The Tax Year Ahead – Time to Reset Your Tax Planning Goals
Author: Dean Crossingham
With the start of a new tax year upon us, it’s time to reset your tax planning goals. To assist, we have collated the key tax planning opportunities that are available over the next 12 months.
We have included what we think to be the most important considerations for you as our client. Please keep these matters in mind during the course of the financial year and should you need any further details or assistance, please do not hesitate to contact our team at Stanford Brown Accounting.
As a summary, the topics addressed in this article include:
Tax Deductions for COVID Tests
A reminder that the costs of COVID-19 tests are deductible when you used them to determine whether you can attend or remain at a place of work. As guidance, the ATO provides the following example on its website:
“Mary is a casual employee at a local café. Mary buys a qualifying multipack of COVID-19 tests, which she only uses before commencing a shift if she has any COVID-19 symptoms or has been in contact with a COVID19 case. Her employer doesn’t reimburse her for the cost of the COVID-19 tests.
Mary can claim a deduction for the cost of these COVID-19 tests.”
Annual Contribution Caps
You don’t have to wait until you’re close to retirement to boost your super balance. It’s always the right time to be thinking about making additional contributions to superannuation.
Concessional Contributions (before-tax contributions)
The annual concessional contribution limit (before-tax contributions) for the 2023 financial year is $27,500, regardless of your age. If your employer contributes less than this amount, you are able to personally contribute the remaining amount and claim a deduction in your tax return.
If you are 67 years of age or over, you must meet the work test to claim a personal super contribution deduction.
Please note, if you are 75 years or older your fund may only be able to accept employer contributions (and downsizer contributions).
Unused Concessional Cap Carry Forward Contributions
If you have a total superannuation balance of less than $500,000 on 30 June 2022, you may be eligible to contribute more than the annual $27,500 concessional contribution limit. Under the carry-forward rules, you are entitled to contribute the sum of your unused annual concessional cap amounts dating back to 1 July 2018.
For example, if you have an overall unused concessional cap of $10,000 spanning the last 5 financial years (including this year), you may be eligible to make an additional $10,000 concessional contribution in the 2023 financial year. This may be claimed as a personal deduction in your tax return.
Non-Concessional Contribution Limit (after-tax contributions)
The annual non-concessional contribution limit (after-tax contributions) for the 2023 financial year is $110,000. Please note, you are only eligible to make non-concessional contributions if you are under 75 years of age on 1 July 2022 and your super balance is less than $1.7m on 30 June 2022.
If you are between 67 and 74 years of age, from 1 July 2022 you no longer need to satisfy the work test in order to make a non-concessional contribution.
Non-Concessional Bring-Forward Contributions
If you are under 75 years of age on 1 July 2022 (increased from 67 years of age) and depending on your total super balance at 30 June 2022, you may be eligible to contribute greater than your $110,000 non-concessional cap in the 2023 financial year.
This arrangement can allow you to bring forward the equivalent of up to 2 years of your annual cap from future years, to contribute now even if you are over 75 years in those future years.
Depending on your circumstances, you may be eligible to contribute up to $330,000 in the 2023 financial year. Please contact us to specifically discuss your bring forward eligibility.
Super Guarantee Opt-Out for High Income Earners with Multiple Employers
The superannuation guarantee opt-out is applicable to you if you have multiple, concurrent employers during the 2023 financial year, and the sum of your employers’ super guarantee payments are expected to exceed your annual concessional contribution limit of $27,500.
To save you the time and cost of attending to an excess concessional super contributions assessment after year end, you can instead apply to opt-out from receiving superannuation guarantee payments from one or more employers. To become eligible, you must obtain an exemption certificate from the ATO.
From 1 July 2022, if you are 60 years old or older and sell your home, you may be entitled to contribute up to $300,000 of the sale proceeds into superannuation. A downsizer contribution doesn’t count towards any of your contribution caps.
Prior to 1 July 2022, you could only make a Downsizer Contribution if you were 65 years of age or older.
Business Tax Initiatives
There are a number of significant tax initiatives available during the 2023 financial year for those carrying on business.
Technology Investment Boost
The Federal Budget 2022–23 proposed an additional 20% deduction for eligible expenditure on digital technology, capped at $100,000 per annum for businesses with an aggregated turnover of less than $50m.
Business expenditure that may be applicable includes business expenses and depreciating assets that support digital adoption such as portable payment devices, cyber security systems or subscriptions to cloud based services.
As this measure has not yet been legislated, further details should be made available by the ATO in due course.
Skills and Training Boost
The Federal Budget 2022–23 also proposed an additional 20% deduction for eligible expenditure on external training courses available for businesses with an aggregated turnover of less than $50m.
As this measure have also not yet been legislated, further details should be made available by the ATO in due course.
Temporary Full Expensing of Business Assets
As the name suggests, this measure enables businesses to fully expense any depreciating assets acquired before 30 June 2023.
To fully expense a depreciating asset in the 2023 financial year, the asset must be first held by 30 June 2023 and first used or installed ready for use also by 30 June 2023.
You Can Still Carry-Back your Company Losses
Continuing on from prior years, a company is able to carry-back a tax loss from the 2023 financial year and apply it against its taxable income as far back as the 2019 financial year.
This allows income tax losses from the 2023 financial year to be carried back for a refund of tax paid in respect of the 2019 to 2022 financial years.
Family Trusts in the ATO Spotlight
The ATO has continued it focus on arrangements where trust structures are used to reduce a family’s overall tax liability. Although such attention from the ATO is not unprecedented, the spotlight has now been shone directly on arrangements whereby adult children become entitled to trust income at a lower tax rate but do not receive the benefit of that entitlement.
As has been the case in executing your income distribution resolutions for the 2022 financial year, additional considerations around family trust planning will continue to be had into the 2023 financial year as further statements are released by the ATO.
NSW Stamp Duty Changes
The NSW Government has announced that first home buyers purchasing properties for up to $1.5m will be able to choose to pay an annual property tax instead of stamp duty. The property tax will only be payable by first home buyers who choose it.
The Government intends that legislation to establish the property tax will be introduced into the NSW Parliament during the second half of 2022. Eligible first home buyers who sign a purchase contract on or after 16 January 2023 will be eligible to opt into the property tax and will not be required to pay stamp duty in order to complete their transaction.
Existing stamp duty concessions for first home buyers are available for purchases of up to $800,000, and these concessions will continue.
The ATO’s Key Focus Areas
Last but not least, the ATO has announced four key focus areas for its compliance activities regarding tax return lodgements for the year ended 30 June 2022.
The ATO will be focusing on:
- record-keeping – you must have a record to prove your deduction,
- work-related expenses – you must have spent the money yourself and weren’t reimbursed,
- rental property deductions – if the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income, and
- capital gains from crypto assets, property and shares – If you dispose of an asset such as property, shares or crypto assets, including non-fungible tokens, (NFTs) you will need to calculate a capital gain or capital loss and record it in your tax return.
Our office will be closely engaging with our clients in preparing 2022 tax returns to ensure all ATO requirements are satisfied.
Although the above guide is general in nature and is by no means exhaustive, we hope it assists you in setting a clear tax-path into the new financial year.
If you have any enquiries or would like to discuss your circumstances in further detail, please do not hesitate to contact our team at Stanford Brown Accounting.