With the end of financial year approaching, now is the time to put in place any final strategies to reduce taxable income. The following are simple but effective ways to legally reduce income tax for taxpayers big and small.
- Defer Income – consider deferring the issuing of invoices until after 30 June where it is optional to do so such as work in progress or interim invoices and makes sense.
- Asset purchases – there is an immediate deduction for assets acquired and first used before 30 June 2023 and no limit on the cost of new assets. In addition, if your turnover is less than $50M then you can also immediately write off second-hand assets.
- Bad debts – review any old debtors and write-off before 30 June. Make sure you have made some attempts to recover the debt.
- Stock – complete your stocktake before 30 June and write off any obsolete, expired or unusable stock before 30 June 2022 and reduce your stock on hand figure.
- Superannuation – don’t miss out on getting a tax deduction in 2022 for your employee’s superannuation. Pay the June quarter before 30 June.
For small business entities with turnover less than $50M the following tax concessions are available:
- Prepayments – there is an immediate deduction for prepayments of expenses for a period of up to 12 months.
- Loss Carry-back – companies who make a loss in the 2022 financial year will have the ability to offset those losses against any profits that were made in the 2019, 2020 or 2021 years and claim back any tax paid.
When combined with the Asset Write-off it is possible to buy large items of equipment and generate a loss in the current year which can be offset again profits of a prior year.
For individuals most strategies come from deductions for employment, business or investment expenses.
- Superannuation contributions – an individual can make up to $27,500 of superannuation contributions per year from 2022. In addition, where the full allowance has not be utilized in the prior three years then a catch up can be done. E.g. only $30,000 superannuation was contributed in the last 3 years but $75,000 was the allowable maximum. A top up of $45,000 can be made in the 2022 year and be fully tax deductible.
- Prepayments – prepay interest on loans for rental properties or other investments for up to 12 months and claim the full amount as a tax deduction.
- Capital Gains – if you are planning around the sale of an asset then note that the date you sign a contract is the date of sale not the date of settlement.
- Equipment – for rental or work equipment purchases of less than $300 are fully tax deductible. Note that where a rental property is jointly owned then the asset can be up to $600.
- Donations – feeling charitable? Make a donation before 30 June to a registered charity and get a tax deduction.
DISCLAIMER: This article is intended to provide a general summary only and should not be relied on as a substitute for professional advice.
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