Navigating the tax world as a small business can seem like an uphill battle, especially when the Australian tax system regularly introduces new changes that can take time to follow.
To give you a helping hand, we’ve compiled the following guide that lays out the new tax changes in the 2023 financial year to ensure your small business has all the necessary information.
No More Take Back Initiatives
Many measures the Australian Government introduced to help businesses during the COVID-19 pandemic are gradually drawing to a close. The Loss Carry Back Tax Offset program is one that won’t be extended past FY23, meaning businesses won’t be able to offset tax losses against previous years’ profits from FY24.
As a result, businesses must be vigilant regarding tax strategies, as it won’t be as easy to receive financial relief if tax losses occur in FY24.
Temporary Full Expensing Draws to a Close
The Temporary Full Expensing scheme enabled eligible businesses to immediately write off asset purchases (upto a certain value for passenger vehicles), as opposed to writing the cost off over a few years (depreciation).
The scheme will not expand into FY24. Those with an annual turnover of less than $10 million can still continue to enjoy the privilege of instantly deducting the full cost of eligible assets, as long as they fall under the new $20,000 threshold, until 30 June 2024. (This returns the asset write-off limit to the same level it was at in 2015.)
Working From Home Deductions Altered
The ATO will no longer accept deductions calculated with the shortcut or old fixed rate method. Instead, individuals must use the revised fixed rate method or the actual method and have reliable and accurate evidence for their working-from-home hours over the entire income year.
The revised fixed rate is 67 cents per hour and covers expenses relating to energy, computer consumables, internet usage, mobile and home phone usage, and stationery. You can claim deductions for assets separately.
Introduction to The Small Business Energy Incentive
Details surrounding the Small Business Energy Incentive are yet to be finalised, but it’s looking promising. With the incentive, small businesses with less than $50 million in turnover can claim an additional 20% deduction on energy-efficient expenses, such as electric heating systems.
Going hand in hand with the energy incentive is the Energy Bill Relief Fund. This incentive means small businesses become eligible for energy bill relief of up to $650, depending on their area. The fund reflects the rise in energy bills and ensures small businesses don’t suffer from inflated prices.
Lodgment Penalty Amnesty to Help You Get it Right
Small businesses with annual turnover of less than $10 million will be eligible for the Lodgment Penalty Amnesty to get back on track with taxes. With the amnesty, any outstanding taxes from 1st December 2019 and 29th February 2022 won’t be penalised as long as you lodge them from 1st June to 31st December 2023.
Technology Investment Boost (not yet law)
In March 2022, as part of the 2022-23 Budget, the Morrison Government announced the Technology Investment Boost for small businesses, which would allow businesses with an annual turnover of less than $50 million, to deduct an additional 20% of the expenditure incurred for their digital operations.
However, the legislation underpinning these tax breaks hasn’t been passed yet, and you won’t be able to claim the boosts until the law has been enacted.
Were the legislation to pass, even something as simple as getting a Xero subscription could result in an extra deduction. It’s a free kick for small businesses – but only if the legislation ends up passing.
As such, good detailed records will go a long way to identifying these extra deductions.
Other considerations
While small business owners should be aware of the extra perks and opportunities available, it’s important to approach tax planning holistically, and consider factors beyond tax benefits.
There are always opportunities to optimise your tax position – but you should never make decisions based solely on the tax benefits.
For instance, small businesses can claim a large upfront deduction by pre-paying their rent up to a year in advance. But then you may have strained your cash flow for a year to get a temporary tax advantage, and limited your ability to invest in other business needs throughout the year. Striking a balance between tax optimisation and business sustainability should be the goal.
When you’re dealing with complicated financial & tax matters, it’s always a good idea to get help from experts who are skilled and have the necessary experience. They’ll offer personalised advice and help you make smart money decisions that fit your business goals and set you up for long-term success.
Need Help Getting On Track With Your Taxes? We Can Help
If you have any questions, reach out to us at Glance Consultants on 03 98859793 or at enquiries@glanceconsultants.
