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Day: 26 June 2023

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Business Value Creation

Tax Planning: You Are One Step Away To Your Financial Freedom

tax agents australia

Tax planning is not just about compliance; It is one step towards creating your financial freedom. With strategic tax planning, you can minimise your tax liabilities, maximise your savings, and create a solid foundation for long-term financial success.

What Pain Does Tax Planning Remove from Our life? 

Tax planning helps remove various pain points from our lives, including:

  1. Removes the pain of financial stress by minimising tax liabilities and maximising savings.
  2. Eliminates uncertainty by providing clarity and certainty regarding tax obligations.
  3. Alleviates compliance concerns, reducing the risk of penalties, audits, and legal issues.
  4. Manage cash flow effectively, avoiding cash flow challenges caused by large tax payments.
What Opportunities does Tax Planning create in life? 

Tax planning creates various opportunities in life, including:

  1. Allows individuals to minimise their tax liabilities, resulting in increased savings.
  2. Effective tax planning helps optimise cash flow by strategically timing income and expenses.
  3. Tax planning provides opportunities for individuals to allocate more funds towards investments.
  4. Provides access to valuable tax deductions, credits, and incentives.
What are the KPIs to measure
  1. Financial
    1. Tax Saving
    2. Cash flow
    3. Director Loan
    4. Tax Liability
    5. Dividends & Distributions
  2. Non Financial
    1. Certainty about tax obligations
    2. Resource Planning
    3. Peace of mind
What are the different methods of Tax Planning

There are various methods and strategies for tax planning. Here are a few different approaches:

  1. Income Allocation
  2. Timing of income and expenses
  3. Capital Gains & Losses management
  4. Tax Efficient spendings & investments
  5. Entity Structuring
  6. & more
What are the positive impacts of Tax Plannings? 

Tax Planning can have many positive impacts on our life, including:

  1. allows individuals and businesses to strategically minimise their tax liabilities, resulting in potential savings.
  2. improves cash flow by providing individuals and businesses with more disposable income. 
  3. Promotes financial stability by ensuring that individuals and businesses have a clear understanding of their tax obligations and can meet them in a timely manner.
  4. support business growth by optimising tax structures, taking advantage of tax incentives, and maximising deductions. 
What are the negative impacts of Not doing Tax Planning? 

Not doing Tax planning can have a number of negative impacts on our life, including:

  1. Failing to engage in tax planning can result in higher tax obligations, leading to a reduced ability to save, invest, or meet financial goals.
  2. Without tax planning, individuals and businesses may overlook valuable deductions, credits, and incentives, resulting in missed opportunities to reduce their taxable income and save on taxes.
  3. Not considering tax implications can lead to cash flow challenges, particularly if individuals or businesses are unprepared for large tax payments that could strain their financial resources.
  4. Lack of tax planning increases the risk of non-compliance with tax laws and regulations, potentially resulting in penalties, audits, and legal issues.
High Level Roadmap
  1. Gathering financial information
  2. Setting financial goals
  3. Analysing tax implications
  4. Identifying tax-saving opportunities
  5. Implementing tax strategies
Case Study

Ms Taylor is an NDIS support worker and owns a proprietary Limited company with 10 payroll staff members. Her estimated Tax payable for the year was $64k with a taxable income of $259k.

We implemented the following strategies in her Tax planning

  1. Paid Director fee to Ms Taylor and her spouse for $90k. 
  2. Paid $27,500 Superannuation to the directors.
  3. Paid Superannuation for the staff for the June Qtr in advance.
  4. Prepaid expenses such as rent, conference fees etc worth $20k for the business before 30 June.
  5. Bought a business Car for $50k to utilise the $150k temporary expense claim finishing on 30 June 2023.

The net result was a saving of approx $42k tax for the company 

Remember, this is just a general guide and each organisation is different, so it’s important to properly review your finances with a cost-benefit analysis before making any big decisions. Our NexZen tax experts can provide personalised advice and can help you find out what you can claim as a small business. Get in touch to book a discovery call. 

Until then, thanks for reading and if you liked this or you know someone who would also find this helpful please feel free to like and share. See you next time. Can’t wait.

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This is a loser that most people are probably pretty happy about — the government is extending a task force that targets tax avoidance by multinationals, large public and private groups, trusts and wealthy individuals.

It is giving the Australian Tax Office (ATO) more than $600 million over the next three years to keep the scrutiny on those groups.

