With the end of the financial year approaching, now is the ideal time to meet and discuss the suitable actions you can take before 30 June 2023, to reduce your tax and grow your wealth.
Having a well thought out tax strategy is an important way to minimise your tax bill. We encourage our clients to do this well before 30 June 2023 to allow enough time to implement the relevant tax saving strategies. The sooner we start planning the better! So, If you haven’t scheduled a tax planning meeting with your advisor yet, please contact your advisor today!
What tax minimisation strategies should you consider for 2023?
To help prepare clients for tax time, our Morrows advisors have developed two 2023 Tax Minimisation guides. These guides outline over 30 various strategies we can consider to help reduce your personal and business tax bill this financial year. Below is a snapshot of what you can expect from the guides. Complete the form below to download a comprehensive summary of the tax minimisation strategies we recommend for individuals and business owners.
The top 3 key tax saving strategies for business owners in 2023 are:
- PRIVATE COMPANY (“DIV 7A”) LOANS: Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2023. Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return, or risk having it counted as an unfranked dividend in the return of the individual.
- Use a Bucket Company to lower your Company Tax Rate: The 2023 company tax rate for businesses with less than $50 million turnover is 25%, if 80% or less of a company’s assessable income is “passive income” (such as interest dividends, rent, royalties, and net capital gains). If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 25% for the 2023 year. Note that this company must qualify as a “base rate” entity to be eligible for the lower 25% company tax rate. Please discuss with your Morrows Tax and Business advisor to determine whether your company will qualify.
- Defer Investment Income and Capital Gains: If possible, arrange for the receipt of Investment Income (e.g. interest on Term Deposits) and the Contract Date for the sale of Capital Gains assets, to occur AFTER 30 June 2023. The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
Key Tax Saving Strategies for Individuals in 2023 include:
- Review whether you can still allocate trust distributions (from your Family Trust or Discretionary Trust) to adult children or parents as a result of the newly released ATO Tax Rulings.
- Maximising voluntary superannuation contributions: The tax-deductible super contribution limit (or “cap”) is $27,500 for all individuals under age 75. Individuals need to pass a work test if over age 67. To save tax, consider making the maximum tax-deductible super contribution this year before 30 June 2023. The advantage of this strategy is that superannuation contributions are taxed at between 15% to 30% compared to typical personal income tax rates of between 34.5% and 47%.
- Take advantage of the Super Carry- Forward Contributions: Carry-forward contributions are not a new type of contribution, they are simply new rules that allow super fund members to use any of their unused concessional contributions cap on a rolling basis for five years. This means if you don’t use the full amount of your concessional contribution cap ($25,000 from 2019 to 2020, and $27,500 for 2021 to 2023), you may qualify to carry-forward the unused amount and take advantage of it up to five years later.
Want to learn more Tax Minimisation Strategies?
Download our two Tax Minimisation Guides today. These comprehensive guides outline over 30 additional tax saving strategies to help reduce your personal or business tax bill this financial year. Fill in your details below, to gain access to these guides for free.