Caution – End of financial year fast approaching
There are a number of time sensitive decisions to make – here are just a few to consider this year.
A key task for EOFY is maximising your super contributions to boost your retirement savings and take advantage of tax benefits. Annual contribution limits for super rose this financial year. From 1 July 2021, the annual concessional contributions cap increased to $27,500 (up from $25,000). This allows you to contribute a bit extra into your super on a before-tax basis.
If you have any unused concessional contribution amounts from previous financial years and your super balance is less than $500,000, you may be able to “carry forward” these amounts to further top up.
If you employ staff, you should also consider their superannuation obligations. Super Guarantee and employee salary sacrifice for in the current financial year must be made prior to June 30 otherwise they become next years deduction.
It is also worth remembering that from 1 July 2022 the Super Guarantee rate is increasing to 10.5% – so make sure your payroll systems are ready to go with that from the first payrun in July.
One of the Government’s key initiatives in response to the pandemic was to allow temporary full expensing of eligible assets purchased for business purposes. This 100% write-off continues until 30 June 2023, but time is running out if you are looking to gain a deduction for the current year.
Another option many businesses consider is to bring forward future year expenditure to reduce current taxable income. Small expense amounts under $1,000 can be claimed without triggering the prepayment rules. For expenditure over this limit, the prepayment rules regulate what may be deducted – specifically that the prepayment relates to a service period not exceeding 12 months.
If incurring an expense now is not on the table, but you have spending that is coming up further down the track, an alternative might be to consider Farm Management Deposits. These accounts allow a deferral of income to a future year and therefore pushes a current tax burden forward to a time when it might be able to be managed better.
To understand how these or the many other EOFY actions might be of benefit, you must first know what you are facing. Get your business financial reporting up to date and work with your accountant to understand the likely tax bill you have ahead. Then you can plan the actions to get the most benefit in the near term.
Before we know it FY2023 will have begun and we will do it all again. How well the next year starts will depend on how you finish off this one. Don’t delay – get your strategies in motion today.
Accounting Services Pty Ltd
ABN 89 103 720 190
Phone: 03 5144 4566
Fax: 03 5144 5403
Financial Planning Pty Ltd
ABN 87 103 720 181
Phone: 03 5144 5207
Fax: 03 5143 3419