ATO Hit List – 2024 tax returns

ATO Hit List 2024 tax returns

The ATO have released their hit-list for the 2024 tax returns – essentially, this is a list of key areas that they will be focusing on for their tax return reviews (noting that, really, all areas are subject to review):

  • Incorrectly claiming work-related expenses
  • Inflating claims for rental properties
  • Failing to include all income in your tax return

Work-related expenses

Last year the ATO changed the records that were required to be kept to claim the fixed rate working from home deduction (see more in our article here).

To claim a working from home deduction using the fixed rate method, you need to have kept the following records:

  • Diary evidence showing the total hours worked from home; and
  • Records of the additional costs you have incurred for working from home (eg. Electricity bill, internet bill).

Simply “copying and pasting” your deduction from last year will likely result in a review of your tax return.

Rental properties

The ATO have specifically identified repairs and maintenance of rental properties as one of the areas of concern.  General repairs can be claimed as a tax deduction, but expenses that are capital in nature are not deductible as repairs (these may be eligible for a depreciation deduction instead).

While not specially identified by the ATO, interest deductions are also another area where significant mistakes are made by taxpayers. 

You need to ensure you keep full and complete records to ensure so your tax return can be prepared accurately.

See our previous article for rental properties here.

Missing income

If you rush to lodge your tax return on 1 July, not all of your income will be available on your ATO prefill report. 

Check that your income statement from your employer is marked as “tax ready” before lodging your tax return. 

Also check that all of your investment income has been included in your tax return (as it can take some time for this to be available on your ATO prefill report).

By following these steps, it means it will be less likely that your return will need to be amended.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore, it should be regarded as confidential and not be made available to any person without our consent,

Use it or Lose it – Carried Forward Super Contributions

Super Contributions: Use it or Lose it

If your superannuation account balance was less than $500,000 as at 30 June 2023, you have until 30 June 2024 to catch up any unused concessional superannuation contributions from 2019.

From the 2020 financial year onwards, new rules came into effect that enabled individuals with a total superannuation balance of less than $500,000 to catch up on superannuation contributions that may not have been maximised made in prior years. 

For example, in the 2019 year, the total concessional contribution cap was $25,000.  If you only made contributions of $15,000, then you have $10,000 unused from that same year.  You can carry this unused cap balance forward for up to 5 years.  After 5 years, the unused balance expires.  This means that you have until 30 June 2024 to use up any unused concessional cap from the 2019 financial year.  If you don’t use up the 2019 carried forward balance before 30 June 2024, it will be lost.

But there’s a catch: your current year contributions first go towards this year’s cap.  Once that is maxed out, any extra goes towards past years, starting from the oldest.

So, to claim your 2019 unused cap, you’ve first got to max out your 2024 contributions ($27,500).  Anything above that goes towards your unused caps from previous years, starting with 2019.

Not sure what your prior year unused caps are?  Check your myGov account or as your tax agent.

Now, before you go all in, chat with your financial planner to make sure it aligns with your retirement goals.

Remember, if you are looking to claim a personal tax deduction for superannuation contributions, you need to:

  1. Ensure the contribution is received by your superfund prior to 30 June;
  2. Give your superannuation fund a “Notice of Intention to Claim a Tax Deduction” for the contributions;
  3. Receive an acknowledgement letter from your fund prior to lodging your 2024 tax return.

If you’re considering extra contributions this year, talk to your tax agent and your financial planner to figure out how much and if it fits your retirement plan.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore it should be regarded as confidential and not be made available to any person without our consent,

Upcoming Changes to ATO Interest: What Businesses Need to Know

Upcoming Changes to ATO Interest: What Businesses Need to Know

As part of the Mid-Year Economic and Fiscal Outlook, the Government announced that it will pass legislation to deny deductions for ATO interest charges (this includes General Interest Charge (GIC) and shortfall interest charges (SIC)) from 1 July 2025.

This applies to all GIC and SIC charged by the ATO – including interest charged on payment arrangements.

