End-of-year tax planning advice 22/23

It’s hard to believe we’re at the pointy end of another financial year. 

And you know what this means? Yes, it's tax planning time. 

Tax planning involves reviewing your year-to-date trading performance, estimating the profits for the remainder of the year and calculating likely tax payable. 

The end goal, of course, is to ensure you’ve maximised your tax benefits and minimised your tax liabilities. So let’s take a look at the opportunities as well as the latest compliance rules you need to be aware of.  

How to reduce your tax bill

Before the 30 June deadline hits, here are some of the strategies that may be available to you to reduce the amount of tax you need to pay:

• Top up your personal superannuation balances – You may be able to claim personal super contributions as a tax deduction and reduce your assessable income. These contributions are generally taxed at a concessional rate of 15% instead of a marginal tax rate which could be up to 47%. 
• Acquire business assets – Under the soon-to-end temporary full expensing rules, if you purchase certain depreciable assets, you may be able to immediately deduct the full costs, provided the assets are used or installed ready for use before 30 June.  
• Prepay rent or interest on your business loans – By prepaying these expenses, you can claim a deduction for them in the current financial year, reducing your taxable income and lowering your tax liability. The payment must not exceed a 12-month period. 
• Give bonus payments to high-performing staff – Bonuses form part of your business costs and are, therefore, tax deductible. To qualify, you must be definitively committed to the payment of a quantified amount.
• Look at business restructuring opportunities – For example, if you’re eligible, consider rolling your business into a lower-taxed environment and taking advantage of capital gains tax concessions. This is not necessarily a pre-30 June action but can benefit future tax management. 
• Claim FBT exemptions on eligible EVs – Fringe benefits tax exemptions are available on certain electric vehicles (EVs) regardless of how many private kms you travel. This is in addition to the NSW stamp duty exemption and the $3,000 NSW Government incentive available on certain vehicles.
• Make voluntary HELP debt repayments – By making voluntary repayments towards a family member’s HELP debts before 1 June 2023, you can avoid the 7.1% indexation that would otherwise apply to any balance owing. 

While these tactics can help you reduce your liabilities, they do require you to spend money to save on tax. Because of this, it’s important to review your cash flow position and forecast to ensure your business can fund them. 

New tax compliance considerations 

When tax planning, as well as employing strategies to reduce your tax liabilities, it’s vital that you ensure ongoing compliance with the rules. 

If you aren’t already aware, the government recently announced some anti-avoidance provisions that must be considered:

Do you have a family trust? 

If so, closer attention must now be paid to who the trust distributes to and whether the beneficiary receives an enduring benefit from the distribution. 

This basically means cash must follow any distribution of a trust made to adult children without the expectation of having it paid back.

Are you a professional in business? 

If so, there are new rules regarding who ultimately pays tax on the professional income. 

Closer attention must be paid to how business profits are paid to the professional versus a non-professional (such as a non-working spouse) to ensure the arrangement is not flagged at risk of ATO review.

Get it right with tax planning advice

By taking advantage of the various tax deductions and concessions available this year, you can reduce your tax liability and improve your financial position. 

When tax planning, it pays to work with an experienced advisor. They can help you review your cash flow position to ensure you have the funds to reduce your liabilities and advise you on the latest compliance rules. 

Reach out to your Maxim advisor or contact our team today to schedule a tax planning review of your position to ensure you get it right.