Published 31 May 2023
As the end of the financial year approaches, now is the time to implement a proactive tax strategy to reduce your overall tax bill and ensure the maximum refund.
Tax is complicated, so a knowledgeable accountant is vital in the lead up to 30 June in order to take advantage of all available options to minimise your tax liability.
The 3 key questions to ask now are outlined below.
The $150,000 Instant Asset Write-Off (IAW) scheme was introduced in 2015, and, during the Covid-19 pandemic, was extended to the end of 2020, after which it dropped to $1,000 and made way for the temporary Full Expensing Scheme (FES). The FES is due to end on 30 June 2023 and allows eligible businesses to deduct the full cost of eligible depreciable assets of any value in the year they are first held, and first used or installed, from 6 October 2020 to 30 June 2023.
If a business doesn’t need the immediate and full deduction, it may be better to depreciate the asset over time.
Maximising the advantages of our superannuation system is beneficial, and there is a range of options at your fingertips: additional contributions, co-contributions, tax offsets and downsizer contributions.
Concessional contributions are before-tax contributions made into your superannuation fund from sources such as employer or your own personal contributions.These are taxed at 15%, although high income earners are subject to an additional (Division 293) tax. The concessional contributions cap is a limit on the total amount of pre-tax contributions you can make in a financial year. Any contributions above this cap will incur additional tax.
The concessional contributions cap for this financial year is $27,500, which includes the employer contributions; however, under certain circumstances you may be able to increase your contributions using the carry-forward rule (further information below).
Non-concessional superannuation contributions are made from your after-tax income and the cap for this financial year is $110,000. Furthermore, if you are under 75 years of age, you can bring forward up to three years of contributions, effectively allowing you to contribute up to $330,000 in one year. However, individuals whose total superannuation balance is more than $1.7 million are ineligible to make additional after-tax superannuation contributions.
It's important to note that exceeding the after-tax superannuation contribution cap can result in additional taxes and penalties. Excess contributions are taxed at the highest marginal tax rate and may also incur an extra 15% tax.
You may be able to take advantage of any unused concessional contribution cap from previous financial years with the carry-forward rule. This enables individuals to add to their superannuation balance above the annual contribution cap without having to pay extra tax.
Any unused amount of the $27,500 cap from the three previous financial years can be carried forward and used in the next financial year. Unused cap amounts are available for a maximum of 5 years before expiry.
It's important to note that eligibility for the carry-forward rule requires the individual to have a total superannuation balance of less than $500,000 as at the end of the previous financial year. Any amount contributed that exceeds the concessional contributions cap counts towards the individual's non-concessional contributions cap, which is $110,000 for the current financial year.