Despite the ATO’s interest rates rendering it an expensive debt financing option (current rate is 11.34% in June 2024), numerous businesses have favoured it for its ease and accessibility, bypassing the formalities associated with traditional lenders like banks.

Although the ATO imposed GIC/SIC will no longer be deductible, if businesses were to seek finance elsewhere to pay their ATO debt, interest on this finance is deductible. 

What does this mean for businesses?

If you currently use payment plans with the ATO as a means of financing your tax liabilities (including GST, PAYG withholding and income tax), we recommend that you review your cashflow forecasting to ensure you have sufficient cashflow to pay your tax liabilities as and when they fall due.

Cashflow forecasting should always be a cornerstone of your business planning.  However, if you don’t currently forecast your cashflow, we recommend that you start from at least 1 July 2024 to ensure that you have sufficient cashflow to fund your 2024-25 and future ATO liabilities.

As needed, consider exploring alternative financing avenues to pay ATO liabilities, such as bank overdrafts or loans secured by property. Interest incurred on such borrowings is tax-deductible when used for business purposes, including paying ATO obligations.

How can we help?

We’re here to help you evaluate your business’s cash flow and forecasts. Additionally, we can connect you with finance brokers who specialise in assisting clients in accessing additional financing options for their businesses.

Note: Legislation to enact this has not yet been passed.  We will keep you up-to-date of the passage of the relevant legislation.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Selling a property? Do you need a tax clearance certificate?

Property Sales

Do you need a tax clearance certificate?

 

From 1 July 2016, purchasers of residential property were required to withhold 10% of the purchase price where the property cost was more than $2 million (this changed to 12.5% and $750,000 from 1 July 2017).  The ultimate goal of the withholding regime was to have tax withheld for the anticipated capital gain for foreign vendors.  However, under the legislation all sellers are deemed to be foreign vendors.  Australian residents could only avoid the withholding obligation by obtaining a clearance certificate from the ATO and providing it to the purchaser.

Recently, the Government announced that from 1 July 2025, it would increase the withholding rate to 15% and reduce the threshold for withholding to $0.  As such (provided the relevant legislation is passed for these changes), from 1 July 2025, all Australian resident vendors of property will be required to obtain a clearance certificate to provide to the purchaser.  Failure to do so will result in 15% of the sales proceeds being withheld by the purchaser and remitted to the ATO.

What do you need to do?
 
If you are an Australian resident selling property, currently you will need to obtain a clearance certificate from the ATO if the sales price is more than $750,000.  From 1 July 2025, all Australian resident vendors will need to obtain a clearance certificate.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Rental Properties – Getting the Best Tax Outcome in 2024

Rental Properties

Getting the Best Tax Outcome in 2024

 

To get the best tax outcome from your rental property, we recommend paying any upcoming expenses before 30 June. 

Any deductible expense that is paid prior to 30 June can be claimed in this financial year.  If you pay the same expense after 30 June, it can’t be claimed as a deduction until next financial year.

With the individual tax rates decreasing after 30 June 2024, you will get an even bigger advantage in paying your rental property expenses prior to 30 June (as a deduction is worth more in the 2024 year than the 2025 year).  For example, a $5,000 expense will get you a $125 greater tax deduction in 2024 than in 2025:

2024 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2024 return) = $1,625
Net out of pocket = $3,375

2025 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2025 return) = $1,500
Net out of pocket = $3,500

Rental expenses

For rental properties, examples of some of the deductible expenses you might be able to pay before 30 June include:

  • Repairs and maintenance
  • Cleaning
  • Gardening
  • Pest control
  • Smoke alarm review and maintenance
  • Servicing costs – eg. air conditioner, pool

Have a chat with your property manager to see if there are any expenses that can be paid prior to 30 June.

Depreciation

We also recommend getting a depreciation schedule for your property.  Contact a qualified quantity surveyor to prepare a depreciation schedule for your property (for example – BMT Tax Quantity Surveyors or Deppro).  The cost of the report can be claimed as a deduction and the report will also provide you with the details of the depreciation you can claim in your tax return.

What should you do now?

