With only a week left until the end of the financial year, now is the perfect time to take action and make the most of available tax benefits.
As the deadline approaches, it’s crucial to be proactive and ensure you’ve taken advantage of all the deductions and strategies available to you.
Here are some reminders as the financial year draws to a close:
Stocktake
Businesses engaged in buying and selling stock generally need to conduct a stocktake at the end of each financial year. The value of stock is factored into the calculation of your business’s taxable income. You can utilise the simplified trading stock rules if your business has an aggregated turnover below $10 million. Under these rules, you can choose not to conduct a stocktake for tax purposes if the difference in value between the opening and estimated closing value of your trading stock at the end of the year is less than $5,000. However, you must record the method used to calculate the value of the trading stock on hand. If a stocktake is necessary, there are three methods to value trading stock: cost price, market selling value, and replacement value. Different valuation methods can be chosen for each stock class or individual items, providing an opportunity to minimize the trading stock adjustment at year-end.
Reportable fringe benefits
If you have provided fringe benefits to your employees totalling more than $2,000, it is necessary to report the FBT grossed-up amount. This is known as the “Reportable Fringe Benefit Amount” (RFBA), and it must be updated for each employee as part of your Single Touch Payroll finalisation procedure for 2023.
Workcover/ Worksafe
Complete and lodge the Annual Reconciliation with your WorkCover/WorkSafe insurer by the due date.
Your WorkCover/WorkSafe insurer will send an annual reconciliation to all registered employers at the end of the financial year. In addition to normal salaries and wages, the reconciliation should include fringe benefits based on the taxable value (without grossing up), employer contributions to superannuation, and certain contractor or sub-contractor fees. Upon processing the reconciliation, your WorkCover/WorkSafe insurer will issue a final assessment or a refund based on the payments made throughout the year.
Goods and service tax (GST)
Complete the annual GST reconciliations and ensure that you have all required tax invoices and supporting documents.
Perform a reconciliation of GST as at 30 June 2023 to identify any under or over-payment during the tax year. If a discrepancy arises, adjustments can be made on subsequent Business Activity Statements (BAS) to rectify the error. However, there are limitations on the adjustments that can be made through this method. Ensure that the income declared on your BAS reconciles with the income declared on your income tax returns. Additionally, it is essential to retain all complying Tax Invoices for a minimum of 5 years to substantiate Input Tax Credit claims.
Trust distribution resolutions
Trustees (or directors of a trustee company) must consider and decide on the distributions they intend to make by 30 June 2023 at the latest. These decisions should be documented in writing by the same date.
Trustee resolutions need to be in place to be able to distribute trust income for the 2023 financial year to beneficiaries and avoid being taxed at default tax rates. Recent ATO and legal viewpoint changes mean that you need to consider your distributions to adult children and that all named beneficiaries in your Trust Deeds have been properly considered.
Read more: Save tax with a Family Trust
Div 7A agreement minimum repayments
When a company loans funds to a shareholder or an associate of a shareholder, a Loan Agreement must be established, and minimum annual repayments for the loan should be made before 30 June each year. Failure to comply with these requirements will result in the loan amounts being treated as deemed unfranked dividends, taxable at the taxpayer’s marginal tax rate, potentially as high as 47%.
ATO Audit Activity
Please be aware that the ATO and State Revenue Offices are increasing their audit activities. There has been a rise in audit activity for PAYG Withholding, Payroll Tax, WorkCover, GST, Division 7A loan accounts, and Trust distributions. If you are concerned about your ability to satisfy an audit, our KMT advisers can review your records and record-keeping procedures.
Other ways to optimise your business tax for 2023:
- Write-off Bad Debts in your computer system before 30 June 2023.
- Write-off any trading stock that is damaged or obsolete.
- Review your Asset Register and scrap any obsolete plant and equipment.
- Pay for marketing materials, repairs, consumables, office stationery, and donations before 30 June 2023.
- Ensure employee superannuation contributions are made and received by your employees’ superannuation fund/s by 30 June 2023 to allow a tax deduction this 2023 financial year.
- Realise any capital losses you have before 30 June 2023 to offset against any capital gains you may have made.
- Pass a properly authorised resolution to commit to the payment of a Director’s Fee or employee bonus before 30 June 2023, even if it paid within a reasonable time after 30 June 2023.
- Raise management fees between entities by 30 June 2023 and ensure that you have a signed Management Fees Agreement / Services Agreement in place to support the transaction and to ensure they are commercially reasonable.
- Seek professional advice: Engaging the services of a qualified accountant or tax adviser can be highly beneficial, especially as the financial year-end approaches. At KMT Partners, we can provide expert guidance tailored to your specific circumstances, ensuring you make informed decisions and optimise your tax position.
Remember, time is of the essence, so don’t delay taking action. By being proactive and strategic in the final week of the financial year, you can potentially maximise your deductions, minimise your tax liability, and set yourself up for a stronger financial position in the coming year.
Take advantage of this final week and make the most of the available opportunities. Ensure you’re well-prepared for the end of the financial year and set yourself up for success in the year ahead.
Learn more strategies to optimise your tax position here.
Contact KMT accountants now if you need assistance with your tax!
This is general advice only and does not take into account your financial circumstances, needs and objectives. Before making any decision based on this document, you should assess your own circumstances or seek tax advice from a qualified accountant at KMT Partners. Information is current at the date of issue and may change.
