax Planning Opportunities

Disclaimer: This newsletter contains general information only and no responsibility can be accepted for errors, omissions or possible misleading statements. It is not designed to be a substitute for professional advice and does not take into account your individual circumstances. Therefore, no responsibility can be accepted for any action taken as a result of any information contained in this newsletter.