  1. Talk to your property manager about any expenses that you can pay for your property prior to 30 June;
  2. Book in any relevant services now to ensure that they are completed and paid prior to 30 June (keep a valid tax invoice for all services that you want to claim as a tax deduction);
  3. Contact a quantity surveyor to get a depreciation report for your property;
  4. Start compiling records for the expenses already paid for your property during this financial year.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Self-Education Expenses – TR 2024/3

Self-Education Expenses 

New Tax Ruling – TR 2024/3

On 21 February 2024, the ATO finalised the ruling for Self-Education Expenses (TR 2024/3).  The ruling sets out the principles on the deductibility of self-education expenses under the Income Tax Assessment Act and provides 38 examples.

When are self-education expenses deductible?

Self-education expenses are deductible to the extent they:

  • Are incurred in gaining or producing your assessable income; AND
  • Are not:
    • Capital, private or domestic in nature
    • Incurred in gaining or producing exempt income
    • Prevented from being deductible by a specific provision in the tax law.

If you are reimbursed for the self-education expenses, you cannot claim a personal deduction.

Gaining or producing assessable income

You need to be able to show one (or both) of the following apply:

  • Your income-earning activities are based on the exercise of a skill or specific knowledge, and the self-education enables you to maintain or improve that skill;
  • The self-education is likely to lead to an increase in income from your current income-earning activities.

They will not be deductible if you have incurred them to obtain new employment or open up a new income-earning activity.

Types of self-education expenses

Some of the self-education expenses that may be deductible include:

  • Course fees but not if you have a Commonwealth Supported Place (CSP) (including where you have used a FEE-HELP loan or personal loan to fund the fees)
  • Interest on monies borrowed to fund the self-education expenses
  • Books, digital subscriptions, stationery
  • Travel (including airfares, accommodation and meals)
  • Depreciation of equipment

Action to take

If you are personally paying for any self-education costs that are related to your current employment, please ensure you keep all details and invoices of the costs incurred.  We can review these at tax time to determine whether they are deductible in your individual tax return.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Tax Planning with Decreasing Tax Rates

Tax Planning with Decreasing Tax Rates


The basic principles of tax planning essentially remain the same every year – maximise and bring forward your deductions, and try and defer your income.  Often this just results in you deferring your tax liability (not necessarily reducing it).  However, in times of decreasing tax rates, you can take advantage of the decreasing rates to reduce your tax bill.

Tax Rates

Below is a comparison of the tax rates for the 2023-24 financial year and the rates currently being legislated for the 2024-25.

With decreasing tax rates, there are steps you can take prior to 30 June 2024 to reduce your overall tax liability.

Bring Forward Deductions

Any deductions that you claim in the 2024 financial year get you a higher refund than the same deduction claimed next year.

For example, let’s say you’re earning $100,000 per year.  If you paid $100 for stationery for your employment on 30 June 2024, and claimed a full tax deduction for this expense, you would receive a tax refund of $32.50 for the stationery deduction.  If you purchased the same $100 stationery on 1 July 2024 (the very next day), you would only receive a tax refund of $30.  So if you are earning $100,000, there is a $2.50 reduction in your tax refund for your deductions between 2024 and 2025.  It is better to claim as much as you can prior to 30 June 2024 to get a tax benefit at the higher tax rates.

Examples of deductions to bring forward

  • Prepaying interest on rental properties or margin loans
  • Repairs to your rental property
  • Additional deductible superannuation contributions (to be reviewed with your financial planner
  • Annual payment of income protection insurance
  • Expenses due in July that you may be able to pay early
Defer income
 

With the personal tax rates decreasing after 30 June, this means that any income that you make in this financial year, will be taxed at a higher rate than if you earned the same income next year.

As we are talking about individual tax rates, we need to consider if there is any income in our individual name that we can defer until after 30 June.

A good example of deferring income is the delaying sale of capital assets (for example, an investment property).  When selling capital assets, the relevant date for the capital gains tax, is the date that the contract is entered into.  For example, if you are selling an investment property, you are deemed to have disposed of it on the date you enter into the contract for the sale (not the date of settlement).

