As we approach the end of the current financial year, we would like to bring your attention to the following tax planning matters, some of which need to be in place by 30 June 2023.

1. Superannuation Concessional Contributions (deductible)

Concessional contributions which include employer contributions, contributions made under a salary sacrifice arrangement and personal contributions claimed as a tax deduction
is subject to an annual cap of $27,500.

Your concessional contributions cap can be increased if you meet all these conditions:

• You have a total super balance of less than $500,000 at the end of 30 June of the previous financial year
• You make concessional contributions in the financial year that exceed your general concessional contributions cap
• You have unused concessional contributions cap amounts from up to 5 previous years (but not before 2018–19) *

If you meet these conditions, you can make concessional contributions above the general cap without paying extra tax.

*The carry forward arrangements involve accessing unused concessional cap amounts from previous years. To use your unused cap amounts you need to meet 2 conditions:

• Your total super balance at the end of 30 June of the previous financial year is less than $500,000
• you made concessional contributions in the financial year that exceeded your general concessional contributions cap

The amount of unused cap amounts you can carry forward depends on the amount you have contributed in previous years (beginning from 2018–19). You can use caps from up to 5 previous financial years. he oldest available unused cap amounts are used first. Unused cap amounts are available for a maximum of 5 years and will expire after this. So, for example, unused cap from the 2018–19 year will expire in the 2023-24 year.

For the purpose of getting a tax deduction, ensure that the decided amount of superannuation is paid by the company one week before the end of the financial year to allow sufficient time for the superannuation funds (particularly industry funds) to receipt the monies by Friday 30 June 2023. If the monies are not received by the applicable superannuation funds by 30 June 2023, a tax deduction is denied until the following year. Please note that if the funds are received on 1 July 2023 onwards, the amount receipted will be included in the following years contribution cap (23/24) rather than the current year (22/23).

Please note that tax deductions are only available only for actual superannuation payments made, rather than payments that are due. To be eligible to claim a deduction, payments must be made on time (ie 28 days after the end of the relevant quarter). If a payment is made after the due date, the tax deduction is denied.

2. Superannuation Non-Concessional Contributions (Non-deductible)

The non-concessional contributions cap (NCC) for 22/23 year is $110,000. The cap will be nil for anyone who has a total superannuation balance greater than or equal to $1.7 million.

Non-concessional contributions are made from after tax income and not taxed by a superannuation fund. Non-concessional contributions include personal contributions for
which you do not claim an income tax deduction (eg. undeducted contributions).

From 1 July 2022, taxpayers under 75 years old at any time in a financial year, can make non concessional contributions of up to 3 times their annual non-concessional contributions cap in that financial year. (The work test was removed for individuals aged 67-74).

If you are over 75 years old, your fund may only be able to accept employer contributions or downsizer contributions.

From 1 July 2017, your total super balance affects:

• The non-concessional contributions cap amount that you can bring forward
• Whether you have a 2 year or 3 year bring forward period.

For the 2022–23 financial year, in order to access the non-concessional bring-forward arrangement you must meet all these conditions:

• You are under 75 years old for at least one day during the triggering year (the first year)
• You contribute more than the annual cap ($110,000 from 2021–22)
• You are not already in an active bring-forward period
• You have a total super balance at the end of 30 June of the previous financial year that is less than the general transfer balance cap ($1.7 million from 2021–22)

The table below sets out NCC caps where the bring-forward rule is triggered in the 2022/23 year:

Total super balance on 30 June 2022 (previous year)	NCC Caps for the Bring-forward period	Bring-forward period
Less than $1.48 million	$330,000	3 years
$1.48 million to less than $1.59 million	$220,000	2 years
$1.59 million to less than $1.7 million	$110,000	general NCC cap (ie $110,000)
Over $1.7 million	Nil	Nil

If you exceed the non-concessional contributions cap, you will have two options:

• Withdraw the excess amount, plus 85% of the associated earnings of the excess contributions, or
• Pay excess contributions tax equal to the top individual tax rate, on the excess amount.

3. Superannuation for Spouse

Taxpayers that make non-concessional contributions for their low-income earning (earning under $40,000 p.a.) or non-working spouse are eligible for a superannuation spouse contribution tax offset.

