As the financial year comes to a close, now is the time to visit your accountant or tax advisor to discuss tax planning for your business in 2023.
At the end of every financial year, business owners should be reviewing and measuring their performance in comparison to the previous year.
By regularly reviewing this information, a greater understanding of the basis for tax planning and budgeting can be determined more accurately. While tax planning is a process that should be continuously managed over the year for better and more adaptive results, it’s never too late to start.
This is especially relevant now as business owners need to understand the business’s current ability to move forward in the current economic circumstances and plan for the future. Otherwise, past mistakes could be repeated in the future.
Here are some general tax tips that business owners can take with them into the 2023-2024 financial year.
Timing of Expenses
An expense is an allowable deduction that is necessarily incurred in carrying on a business or for the purpose of gaining or producing assessable income. Expenses should be recognized in the same period as the revenues to which they relate when it comes to lodging your tax.
Most prepayments that are made now are not deductible until the period to which they relate (though some exceptions may apply). Small businesses and individuals may be able to deduct 12 months of prepayments in the year paid, as an expense.
Payments to Workers
Deductions on payments to workers (whether they are employees, contractors, directors, etc.) can only be claimed when the business has complied with its PAYG withholding and reporting obligations.
Family businesses or businesses that employ family members should be especially concerned with preparing for this, as they have additional obligations to ensure that they are correctly paying the right amount of tax. If they have received wages or been given allowances below the tax-free threshold, they will need to be registered as a withholder and a PAYG summary provided.
Your business should already be in the position to process payments through Single Touch Payroll, as it was made mandatory for all businesses to use from 1 July 2021.
Bad Debts
Conduct a review of the debts that may be affecting your business. If any of these are unlikely to be recovered, the best course may be to write them off as ‘bad’ prior to the end of the financial year. You can speak with us about this process to ensure that it is performed correctly (and that you are able to do so). Writing off bad debts can reduce your income tax and generate a GST refund.
We are here to help you. Please contact us for an arrangement to review your Year-End Strategies and answer any questions you have about your 2023 tax. Remember, if you spend a little bit of time with us to review your financial situation and discuss your tax planning options, you could end up saving yourself thousands of dollars.
Approaching the end of 2023, why not start a conversation with us to see how we can assist?
Disclaimer:
The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.