Examples of income to defer

  • Sale of capital assets like property or shares (ensure the contract date is after 30 June, irrespective of the settlement date
  • Customer / client invoicing

Client example

We had a client recently ask us to calculate how much additional tax they would need to pay if they sold their investment property. 

If they entered into a contract to sell their investment property now, their total extra tax payable would be $38,000. 

If they delayed entering into a contract until after 30 June, their total extra tax payable would reduce to $30,000 (assuming the sale price remains the same). 

This is a tax savings of $8,000 simply by selling the property after 30 June and taking advantage of the lower tax rates.

Just remember – you need to enter into the contract for sale after 30 June for the income to be included as part of next year’s tax return.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Technology Investment Boost

Small Business Technology Investment Boost

Legislation was passed on 23 June 2023 to enable small businesses to claim an additional 20% deduction for eligible technology expenditure.

What is the boost?

Small businesses (who have an aggregated turnover of less than $50 million) will be able to claim an additional 20% deduction for expenses incurred to support their digital operations.

The boost is available for expenditure incurred between 29 March 2022 and 30 June 2023 and is capped at $100,000 per income year.  The maximum bonus deduction is $20,000 per income year.

Eligibility

To be eligible for the additional deduction, you must meet the following conditions:

  1. You have an aggregated turnover of less than $50 million for the income year in which you incur the expenditure;
  2. The expenditure is “eligible expenditure” (see below);
  3. The expenditure is deductible for your business under Australian tax law;
  4. The expenditure has been incurred between 29 March 2022 and 30 June 2023.

Eligible expenditure

Eligible expenditure may include (but is not limited to):

  • digital enabling items;
  • digital media and marketing;
  • e-commerce;
  • cyber security.

At the end of this article we have included a table of example expenditure that may be eligible for the boost.

What cannot be claimed?

You cannot claim the following expenses towards the boost:

  • Salary and wages
  • Capital works costs
  • Financing costs
  • Training or education costs (but these may be eligible for the Small Business Skills and Training Boost)
  • Expenses that form part of your trading stock.

Cap on the deduction

There is an annual cap of $100,000 on eligible expenditure (with the bonus deduction capped at $20,000).

When do you claim the deduction

For any expenditure incurred between 30 March 2022 and 30 June 2022, you claim 100% of the deduction in the 2022 tax return and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2022 and 30 June 2023, you claim both the 100% deduction and the 20% bonus in the 2023 tax return.

What do you need to do?

To check your eligibility for the boost, we recommend you take the following steps:

1. Review your technology expenditure from 29 March 2022 to 30 June 2023;

2. Identify any expenditure that has been incurred to help digitise your business;

3. If you use online accounting software, attach a copy of the invoice to the transaction in your software;

4. Provide us (your accountant) with the details of all relevant costs incurred that meet the eligibility criteria.

Provided we have the relevant documentation to prove eligibility to the boost, we will claim the additional 20% deduction in your tax return.

Please do not hesitate to contact us if you would like further information about the boost.

Examples of Possible Eligible Expenditure

Category

Example expenditure

Digital enabling items

Computer and telecommunications hardware

  • Desktop and laptop computers
  • Digital tablets
  • Computer keyboards
  • Webcams
  • Computer mouse, trackpads, stylus
  • Computer cables
  • Powerpacks
  • Electrical and power adapters
  • Repairs and improvement costs to computer hardware and equipment

Digital enabling items

Telecommunications hardware and equipment

  • Landline phones
  • Mobile phones
  • Smart watches
  • Telephone accessories
  • Repair and maintenance costs

Digital enabling items

Software

  • Initial purchase
  • Annual subscriptions (eg. accounting software subscriptions, Office 365, anti-virus, ServiceM8)

Digital enabling items

Internet

  • Usage costs
  • Connection costs
  • Repair costs

Digital enabling items

Computer systems

  • Subscriptions to support digital capabilities
  • Help desk support fees and charges
  • IT support charges
  • Repairs and improvement costs

