With just under four weeks until the End of Financial Year (EOFY), climbing interest rates and economic uncertainty ahead, it’s important to be prepared for End of Financial Year and understand what concessions your business may be entitled to.
Grant Thornton is highlighting three initiatives your business may wish to consider including Temporary Full Expensing and the Technology Investment Boost– both ending 30 June 2023, as well as superannuation carry forward concessional contributions.
Kirsten Taylor-Martin, Partner – Private Business Tax & Advisory, said, “We find many of our clients come to us looking for additional ways to put money back into their business. With the potential of a looming recession, it is important businesses utilise all the concessions available to them. Often there are simple and effective ways to invest into your business and it’s important to explore which options are available and which Government initiatives best suit your individual business needs and goals.”
Temporary full expensing
This initiative assists businesses and encourages investment. Created as part of the Government’s COVID-19 business plan, this is your last chance to acquire new business assets and claim a 100 per cent deduction to reduce your overall tax for your business. For Companies, it is important to assess the impact of temporary full expensing on the franking credit balance and the ability to declare franked dividends, especially when Division 7A loan arrangements are in place.
Broadly, this concession applies to businesses with:
- an aggregated turnover of <$5bn;
- the new asset was first held, first used or installed ready for use for a taxable purpose on or before 30 June 2023; and
- This tax incentive will come to an end on 30 June 2023 as it was not extended in this year’s Federal Budget.
Technology investment boost
This is a one-off opportunity for your business to digitise operations on business expenses and portable assets – and with only one month to go – it’s important to take advantage of this boost for your business if it is eligible.
The boost applies to businesses with:
- An aggregated turnover of <$50m;
- The entity must incur the expenditure wholly or substantially for the purposes of your digital operations or digitising your operations. Some examples of such expenditure include: computer and telecommunications hardware and equipment; software, digital media and marketing; e-commerce – goods or services supporting digitally ordered or platform-enabled online transactions; portable payment devices; cyber security systems; backup management; and monitoring services.
- Certain expenses are ineligible for bonus deduction such as salary and wage costs; capital works; financing costs; and training and education costs.
- The bonus deduction is equal to 20 per cent of eligible expenditure, but is subject to a $20,000 cap per income year or relevant period.
- Applies to expenditure incurred from 29/3/22-30/6/22 and 1/7/22-30/6/23
- Ends 30 June 2023.
The technology investment boost is subject to law, which at the time of writing has bi-partisan support but remains in the Senate.
Carry forward concessional contributions
This is an opportunity for family businesses where family members have a superannuation balance of <$500,000 at the end of the previous financial year. You can pay a dividend or trust distribution to family members to contribute towards their carry-forward contributions and claim a personal deduction. Once balance is over $500k, they will never get the deduction again for the extra contributions. Unlike the previous two strategies, this concession will continue past 30 June 2023.
You can only claim a deduction for superannuation contributions when you have taxable income. This is an effective strategy for building wealth for the family outside the business operations – a strategy that can assist in future succession. If this strategy is of interest, it is important you speak to your accountant or tax agent prior to implementing to ensure it works in your situation.
It is important to reach out to your advisors and ensure your business is maximising and using all the relevant concessions and financial boosts available so you are prepared for End of Financial Year .