General Year End Tax Planning Strategies

Business Income and Expenses

Subject to cash flow requirements, consider deferring income until after 30 June, especially if you expect lower income for 2022/23 compared to 2021/22.

Most businesses are taxed on income when it is invoiced. Some small businesses may only be taxed when income is received. Income from construction contracts is generally taxed when progress payments are invoiced or received.

Ensure that you have complied with the requirements to claim deductions in 2021/22:

  • Bad debts must be written off in your accounts before 30 June.
  • Employer or self-employed superannuation contributions must be paid to, and received by, the super fund before 30 June and must be within the contributions cap (from 1 July 2021, $27,500 for all individuals regardless of age).
  • Depreciation can be claimed for assets first used, or installed ready for use, before 30 June.
  • Small businesses (turnover less than $10m), can claim expenses prepaid up to 12 months in advance – for larger businesses, this is generally limited to expenses below $1,000.
  • Wages paid to your spouse or family members must be reasonable for the work performed.

“The Temporary Full Expensing of Assets and Temporary Loss Carry-Back
measures have been extended by 12 months until 30 June 2023.”

Small businesses planning major purchases or replacement of capital equipment should contact us for advice. Careful timing of those transactions can result in substantial tax savings.

Scrap any obsolete item in the asset register before 30 June. Consider delaying the sale of assets that will realise a profit on sale and bring forward any sales that will result in a loss.

Review valuations of trading stock in the lead up to 30 June. The best practice is generally to value stock at the lower of cost or market selling value.

These best practices should be revised if you expect a tax loss for 2021/22 or substantially higher income in 2022/23 compared to 2021/22.

Personal Income, Deductions and Tax Offsets

Subject to cash flow requirements, set term deposits to mature after 1 July, rather than before 30 June.

Consider realising capital losses if you have already realised capital gains on other assets during 2021/22. Conversely, consider realising capital gains if you have unrecouped capital losses, or you expect substantially higher income in 2022/23 compared to 2021/22.

If you expect lower income in 2022/23 due to retirement or any other reason, consider deferring income until after 1 July, when you will be in a lower tax bracket. If you are a primary producer and you expect a permanent reduction in income, consider withdrawing from the income averaging system.

Arrange for deductible donations to be grouped in the higher income year if you expect a substantially higher or lower income in 2022/2023 compared to 2021/22. Make all donations in the name of the higher income earner.

Other Tax Planning Considerations

Contact us for advice if you have moved to or from Australia for an extended period. You may need to review your residency status for tax purposes. There are important tax consequences if you change tax residency.

Trustees of trusts should ensure that all necessary documentation is completed before 30 June, especially where you intend to stream capital gains or franked distributions to specific beneficiaries or have beneficiaries who aren’t the default beneficiaries.

Family discretionary trusts may need to make a family trust election if the trust has unrecouped losses or has beneficiaries whose total franking credits for the year may exceed $5,000.

Be skeptical of year-end tax shelter schemes. You should not enter a scheme without advice regarding both its tax consequences and commercial viability.

Single Touch Payroll

From 1 July 2021, Single Touch Payroll reporting is required for closely held payees. A closely held payee is one who is directly related to the entity from which they receive payments, for example:

  • Family members of a family business;
  • Directors or shareholders of a company;
  • Beneficiaries of a trust.

If you need to review your tax planning strategy, call my office on 3399 8844 and we will give you a FREE Business Tax Check. You can also visit our website at www.straighttalkat.com.au and complete your details on our Home page to request a free appointment.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.