Digital media and marketing

  • Audio and visual content creation
  • Web page design
  • Web page update costs
  • Search engine optimisation fees
  • Email marketing fees
  • Photo stock fees
  • Music royalty fees

E-Commerce

  • E-commerce website setup
  • E-commerce website optimisation
  • Setup of social media store functionality
  • Costs associated with setting up online methods of payment
  • Photography costs for online display
  • Photostock fees
  • Portable payment devices
  • Digital inventory management
  • Subscription to cloud-based services
  • Advice on digital operations

Cyber Security

  • Cyber security consultant fees
  • Cyber security software (eg. anti-virus)
  • Cyber security installation and implementation costs
  • Cyber security backup management
  • Cyber security monitoring services

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Skills and Training Boost

Small Business Skills and Training Boost

Legislation was passed on 23 June 2023 to enable small businesses to claim an additional 20% deduction for expenditure on staff training.

What is the boost?

Small businesses (who have an aggregated turnover of less than $50 million) will receive an additional 20% deduction for expenditure on external training courses delivered to employees by registered training providers.

The additional deduction will apply to expenditure incurred between 29 March 2022 to 30 June 2024.

Eligibility

To be eligible for the additional deduction, you must meet the following conditions:

  1. You have an aggregated turnover of less than $50 million for the income year in which you incur the expenditure;
  2. The training is provided to employees of your business (the boost does not apply to training provided to sole traders, partners in a partnership or independent contractors);
  3. The training is provided either in-person in Australia or online;
  4. The training is provided by a registered training organisation that is not you or an associate of yours – you can check here for registered providers: https://training.gov.au/
  5. The expenditure is deductible for your business under Australian tax law;
  6. The expenditure has been incurred between 29 March 2022 and 30 June 2024.

Expenses you can claim

The boost applies to expenditure on training and also incidental costs (for example: books or equipment).

When do you claim the deduction

For any expenditure incurred between 30 March 2022 and 30 June 2022, you claim 100% of the deduction in the 2022 tax return and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2022 and 30 June 2023, you claim both the 100% deduction and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2023 and 30 June 2024, you claim both the 100% deduction and the 20% bonus in the 2024 tax return.

What do you need to do?

To check your eligibility for the boost, we recommend you take the following steps:

1. Review your training expenditure from 29 March 2022 to 30 June 2023;

2. Identify any expenditure that has been provided by a registered training provider (refer: https://training.gov.au/)

3. If you use online accounting software, attach a copy of the invoice to the transaction in your software.

4. Provide us (your accountant) with the details of all relevant training costs incurred that meet the eligibility criteria.

Provided we have the relevant documentation to prove eligibility to the boost, we will claim the additional 20% deduction in your tax return.

Please do not hesitate to contact us if you would like further information about the boost.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

2023 End of Year Tax Planning

End of Financial Year

In a previous article (see here), we discussed the ideal timing for tax planning.  It is crucial to regularly assess your business performance and implement strategies that optimise tax outcomes.  We recommend conducting a minimum quarterly review of your business to allow ample time for the implementation of growth and tax-related strategies.

If you haven’t yet reviewed your business performance and tax outcomes for this financial year, now is your final opportunity to make a difference before 30 June.

When we engage in end of year tax planning for our clients, we begin by evaluating their year-to-date performance.  This analysis provides insights into their projected financial position at year-end and estimates their tax liability for the year.

Outlined below are some key tax planning ideas for 2023, along with upcoming changes that will come into effect on 1 July 2023. 

Remember, there is still time to schedule an end-of-year tax planning meeting with us.  This will enable us to provide specific advice tailored to your business – click to book in with Jeanette or Troy.

Depreciation of assets

For businesses with a turnover under $50 million, up to 30 June 2023 you can claim a deduction for the acquisition of any eligible depreciating assets (there is no limit for most assets).

For small businesses (turnover under $10 million) that use simplified depreciation rules, the balance of your small business pool can be written off at the end of the income year.