The budget forecasts the extension of the task force will make the government $2.1 billion in revenue from tax over the next four years.

In bad news for people’s pay packets, real wages are not forecast to grow until later this year at the earliest thanks to higher-than-expected inflation.

At the end of last year, Treasury predicted the inflation rate would be 2.75 per cent. The reality has ended up being around 4.25 per cent.

The budget is predicting wages will only be just higher than inflation in the next couple of years, meaning cost of living pressures are unlikely to ease any time soon.

Despite current price hikes, the budget is forecasting inflation will taper off and wages will grow faster by the middle of the decade.

Buried under the wildly exciting headline of Commonwealth’s Deregulation Agenda, is the $19.9 million spend by the Australian Bureau of Statistics to develop a new reporting application to enable businesses to submit surveys on business indicators directly through their accounting software. Excellent. Real time reporting utilising verified data on the state of Australian business. Guarantee of Origin scheme, and the development of a Biodiversity Stewardship Trading Platform to support farmers to undertake biodiversity activities ahead of the introduction of a voluntary biodiversity stewardship market.

Another $148.6m is for the development of community microgrids and just over $50m to develop gas infrastructure projects.

An additional $652.6m has been set aside to extend the ATO’s Tax Avoidance Taskforce by 2 years to 30 June 2025.
In that time, the taskforce is expected to increase receipts by $2.1bn and increase payments by $652.6m.

Just prior to the Federal Budget, the Government announced the extension of the:

  • Boosting Apprenticeship Commencements wage subsidy, and
  • Completing Apprenticeship Commencement wage subsidy.

    Any employer (or Group Training Organisation) who takes on an apprentice or trainee up until 30 June 2022 can gain access to:
  • 50% of the eligible Australian Apprentice’s wages in the first year, capped at a maximum payment value of $7,000 per quarter per Australian Apprentice,
  • 10% of the eligible Australian Apprentice’s wages in the second year, capped at a maximum payment value of $1,500 per quarter per Australian Apprentice, and
  • 5% of the eligible Australian Apprentice’s wages in the third year, capped at a maximum payment value of $750 per quarter per Australian Apprentice.

From

7:30pm AEDT, 29 March 2022 until 30 June 2024

The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. The deduction will be available to small business with an aggregated annual turnover of less than $50 million. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
We assume there will need to be a nexus between the employee’s employment and the training program undertaken for the boost, although we are waiting on further details of this initiative to be released. 
The boost for eligible expenditure incurred by 30 June 2022 will be claimed in the tax return for the following income year (that is, the 2023 tax return). The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2024, will be included in the income year in which the expenditure is incurred.

From

1 July 2021

As previously announced, work‑related COVID‑19 test expenses incurred by individuals will be made tax deductible. 
Changes will also be made to ensure that FBT will not be payable by employers if they provide fringe benefits relating to COVID‑19 testing to their employees for work‑related purposes.
The changes for deductions will be effective from 1 July 2021, with the FBT changes to apply from 1 April 2021.
At this stage it is not entirely clear whether the deduction rules will cover expenses incurred where the employee is able to work from home. The initial media release indicates that the measure will cover situations where the individual has the option of working remotely, while the Budget only refers to costs of taking a COVID-19 test to attend a place of work but doesn’t specifically refer to employees who can work from home.

From

1 July 2022
Back in the 2019-20 Budget, the Government announced that Australian Business Number (ABN) holders would be stripped of their ABNs if they failed to lodge their income tax return. In addition, ABN holders would be required to annually confirm the accuracy of their details on the Australian Business Register.


This measure has been deferred for 12 months, which means that the tax return lodgement obligation is due to commence from 1 July 2022 with the annual confirmation of ABN details to commence from 1 July 2023.

As announced prior to the Budget, the Government will commit $6.6 million for the development of IT infrastructure that will enable the ATO to share Single Touch Payroll (STP) data with State and Territory Revenue Offices on an ongoing basis. 

The funding will be deployed following further consideration of which states and territories are able and willing to make investments in their own systems and administrative processes to pre-fill payroll tax returns with STP data in order to reduce compliance costs for businesses.

