Investors and Small Business
There are important issues to be aware of regarding your contributions to superannuation this year. These will affect all those under 75 years of age making contributions to their superannuation for the 2022/23 financial year.
- Claim a tax deduction on your after-tax contributions. From July 2017, most individuals under 75 may claim a tax deduction for superannuation contributions made from their after-tax savings. Talk to us and we can help identify whether you satisfy the required conditions.
- Your concessional contributions cap is $27,500. Concessional contributions are taxed at 15% instead of your marginal tax rate. The most common concessional contributions are amounts contributed from your pre-tax income (employer SCG and salary sacrifice) and personal contributions claimed as a tax deduction (see point 1). Amounts that exceed this cap lose the concessional tax status and may be subject to excess charges. You must complete a ‘Notice of intent to claim or vary a deduction for personal super contributions’ ATO form and submit it with your super fund after June 30 of the relevant financial year, and before your Individual Tax Returns are completed for that relevant financial year.
- You can increase your Concessional Cap. Starting from 1 July 2018, if your concessional contributions don’t meet the full $27,500 for the year the unused amounts can be carried forward for up to five years. This means you will be able to contribute more than the $27,500 cap in later years.
- Your Non-concessional Cap is $110,000. Commonly, Non-concessional contributions consist of amounts from your after-tax income paid by your employer, yourself (if you are not claiming a deduction), and contributions from your spouse. However, be aware that if your ‘Total Superannuation Balance’ is greater than or equal to $1.6 million your non-concessional cap will be NIL.
- If you’re under 67, you can bring forward your Non-concessional Cap. This rule allows individuals to make up to $320,000 in non-concessional contributions in a single year by ‘bringing forward’ your cap from later years. By bringing forward your cap like this then restricts your non-concessional contributions over the following 2 years. This rule is particularly beneficial for those who have received a big inheritance or sold a high-value asset (like rental property). Be aware that there are limitations on this rule if your total superannuation balance is nearing $1.7m.
Sacrifice Your Salary to Super
If your marginal tax rate is more than 15%, salary sacrifice may be a great way to boost your superannuation and pay less tax.
By putting pre-tax salary into super rather than having it taxed as normal income at your marginal rate you may save tax.
This can be especially beneficial for employees and business owners approaching retirement age.
Motor Vehicle Logbook
If this is the first year using the logbook method, you must keep a logbook for 12 continuous weeks during this financial year. This 12-week period needs to represent your general travel for the entire year.
If you started to use your car for less than 12 weeks before the end of the financial year, you can continue the logbook into the next year so that it covers 12 continuous weeks.
Work Related Expenses
We often see individuals paying for work related expenses they weren’t aware they can claim themselves, particularly those relating to work related travel and accommodation expenses.
If you do a lot of work-related travel, it may be beneficial to receive part of your income as a travel allowance, which can allow you to claim travel and accommodation expenses up to the reasonable limit.
Don’t forget to keep any receipts for work-related expenses such as uniforms, training courses and learning materials, as these may be deductible for tax purposes.
Realise Capital Losses
Tax is normally payable on any realised capital gains. You might consider selling any non-performing investments you hold before 30 June to crystallise a capital loss and reduce or even eliminate any potential capital gains tax liability. Unused capital losses can be carried forward to offset future capital gains.
In addition, we hold a unique strategy to reduce capital gains to zero if implemented prior to 30 June 2023.
So, if you have sold a property, shares, collectible, or any other asset which might attract capital gains tax, contact us immediately to implement a solution.
Possibly your greatest financial asset is your ability to earn an income. Income protection insurance replaces up to 70% of your salary if you are unable to work due to sickness or an accident.
The insurance premium is generally tax deductible, plus you get the benefit of protecting you and/or your family’s lifestyle if you cannot work due to sickness or an accident. It’s a small price to pay for peace of mind.
Add to this the benefits of key person insurance where you are the key earner of revenue for your practice. This may be the difference between keeping your doors open or closing the business!