We note that there is still a cost limit on certain assets – for example, you can only claim a maximum deduction of $64,741 for a passenger vehicle during the 2023 financial year.  A passenger vehicle is a vehicle that is designed to carry a load less than one tonne and fewer than 9 passengers.

From 1 July 2023, the depreciation limit changes to $20,000 – this means you can only claim a full deduction at time of purchase for assets that cost $20,000 or less.  After 1 July 2023, any assets that you acquire for more than $20,000 will need to depreciated for tax purposes.

EOFY Tax tip: If you are looking to acquire capital assets for your business, we recommend doing so prior to 30 June to get the deduction in the current financial year.  If the deduction puts your company in a loss position – consider the loss carry-back provisions below.

Business tip: While you get the benefit of deducting the full cost of the asset in the current financial year, this means that you will not receive any depreciation on this asset in future years.  It also means that when you sell the asset, any income from the sale will be subject to income tax.

Business tip: The tax depreciation deduction is only available once the asset is installed and ready for use.  Getting assets installed and ready for use by 30 June might be difficult for some businesses given the current lack of supply for equipment and vehicles.

Company loss carry-back

Companies that make a loss in the 2020 to 2023 financial years, can carry this loss back to reduce taxable profits made on or after the 2019 financial year.  The company can then elect to receive a refund of the tax paid in that year when lodging the later year tax return.

EOFY Tax tip: Your company may be able to take advantage of the asset depreciation rules to write off the full value of new assets purchased.  If the depreciation puts your company into a loss, this loss may be applied against the taxable profits from 2019 to 2022.  You may then receive a refund of tax paid in those financial years.

Employee super

The June quarter superannuation guarantee liability is required to be paid by 28 July.  However, a business can only claim a tax deduction for employees’ superannuation when it is actually paid.  As such, to ensure you get a deduction in the current year, you need to pay your employees’ June superannuation guarantee liability prior to 30 June (cashflow permitting).  We recommend that the payment be made by 20 June (to ensure it is processed by the recipient superfund). 

EOFY Tax tip: Pay your employee June quarter superannuation by 20 June 2023 to get a deduction in the current financial year.

Business tip: The ATO are currently allocating considerable resources to reviewing employer compliance with paying employees’ superannuation guarantee.  There are significant penalties that apply if you pay your employee superannuation late. 

Business tip: The payment of your June quarter superannuation liability does not impact on your profit and loss position (as the superannuation liability has already been recorded in your profit and loss).  The payment before 30 June simply brings the tax deductibility of the payment forward to the current financial year.  If you make the payment after 1 July (and before the 28 July cut-off), the payment will be deductible next financial year.

Business tip: From 1 July 2023, the superannuation guarantee rate increases to 11%.  This will continue to increase by 0.5% per year until it reaches 12%.  This will have flow-on implications for payroll tax, workcover etc. 

Personal superannuation

You may also want to make personal contributions to super.  For the 2022/23 financial year, the maximum concessional (deducted) contribution cap is $27,500.

However, if your superannuation balance was less than $500,000 as at 30 June 2022, it may also be possible for you to contribute more super by taking advantage of the unused concessional cap carry forward rules. 

EOFY Tax tip: If you have unusually high income during the 2023 financial year, consider whether making additional deductible superannuation contributions fits within your personal financial plan.  We recommend speaking with your financial adviser with regards to your superannuation contributions.

Trade debtors

You should review your trade debtors as at 30 June.  You must ensure that any debts that are uncollectible are written off prior to 30 June in order to claim a tax deduction for the write-off in the current financial year.  This is particularly important given the on-going effect of COVID-19 on many businesses.

EOFY Tax tip: To write off a bad debt – you must have made reasonable and commercial attempts to recover the debt and have now determined it is uncollectible.  You then need to make a decision in writing to write off the bad debt (eg. you have removed the debt from the customer’s account and have recognised a bad debt expense).

Prepay or bring forward your expenses

Make sure you review all of your expenses and bring forward any expenses to June (where possible).  For example, stock up on stationery and office consumables, prepay your insurance and interest (if applicable) and look at any other expenses you may be able to pay in June.  By bringing these expenses forward to June, you are obtaining a tax deduction in the current financial year which will reduce your overall tax bill for the 2023 year.

