Now that we have covered the main ALP tax points, let’s look at a general approach to year-end tax planning to get across your finances and start the new year moving in the right direction. A more detailed year tax checklist is part of our ongoing client service plan.

Defer Income

A basic but necessary one. Can you defer income to the following year, if you predict you will have a significantly higher taxable income this financial year? Make that delivery after year-end, complete that service invoice when you finish the job in early July, if you are on a cash basis, when were the proceeds banked to your account.

Pay it forward or carry it back

If you suspect the following financial year not to be as good as this one, consider paying next years expenses prior to 30 June. Small businesses can claim a deduction for prepaid expenses in the year they are paid, so long as they are not prepaid for more than 12 months and are used by the end of the next tax year. This only applies to businesses with a turnover of less than $50 million.

In reverse, are you able to carry back losses from this financial year to apply against profits derived in previous financial year?

Do the year-end things well

  • Write off bad debts prior to 30 June. You could look at it as a donation to the business world.

  • You can also look to pay any donations, like the school building fund on or by 30 June.

  • Count your stock and consider its age and value.

  • Top up all eligible superannuation contributions to the maximum, making sure the transaction is dated 30 June on the bank statement.

  • Buy the new assets before year end and be eligible for the instant asset write-off this year, although the instant write-off remains in place until 30 June 2023.

  • Undertake a full review of your depreciation processes post Covid. Are there assets that you no longer use that could be scrapped?

Catch up on prior year super contributions

If you have a superannuation balance of under $500,000 you are able to carry forward unused concessional contributions from a previous financial year. Starting from FY2019, the amount of unused cap you will be able to carry forward will depend on the amount you have contributed. You can then top it up in this year and claim the deduction.

Clean up your records

It can be tedious and time consuming. However by keeping an eye on the small things such as business expenses throughout the year, it can lead to you knowing what can be claimed and not missing any opportunity for deductions. Keep meticulous records of those smaller expenses that add up such as office supplies, travel costs, motor vehicle expenses and other expenditure that is crucial to running your business or earning your income.

Feel like it’s too late to start? It never is. Not only will there be expenses you haven’t remembered, or you may incur in the last few weeks of this financial year, it enables you to start the new financial year with good feelings and good habits.

Consider business structure

The corporate entities base rate has been reduced to 25% for the 2022 financial year, continuing into FY2023. Should you be using a company in your business structure, particularly for limiting your liability? Perhaps this is something we can gauge for you.

Small business concessions

Make the most of small business concessions such as temporary full expensing and a lower company tax rate for eligible businesses. The previous federal government had introduced a range of tax concessions for small business to assist with cashflow. These include an increase in small business income tax offset and deductions for professional expenses in respect of startups.

What has the ATO flagged as targets for FY2022

Taken from the ATO website,

The ATO will be focusing on:

  • record-keeping

  • work-related expenses

  • rental property income and deductions, and

  • capital gains from crypto assets, property, and shares.

These ATO priority areas will ensure that there is an appropriate level of scrutiny on correct reporting of deductions and income, so that Australia continues to have a strong tax system that can support the Australian community. Taxpayers can take steps to lodge right the first time.

Assistant Commissioner Tim Loh explained that “The ATO is targeting problem areas where we see people making mistakes.”

"It’s important you rethink your claims and ensure you can satisfy the 3 golden rules” Mr Loh said.

  1. You must have spent the money yourself and weren’t reimbursed.

  2. If the expense is for a mix of income producing and private use, you can only claim the portion that relates to producing income.

  3. You must have a record to prove it.