As the current financial year draws to a close, it is time for businesses to consider the
various tax planning options and strategies available to them.
Below are examples of tax saving strategies available to small businesses:
Temporary full expensing
Temporary full expensing (TFE) will end on 30 June 2023. Businesses can deduct the entire
cost of eligible depreciable assets if:
- these assets are acquired and first utilised or prepared for use for taxable purposes
- between 7:30 pm AEDT on 6 October 2020 and 30 June 2023
- the asset is utilised and situated within Australia
- the business has an aggregated annual turnover of less than $5 billion; and
- no balancing adjustment event (sale, loss or destruction of the asset) takes place within that year.
Note the following assets are excluded from TFE:
- Buildings and other capital works eligible for a deduction under Division 43 of the Income Tax Assessment Act (ITAA) (1997)
- Trading stock
- Capital Gains Tax (CGT) assets
- Assets not used or situated in Australia
- Assets involved in a balancing adjustment event during the year of purchase and select primary production assets as per the primary production depreciation rules, including water conservation or conveyance facilities, fencing assets, fodder storage assets, and horticultural plants (such as grapevines).
Businesses should review their trade debtors and consider writing off bad debts before 1
July, thereby claiming a deduction for the current financial year. If it is determined that there
is minimal or no likelihood of recovering an amount included in your assessable income from
a debtor, you may be eligible to claim that amount as a tax deduction.
In specific situations, Small Business Entity (SBE) taxpayers with an aggregated annual
turnover below $50 million can claim an immediate deduction for prepaid business
expenses. This applies when the payment covers a service period of 12 months or less and
concludes in the subsequent income year.
You are allowed to claim expenses immediately under this rule, except for excluded
expenses such as:
- Amounts less than $1,000
- Amounts mandated by a court order or law at the Commonwealth, state, or territory level (e.g., fines or penalties)
- Payments for salary or wages (under a service contract) and
- Amounts of a capital, private, or domestic nature (excluding specific research and development amounts).
Examples of prepaid expenses include:
- Airfares and accommodation
- Contract payments
- IT service agreements and
- Conference and major event bookings.
Crystallise capital losses
If taxpayers have already realised capital gains during the year and are considering selling
other capital assets that would result in a capital loss, they may want to think about doing so
before 1 July. By taking this step, you can apply allowable capital losses to your capital
gains, reducing or eliminating your 2022/23 Capital Gains Tax (CGT) liability.
Capital losses must be utilised at the first opportunity. If you have any capital losses in the
current year or unused capital losses from prior years, you must:
- Apply these losses to reduce any capital gains in the current year; and
- Use the earliest losses first.
It is important to note that when considering whether to sell and subsequently realize a
capital loss, factors beyond taxation should be taken into account. The advice of a licensed
financial planner should be sought.
Superannuation is tax deductible when it is paid
Employers can claim income tax deductions for contributions made to a super fund or
retirement savings account (RSA) on behalf of employees in the income year when the
contribution is made. Super contributions are considered made when the payment is
received by the fund or RSA, not when it is paid (Taxation Ruling TR 2010/1).
Employers should be aware that there might be a time gap between an employer’s payment
to their superannuation clearing house and the trustee of a complying super fund receiving
the contribution. Consequently, payments made towards the end of an income year might
not be received by the trustee of a complying super fund or an RSA within the same income
year, which could affect the timing of an employer’s income tax deduction for super
For employers who do not utilise the SBSCH and instead use commercial clearing houses, it
is recommended to make contributions up to 21 days before the financial year’s end for them
to be deductible in 2022/23. For employers who directly contribute to employee super funds,
it is advised to make contributions a few days before the financial year’s end to ensure they
are received before 1 July, making them deductible in the current financial year.
Small business technology investment boost
Small businesses with an aggregated annual turnover of less than $50 million may be
eligible to deduct $1.20 for every dollar spent on depreciating assets that support their digital
adoption strategies, such as portable payment devices, cybersecurity, and cloud-based
platform subscriptions. This boost is applicable to expenses incurred between 7:30 pm on 29
March and 30 June 2023, but can only be claimed in the 2022/23 tax return. An annual
expenditure cap of $100,000 applies.
We note these measures are not yet law.
Small business skills & training boost
Small businesses with an aggregated annual turnover of less than $50 million may now be
eligible to deduct $1.20 for every dollar spent on external training courses for employees,
provided in Australia or online by registered training organisations (RTOs). This is applicable
to expenses incurred from 7:30 pm on 29 March until 30 June 2024, but can only be claimed
in the 2022/23 and 2023/24 tax returns. Unlike the Technology Investment Boost, there is no
cap on the amount that can be claimed.
We note these measures are not yet law.
Need assistance with tax planning & strategies for your business in 2023? Now is the time to book a consultation with the TSP team to ensure there is enough time to get all your tax items ready to claim and plan for 2024.
Contact us on 49 264155 or email us firstname.lastname@example.org.