It was tax planning season 12 weeks ago – and personally, our favourite time of year as we like to save you money. BUT, why wait to May or June next year, when you can be doing things NOW when it comes to tax savings in the lead up to 30 June 2023?
What is tax planning we hear you ask?
Tax planning is something us accountants generally think about when we enter the final quarter of the financial year – those April to June months… but that does not mean you shouldn’t be thinking about it NOW and ongoing throughout this fiscal year.
This would then give you more than enough time up your sleeve to implement some smart, clever strategies to minimise your tax payable resulting from all those glorious profits your kickass business is going to be making. Here’s some tips:
How to spend money to save on tax
The big question here is – is a tax deduction in your business’ best interest? Remember, to save $1, you must spend $4 – so is that worth considering doing it sooner rather than later?
This comes down to what you’re looking to buy. Do you need that new car, or are you just buying it to save on tax? If there’s a piece of plant/equipment that you’ve been eyeing off and you have the cash or finance ready to go, and the business will benefit from it, then sure, you need to consider whether to buy this (and have it installed and ready for use) before 30 June to maximise your tax deductions.
Got some cash to splash?! Here are some ideas on what you can spend your money before 30 June!
Instant Asset Write Off – to infinity and beyond – it goes until 30 June 2023
The good news here is, if you’re looking at some new equipment, there is no limit on how much we can write off (immediately depreciate) for small business entities (SBE’s). Not an SBE?? – No worries! You also have the option to use temporary full expensing – which means you can still write off the full cost of that asset. Full disclosure – Capital works are excluded.
Review your payment dates for things like insurances, rent, consulting and accounting fees, can you build into your cashflow now, to park funds aside to make some prepayments?
By prepaying these items, you can bring that tax deduction forward into the 2023 financial year – keeping in mind this means the next year you won’t have it, so this is really just kicking the problem to next year! But you can also sometimes get a handy discount on some services by offering to pay upfront, which then adds to your pocket.
Putting funds into Super – Businesses & Sole Traders
If you’re looking for an extra deduction in 2023, then consider paying your employees outstanding super before 30 June 2023, BUT also keep in mind to be paying it as you are going along each month, as it helps with cashflow, and, maybe don’t wait for that BIG quarter hit, which may put you off paying it.
Sole traders can contribute up to $27,500 into super during the 2023 financial year, so consider doing this as you go along. Remember this includes employer SGC contributions, so for those of you that are receiving salary/wages your employer will already be using up some of that cap!
Key takeaway here is that the fund must receive and process the funds before 30 June 2023!
Is it time for you to restructure your business entity?
Different entity types pay different rates of tax. Eg, trading companies that operate as Small Business Entities enjoy a lower tax rate of just 25%. So, if your Sole Trader business’ net profit tends to go up and down significantly between different financial years – then a different business entity structure may provide you some tax relief from these swings and roundabouts.
Trusts on the other hand can’t retain profits like companies can – but they can distribute profits out to individuals/companies in a tax effective way … so thinking about whether it’s time to change is worth a call to us to discuss. 9853 4754 or email@example.com
Remember – plan early so your cashflow can take advantage of what options you have.