Personal Services Income (PSI)
The PSI regime ascribes specific tests and tax rules designed to determine if a contractor or consultant is indeed genuinely such and will not otherwise be defined an employee. This has direct effect upon which amounts are to be included in your assessable income and may limit the deductions you can claim.
The effect of breaching these rules and tests may result in significant penalties which compound over time should multiple years of breach occur. We will work with you to ensure you always comply with the stringent rules either as a contractor or if engaging contractor staff.
Defer Investment Income & Capital Gains
If practical, arrange for the receipt of Investment Income (e.g. interest on term deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2023.
The Contract Date is generally the key date for working out when a sale occurred, not the settlement date!
Note: per the capital gains solution above, where you have realised the sale (by contract date) of a capital asset in this financial year, contact us immediately for your tax solution.
R & D Tax Incentive
The Research and Development (R&D) Tax Incentive is the Government’s principal way of encouraging companies to undertake research and development investment.
The program provides tax offsets for eligible entities (essentially Australian companies and foreign companies with an Australian permanent establishment) that spend $20,000 or more per annum on experimental R&D activities subject to strict conditions.
The R&D Tax Incentive provides companies with a rebate of up to 43.5% of eligible expenditure. This a proven windfall for smart business.
Simpler Depreciation for small business
You can choose to use the simplified depreciation rules if you have a small business with an aggregated turnover (the total normal income of your business and that of any associated businesses) of less than $10m.
Under these rules, you can:
- an instant asset write-off for assets that cost less than the relevant threshold (which is supplemented with the temporary full expensing from 7.30pm AEDT on 6 October 2020 to 30 June 2023)
- a general small business pool, which has simplified calculations to work out the depreciation deduction.
There are several assets excluded from the simplified depreciation rules. Please speak to us for clarification.
Repairs, Maintenance and Replacement Expenses
You can claim a deduction for repairs and maintenance to machinery, tools, or premises you use to produce business income, if the expenses are not capital expenses. You can claim the cost of allowable repairs and maintenance, including:
- conditioning gutters
- maintaining plumbing
- repairing electrical appliances
- mending leaks
- replacing broken parts of fences or broken glass in windows
- repairing machinery.
To repair something means to fix defects, including renewing parts. It does not include total reconstruction. You do not have to own the property or item that is repaired in order to claim a deduction.
Small Business CGT Concessions
If you operate a small business and are considering disposing of an active asset, or an asset held ready for use you may be able to access the small business capital gains tax concessions.
Please contact us for advice as you may be able to make significant contributions to your superannuation without being constrained by the normal concessional and non-concessional caps.
There are a few key points regarding record keeping for property investors.
- Depreciation report – investors can claim depreciation for the declining value of assets.
- Records of any income earned from the property, e.g., rent
- Records of any expenses related to the property, e.g., insurance, interest paid, bank fees, maintenance costs, capital works costs, pest control, rates etc.
- Record of contract of purchase
Increasing the Instant Asset Write-Off
Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.
Instant asset write-off can be used for:
- multiple assets if the cost of each individual asset is less than the relevant threshold
- new and second-hand assets.
For eligible businesses led than $10 million aggregated turnover your write-off threshold is $150,000
Temporary Full Expensing
Temporary full expensing supports businesses and encourages investment, as eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use for a taxable purpose.
You may be eligible for temporary full expensing if you are one of the following:
- a business with an aggregated turnover of less than $5 billion
- a corporate tax entity that meets the alternative income test.
Advice Warning: All content referencing taxation matters is current as 01 June 2023 and accurate to the best of our understanding. References to superannuation and the ability to make contributions is general information and not personal advice. Your financial needs, goals and circumstances have not been taken into consideration. Accordingly, you should consider if the advice is right for you. We recommend that you seek tailored, personal advice. Holzworth Partners is able to facilitate this advice via a specific arrangement should you wish.