Tax Laws (and associated Laws) are changing constantly, which makes it difficult for small business owners in particular to keep track of everything they need to know. Complying with the rules is hard enough, let alone being proactive to minimise your tax and maximise your wealth.
We’ve created this article to cover some of these changes and provide you with some tips to get ahead of the pack.
SINGLE TOUCH PAYROLL - PHASE 2
As detailed in our article covering this topic (view it here), STP (reporting to the ATO) is mandatory for all payments to all employees. This year the ATO expanded the amount of information they expect to receive, which means employers may need to do some tweaks in their payroll software.
Each software has its own process, but essentially it means categorising all of your wages and deductions into ATO specified categories.
If you are yet to work through this so you are compliant with “STP Phase 2”, we highly recommend you do so before 30 June.
IMMEDIATE WRITE-OFF FOR ASSET PURCHASES
As you probably heard as part of the federal budget, the immediate write off is changing from 1 July 2023.
Currently (i.e. pre-30 June 2023), businesses can write off the full cost of any business equipment, no matter the cost. From 1 July 2023, this will only apply to items costing less than $20,000, and only for small businesses.
If you are after a last-minute tax deduction, buying an asset may be the answer but we don’t advocate buying things you don’t need (because even with the tax deduction you are still out of pocket buying the asset). If there is something you need, then yes, buying it now may be the answer.
Keep in mind though that this isn’t a “bonus” or “free” deduction. You can claim the cost of the asset under normal rules, it’s just spread over the life of the asset (e.g. spend $30,000 on a work van, under normal rules you can claim the $30,000 over 8 years). The benefit to the immediate write-off is that you get it all now.
Before you buy however, be sure that you will get the biggest benefit this year. It could be that you save more tax next year than you would this year. This is particularly relevant for sole traders, partnerships, and trusts.
SUPERANNUATION RATE INCREASE
A reminder for businesses that the rate of super that needs to be paid to staff is increasing to 11% (up from 10.5%) on 1 July 2023. This new rate applies to wages paid to staff on or after 1 July.
Most payroll software will automatically update their programs and rates, however if you are not using the in-built superannuation categories you may need to manually update yours.
Not a change but a reminder – to claim a deduction for superannuation contributions in the 2023 year, they must be received and processed by your super fund before 30 June. Given most super payments go via a clearing house which can take up to 10 days, you need to physically pay this super by 20 June in most cases to meet this criteria.
RECONCILE YOUR PAYROLL
Once 1 July ticks over, you should be thinking about reconciling your payroll to ensure that the information you put on your staff’s group certificates is correct. This means checking that the payroll data matches your ledger data and the info you reported on your BAS’s.
We have a great checklist that goes through these (plus covers your payroll tax , workcover, and taxable payments report requirements).
Once done, small businesses have until 31 July to lodge their group certificates with the ATO (which is now called an STP finalisation).
MINIMUM WAGE INCREASE
The minimum wage is currently $21.38 per hour, but we are expecting an increase soon – keep an eye out for announcements from the Government and FairWork. Keeping in mind that “wage theft” is now a crime (see our article on this here), please ensure you are diligent in paying your staff at least the minimum requirements.
RANDOM TAX TIPS
We have a heap of tax tips in our EOY Tax Tips brochure, but some important ones include:
- Bringing forward expenses that you will incur next year can move the tax deduction from next year to this year;
- Staff bonuses that are committed to before 30 June are deductible this year, even if paid next year;
- Ensure you do a stocktake and calculate your work in progress (the value of materials and labour used / paid for on jobs that you haven’t invoiced as yet) as these are used by your accountant in calculating taxable income, and if they don’t know the figures your options are limited; and
- Check what is owed to you by customers and write-off any amounts that you expect to never receive.
MANAGING YOUR BUSINESS CASHFLOW
Most business fail because they run out of cash. This can be caused by many things, but ultimately it is a lack of cashflow that is the final nail in the coffin. We have a video series designed to help businesses better understand and take control of their cashflow at www.youtube.com/playlist?list=PLgtTuizRYnvVKZKrV8WpK6vDY9F1C2vqf. The first video is below.
If you would like to talk to us about the topics in these videos in more detail, just give us a call.