Tax offset amounts for the 2022/23 year are as per the table below:

Spouse assessable income (SAI)	Maximum rebatable contributions (MRC)	Maximum offset
$0 – $37,000	$3,000	$540
$37,001 – $39,999	$3000 – (SAI – $37000)	MRC x 18%
Over $40,000	Nil	Nil

The offset is not available if your spouse exceeds their non-concessional contributions cap for the 2022/23 year or their total super balance is over the general transfer balance cap of $1.7 million (for the 2022/23 year).

4. Small Business Entity Concessions

A) Company tax rate

A company must be a base rate entity to be eligible for the lower 25% company tax rate. A company is a base rate entity if both of the following apply:

• The company has a turnover less than the turnover threshold of $50 million for the 2022-23 year
• 80% or less of the company’s assessable income is base rate entity passive income (such as interest, dividends, rent, royalties and net capital gain)

If your business is a company, your aggregated turnover includes your annual turnover, plus the annual turnover of all the entities that are connected or affiliated with your company, which may be based in Australia or overseas.

Tax rate for private companies that are not base rate entities remains at 30%.

B) Tax Depreciation incentives

Temporary full expensing – ending on 30 June 2023

Businesses with an aggregated turnover of less than $5 billion can immediately deduct the business portion of the cost of eligible new depreciation assets. The eligible asset must be
first held, and first used or installed ready for use for a taxable purpose, between 6 October 2020 and 30 June 2023.

The following are excluded from eligible assets:

• Assets allocated to a low value pool or a software development pool
• Certain primary production assets
• Buildings and other capital works for which you can deducted under Div 43
• Assets that are not located in Australia or are not used principally in Australia for the purpose of carrying on a business

From 7.30pm AEDT on 6 October 2020 until 30 June 2023, temporary full expensing allows a deduction for:

• Business portion of cost of new eligible depreciating assets for businesses with an aggregated turnover under $5 billion
• Business portion of the cost of eligible second-hand assets for businesses with an aggregated turnover under $50 million
• Eligible assets of small business entities using the simplified depreciation rules and the balance of their small business pool

Businesses should consider bringing forward certain expenses to claim as a tax deduction in the year ending 30 June 2023 as this measure will be ending on 30 June 2023.

From 1 July 2023:

• Medium and large businesses (aggregated turnover of $10m or more) will have no immediate deductions available (except for low cost business assets costing up to $100 inc GST)
• Small business entities (aggrevated turnover of less than $10m) will be able to apply the Instant asset write off, temporarily increased to $20,000 for eligible depreciable assets first used or installed ready for use between 1 July 2023 and 30 June 2024. For assets costing $20,000 or more, businesses can add it to the small business pool and depreciate at 15% for the first year, and 30% each year thereafter

Depreciation limits for cars

The maximum value that can be used for calculating depreciation the business use of a car first used, or leased in the financial year, for the 2022/23 year is $64,741 (increasing to $68,108 for the 2023-24 year).

If you purchase a car and the price is more than the car limit, the maximum GST credit you can claim is 1/11th of the car limit will be $5,885 in the 2022/23 year ($6,191 in the 2023-24 year).

Businesses are required to keep a record of asset acquisitions and disposals during the year showing the cost price or disposal value and relevant dates. Acquisition date refers to the date an item of plant or equipment was first installed ready for use, and not necessarily when paid for. Ensure that plant and equipment is reviewed to determine if any should be scrapped (and advise us of the details).

We recommend that you review your company’s asset register to write off any obsolete or destroyed items before 30 June 2023.

5. Prepayments

Business prepayments, is expenditure incurred for things to be done (in whole or part) in a later income year. Prepaid expenses are deductible over the eligible service period rather
than being immediately deductible.

Prepaid expenses may be immediately deductible if:

• It is excluded expenditure
• If the payment is incurred for an eligible service period not exceeding 12 months and the eligible service period ends in the next income year (ie by 30 June 2024)
• It relates to a pre-review of business taxation (RBT) obligation

Excluded expenditure includes:

• Amounts less than $1,000
• Amounts required to be incurred by a court order or law of the Commonwealth, State or Territory
• Payments of salary or wages
• Amounts that are capital, private or domestic in nature

If applicable, please provide us with a list of all prepayments in excess of $1,000 and include information such as date and nature of payment, period of service and amount paid.