EOFY Tax tip: If your business is in a loss position, it may not be advantageous to bring forward expenses to the current financial year.  Please contact us to discuss whether this strategy is appropriate for you.

Defer assessable income

Consider whether it is possible to defer your assessable income (being mindful of cashflow implications) to next financial year. 

Motor vehicles

If you are using a vehicle for a high percentage of work-related travel, make sure you keep a logbook.  Without a logbook, an individual is limited to claiming a maximum of 5,000km at $0.78 (or $3,900) in the 2023 financial year.  If you keep a logbook, you can claim the business percentage of the operating costs of the vehicle (petrol, registration, servicing, depreciation, interest etc).

Logbooks must be kept for 12 continuous weeks and remember to record your vehicle’s opening and closing odometer readings each year.

EOFY Tax tip: A logbook started prior to 30 June can be used to support a logbook claim even if the logbook isn’t completed until after 30 June.

Working from home

If you worked from home during the 2023 financial year, you may be able to claim a deduction for a percentage of the running costs of your home.  There are two different methods you can use to calculate your deduction:

(1) Revised Fixed-Rate method ($0.67 per hour) – this method covers electricity, internet, mobile and home phone, stationery and computer consumables.  It does not cover depreciation of office equipment.  From 1 March 2023, if you are using this method, you need to have a diary of your actual hours worked from home.

(2) Actual cost method – you can calculate and claim the work-related portion of your actual expenses provided you have kept appropriate records.

For more information about your working from home deduction – see our earlier article.

EOFY Tax tip: From 1 March 2023, You must have a diary to record your hours working from home.  If you do not have diary evidence, we cannot claim a deduction for these hours.

EOFY Tax tip: The ATO will be specifically reviewing deductions for working from home during the 2023 year.  Ensure you have appropriate documentation for your hours and you are not claiming twice, by claiming the rate per hour ($0.67) plus a deduction for your phone for example.

Trust minutes

Prior to 30 June, make sure the trustees of your discretionary trusts decide how they are going to distribute their income and capital.  This decision must be documented in a trust minute before 30 June (or as otherwise specified in your trust deed).  It is important that you review your trust income for the 2023 financial year to ensure that the trust minute accurately reflects the trustee’s intention.  Given the recent announcements from the ATO with regards to the distribution of income to adult children and other tax advantaged beneficiaries, it is important that you get tax advice for your end of year tax minutes.

EOFY Tax tip: Your trust minutes must be prepared prior to 30 June to evidence the trustee’s decision regarding the distribution.  Keep this minute with your tax records.

Rental properties

For your rental properties, if you have any expenses coming up in the next few months, try to pay these prior to 30 June – this will bring the deduction into the current tax year and will help you to reduce your 2023 tax bill.

In relation to any interest you are claiming on your rental property, make sure you only claim the interest on the loan that was used to purchase the property.  If you have drawn down on the same loan for private purposes (eg. for a holiday), the interest that relates to the private usage is not deductible.

EOFY Tax tip: Consider getting a depreciation report for your rental property.  You may be able to claim additional tax deductions for the cost of the building and potential its fixtures and fittings.

EOFY Tax tip: Consider undertaking repairs to your property prior to 30 June.

EOFY Tax tip: Rental property deductions are being specifically reviewed by the ATO during the 2023 year.  Make sure your rental expenses are correct and that you have appropriate supporting documentation.

Cryptocurrency

The ATO have specifically announced that they will be reviewing cryptocurrency transactions in the 2023 tax returns.  It is important to ensure you include all cryptocurrency transactions on your tax return.  If you have had any cryptocurrency gains in the current financial year, you may wish to consider some additional tax planning measures before 30 June to reduce any tax liability.

EOFY Tax tip: Make sure you have all of your documentation available for all cryptocurrency transactions.  Noting that changing your investment from one cryptocurrency to another constitutes a transaction which may result in a tax liability. 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore, it should be regarded as confidential and not be made available to any person without our consent,