How can tax planning help you?

Has it ever occurred to you that you can save on your taxes? Tax planning can make your life easier as it will help your business predict and even possibly lower the taxes you’ll need to pay at the end of the financial year. This will result in less worry about whether you have enough funds to pay your taxes or improve your business.

6 Helpful Tax Planning Strategies

We have listed 6 helpful tax planning strategies you can use to ensure that you are effectively managing your finances.

1. Cash flow management

It is important to assess your current financial (cash) position to develop an efficient tax planning strategy. This will help you gain a better understanding of your tax status and the cash available, so you can focus on areas for development or improvement.

Tips for maximising cash flow from tax savings:

• Prepayment of tax-deductible expenses
• Review your depreciation schedule before 30 June 2023, and write off any eligible assets that have been disposed of or destroyed, as these can become tax deductible.
• Conduct a stocktake as of 30 June 2023, and write off any obsolete stock as it may result in a tax reduction.
• Review your accounts receivable before 30 June 2023, and write off any unrecoverable debts.

If you are aware of your current financial position, you may be able to vary tax instalments to avoid overpaying tax over the year and instead use it for other business purposes.

It is also good to plan ahead of time and mark the due date of the tax payments since late payments may result in fines or interest charges that can impact your cash flow.

2. Superannuation

The concessional superannuation cap for 2023 is $27,500 for all individuals.

Allocating funds to your superannuation helps you prepare for your future and gives you the advantage of using it as a tax deduction which lowers your taxable income.

To claim a tax deduction in the 2023 financial year, you must ensure that your employee superannuation payments are received by the superfund or the Small Business Superannuation Clearing House (SBSCH) by 30 June 2023. It is the date the super fund receives your payment, not the date that you make the
payment that matters. Last minute superannuation payments can result in processing delays. This may result in payments being received after year-end with the deduction delayed to the next financial year.

3. Tax rate cuts

The corporate tax rate has been reduced from 27.5% to 25% for the 2023 FY which is only applicable to base rate entities being those with aggregated turnover of less than $50 million and 80% or less of the entity’s assessable income is base rate entity passive income.

For all other companies that do not qualify as a base rate entity, they may be taxed at 30%.

4. Small business concessions

If your business qualifies as a small business (aggregated turnover of less than $10 million), there are various tax concessions available that may result in a favorable tax outcome, including:

• Simplified depreciation rules
• Immediate deduction of prepayments: eligible for immediate deduction if they are prepaid within 12 months or less and terminate no later than 30 June 2023
• Simplified trading stock rules
• Small business rollover
• Up to $1,000 small business tax offset for individuals
• Immediate deduction for specific start-up expenses: for small businesses with an aggregated turnover of less than $50 million
• FBT concessions: for small businesses with an aggregated turnover of less than $50 million

5. Instant asset write-off

Businesses that have an annual revenue of less than $5 billion are eligible for the instant asset write-off. This permits eligible businesses to fully depreciate assets (new or used) acquired for less than $150k and installed and ready for use before 30 June 2023.

It is good to keep in mind that it is better to purchase an asset with the purpose of improving business income than doing it only for the sake of a tax break, however, do note that this concession is likely to expire on 30 June 2023 with the instant asset write off limit likely to revert back to the 2015 rate of a mere $1000!

6. Carry back tax losses

Eligible companies with an aggregated annual turnover of less than $5 billion may be eligible to carry back tax losses made during the fiscal years 2020, 2021, 2022, and 2023 to offset earnings already taxed in 2019 or subsequent years.

Businesses can choose this tax relief approach by revealing it in their 2021-22 or 2022-23 tax returns, and they will get a refundable tax offset in the year the loss was incurred. Carrying back losses must not be more than the previous tax profit and must not result in a franking account deficit. A business can also choose how much of its tax losses are carried back.

How we can assist you

• Accurately forecast your and your business’s finances by getting the information from your financial documents.
• Identify and discuss the best strategies that are applicable for you to minimise your tax obligations.
• Give a pro-active consultation where we ensure that you understand your current financial position through reporting the recommended strategies, the amount of tax you can save, the implications of these strategies to your cash flow and the proper timing of executing on the strategies.
• Prepare an action plan that will be easy for you to follow.

If you are interested in finding out where you stand with your tax position for the current 2023 financial year and give yourself time to plan ahead for any tax payable that may arise, then reach out to us anytime to schedule for a Star Strategy meeting.