Businesses with an aggregated turnover below $50 million should review their expenses and, subject to cash availability, consider bringing forward any payments which are currently being paid monthly such as subscriptions and insurances.

6. Bad Debts

All non-recoverable trade debtors should be written off by 30 June 2023. We recommend a review of trade debtors to be conducted to identify any amounts that are considered uncollectable and written off prior to 30 June 2023.

Where a bad debt is written off and been determined that it is unlikely to be recovered through any reasonable and commercial attempts before 30 June 2023, you may claim a tax deduction for it in the 2023 financial year. Entries should be made in the debtor’s ledger, including a directors’ resolution drawn up or evidence of written approval of the directors.

As the company is registered for GST on an accruals basis, there may be an adjustment required to the company’s Business Activity Statement (BAS), which can be made in the June 2023 quarter BAS or at a later point by amending a prior BAS.

7. Computer Software

For software purchased during the year, please identify if anticipated usage will be less than 2½ years and if so the estimated months of use.

8. Superannuation Guarantee Charge (SGC)

We recommend that you review the payroll records, employee by employee, month by month, to ensure that the appropriate percentage of ordinary time earnings has been paid as
superannuation contributions to a complying superannuation fund or industry fund.

We recommend that superannuation contributions are made the week prior to Friday 30 June 2023 in order to ensure that the contributions are received by the funds by 30 June 2023.

Superannuation is deductible when paid. Therefore, to claim superannuation as a tax deduction for the June quarter, the business must ensure that this superannuation is paid before 30 June 2023.

For the purposes of SGC, the deadline for contributions for the 2022/23 year is 28 July 2023. The rate for all employees is 10.5%.

From 1 July 2023, the SG rate is set to increase by 0.5% from 10.5% to 11% for all employees. Please note that the SG rate is based on date of payment, and not when the work was done.

The SG percentage will increase to 12% by 1 July 2025 with increases of 0.5% scheduled each financial year through to 1 July 2025.

Please also note that the $450 threshold for super guarantee was removed from 1 July 2022. This means that SG will apply to all eligible employees over 18 years old regardless of their monthly pay.

Employers must pay super guarantee on payments made to employees under 18 years old if they work for you more than 30 hours a week (regardless of how much they are paid).

9. Substantiation and Record-Keeping

Ensure that all logbooks, travel diaries and odometer records are completed where applicable in respect of the 2022/23 year. Please note that log books are required to be kept for at least 12 weeks in the first year and then every five years.

New log books are required where circumstances have changed and the previous determined rate (on prior log book) is no longer representative of the business/private usage.

10. Entertainment

Please ensure your meal entertainment is dissected between:

• non-deductible customer entertainment and
• deductible but subject to FBT, such as employee entertainment and
• deductible but free of FBT, such as employee sustenance while travelling on business
  or in an in-house dining facility.

11. Capital Gains

If you have capital losses (current year or brought forward) or current year capital gains, consideration may be given to advancing future gains or losses to offset the position.

Reminder that non-residents are not entitled to the CGT discount or main residence exemption.

Also, a reminder that switching from one crypto asset to another is a CGT event.

12. Loans to shareholders/associates

Any loans or advances to shareholders or their associates, that are not fully repaid to the company by the lodgement time of the company’s income tax return for the relevant year will need to be documented, and will require repayments according to the repayment plan.

13. Stock on hand

Businesses that own stock should ensure that a stocktake is completed at 30 June 2023. Stock can be valued at cost, market value or replacement value, whichever is the lower.

For tax purposes, most businesses that trade stock are required to do an annual stocktake as at 30 June. It is important to plan and execute a stocktake in a way which gives a reliable and accurate stock figure. As part of stocktake, you should identify any old, obsolete or damaged stock which can be written off or written down.

14. Year End Single Touch Payroll (STP) finalisation

Employers should have procedures in place to ensure they are able to lodge the STP year end finalisation report by 14 July 2023. This will allow their employees to complete their tax returns.

Please note that where fringe benefits are provided to employees and the taxable value of benefit provided exceeds $2,000, the grossed up value of the fringe benefit will be recorded as reportable fringe benefits in the employees payment summary.

15. Loss carry back tax offset

The loss carry back (LCB) provisions allow corporate tax entities with an aggregated turnover of less than $5 billion to offset tax losses made from 2019-20 to 2022-23 to be carried back against income tax liabilities for the 2018-19 to 2021-22 years.

The loss carry back tax offset may be available to an eligible company in its 2023 tax return where the company:

• carried on a business and its aggregated turnover did not exceed $5 billion in the loss year
• made a tax loss in the 2023 income year
• had an income tax liability for the 2019, 2020, 2021 or 2022 income year
• has a surplus of franking credits as at 30 June 2023
• has met its tax return lodgement obligations (for the current year and previous five income years)

The choice to claim the LCB tax offset is an alternative to carrying tax losses forward. The entity will have to make a choice to claim the LCB tax offset in the approved form by the
day the entity lodges its income tax return for the 2023 year (or a later day the Commissioner allows).

An entity choosing to carry back losses and claim a refundable tax offset, may result in a cash refund, reduced tax liabilities or a reduction of debt owing to the ATO.

17. Single Touch Payroll (STP) Phase 2 reporting

STP phase 2 reporting is now compulsory and supported by all payroll providers (eg Xero MYOB etc). All employers must now use STP approved software to share payroll/superannuation information with the ATO.

The ATO can apply penalties to employers that do not comply with STP2 reporting requirements.

18. Trust distributions

Discretionary trusts are required to prepare and execute distribution minutes prior to 30 June for each financial year. The minutes specify how the income of the trust will be distributed to beneficiaries for the relevant financial year. Minutes must be prepared in accordance with the trust deed. For the distribution minutes to be effective, they must be prepared and executed by 30 June 2023.

19. Working from home deductions

Record keeping requirements and also methods used to claim working from home deductions have changed in the 22/23 year, now that COVID is over and most employees have returned to their respective workplaces.

From the 2022-23 year onwards, there are two methods to calculate working from home deductions:

• revised fixed rate method (NEW)
• actual cost method (unchanged from the previous year)

A) Revised fixed rate method

The revised fixed rate method has increased to 67c per hour worked from home (52 cents in the 2021-22 year). There is no requirement an employee to have a dedicated home office area to be able to claim under this method.

The revised fixed rate covers additional expenses incurred (from working from home) in relation to:

• Electricity/gas
• Internet usage
• Mobile phone/home phone
• Stationery and computer consumables

However, depreciation for assets used in home office (eg desk, chair, computer) are not included in the revised rate, and can be claimed separately. You will need to keep records for any equipment purchased to work from home.

The revised rate also does not include any occupancy expenses (eg rent), however, occupancy expenses are not usually deductible for the typical employee working from home.

The ATO has also changed record-keeping requirements to use the revised fixed rate. If you plan to use the revised fixed rate method to claim home office deductions in the 2022-23 year, you will need to have:

• From 1 July 2022 to 28 February 2023, a record which is representative of the hours you worked from home (for example a 4 week diary)
• From 1 March 2023 to 30 June 2023, a record of the total number of hours you worked at home (eg timesheet, diary, roster), and also evidence they paid for each of the expenses incurred that are covered by this rate (see above).

B) Actual Cost method

To be eligible to use the actual cost method, you must meet the following criteria:

• incur additional running expenses as a result of working from home
• keep records/written evidence which shows the amount you spend on expenses or depreciating assets used while working from home

Additional running expenses you may incur include:

• Depreciation for assets used such as home office furniture
• Electricity/gas
• Home phone, mobile, internet
• Stationery, computer consumables
• Cleaning costs of your dedicated home office area

You can’t claim running expenses if the area you work from is shared by others while you are working from home.

To claim your work from home expenses using actual costs, you must keep either a record showing the number of actual hours you worked from home in the whole year (for example timesheet or spreadsheet) or a continuous 4 week period that represents your usual pattern of working at home.

If you wish to discuss any of the above matters, please contact our office.
Should you have any questions, please feel free to contact our office on 0402 277282 (Carl) and
0412 404128 (Tina).
Yours faithfully
CARL DUMBRELL & TINA LOH
Partners – CDTL Accountants & Advisors