The measure that enables payments from certain state and territory COVID-19 business support programs to be treated as non-assessable non-exempt (NANE) income has already been extended until 30 June 2022. 
The Government has announced that the following state and territory grant programs have been made eligible for this treatment since the 2021-22 MYEFO, although it is not clear whether the relevant legislative instruments have been issued as yet:

  • New South Wales Accommodation Support Grant 
  • New South Wales Commercial Landlord Hardship Grant 
  • New South Wales Performing Arts Relaunch Package 
  • New South Wales Festival Relaunch Package 
  • New South Wales 2022 Small Business Support Program 
  • Queensland 2021 COVID 19 Business Support Grant 
  • South Australia COVID 19 Tourism and Hospitality Support Grant 
  • South Australia COVID 19 Business Hardship Grant.

    This builds on the list of existing grants paid by New South Wales and Victoria that can already qualify for NANE income treatment. 

From

1 January 2024

As announced prior to the Budget, businesses will be able to report Taxable Payments Reporting System data via their accounting software on the same lodgment cycle as their activity statements.
The measure is expected to reduce the costs of complying with the system and increase transparency.

From

1 January 2024

As announced prior to the Budget, companies will be able to choose to have their pay as you go (PAYG) instalments calculated using current financial performance, extracted from business accounting software, with some tax adjustments. 
The move is intended to ensure that instalment liabilities are aligned to the businesses cashflow. In addition, the digitisation of PAYG instalments will improve transparency and provide more accurate data on performance. 

From

2022-23 income year

Normally, GST and PAYG instalment amounts are adjusted using a GDP adjustment or uplift. For the 2022-23 income year, the Government is setting this uplift factor at 2% instead of the 10% that would have applied. 

The 2% uplift rate will apply to small to medium enterprises eligible to use the relevant instalment methods for instalments for the 2022-23 income year and are due after the amending legislation comes into effect:

  • Up to $10 million annual aggregated turnover for GST instalments and 
  • $50 million annual aggregated turnover for PAYG instalments 
From 7:30pm AEDT, 29 March 2022 until 30 June 2023
The Government intends to provide a 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud based services. The technology boost will be available to small business with an aggregated annual turnover of less than $50 million.An annual expenditure cap of $100,000 will apply to the boost. The boost for eligible expenditure incurred by 30 June 2022 will be claimed in tax returns for the following income year. The boost for eligible expenditure incurred between 1 July 2022 and 30 June 2023 will be included in the income year in which the expenditure is incurred. That is, the additional deduction available under this measure is expected to be claimed in the 2023 tax return.  

The temporary 50% reduction in superannuation minimum drawdown requirements for account-based pensions and similar products has been extended to 30 June 2023. 


Minimum superannuation drawdown rates 2019-2023

Age 

Default minimum drawdown rates (%) 

Reduced rates by 50% for the 2019-20 to 2022-23 income years (%) 

Under 65 

4 

2 

65-74 

5 

2.5 

75-79 

6 

3 

80-84 

7 

3.5 

85-89 

9 

4.5 

90-94 

11 

5.5 

95 or more 

14 

7 

 

From

1 July 2024

Trust and beneficiary income reporting and processing will be digitalised with all trusts being provided with the option of lodging income tax returns electronically.

While this measure will reduce compliance costs, it will also increase transparency and provide the ATO with a greater insight into where anomalies are occurring.

From

1 July 2021

The Medicare levy low income thresholds for seniors and pensioners, families and singles will increase from 1 July 2021.

 

2020-21 

2021-22 

Singles 

$23,226 

$23,365

Family threshold 

$39,167 

$39,402

Single seniors and pensioners 

$36,705 

$36,925

Family threshold for seniors and pensioners 

$51,094 

$51,401

 
For each dependent child or student, the family income thresholds increase by a further $3,619 instead of the previous amount of $3,597. 

The Home Guarantee Scheme guarantees part of an eligible buyer’s home loan, enabling people to buy a home with a smaller deposit and without the need for lenders mortgage insurance. The Government has extended two existing guarantees and introduced a new regional scheme.

Just prior to the Budget, the Government announced:

  • First Home Guarantee – from 1 July 2022, an increase from 10,000 to 35,000 guarantees to support eligible first homebuyers to purchase a new or existing home. 
  • Single parent Family Home Guarantee – 5,000 guarantees each year from 1 July 2022 to 30 June 2025. The family home guarantee supports eligible single parents with children to buy their first home or to re-enter the housing market with a deposit of as little as 2%.
  • Introduction of a Regional Home Guarantee. This guarantee will support eligible citizens and permanent residents who have not owed a home for 5 years (including non-first home buyers) to purchase or construct a new home in regional areas with a minimum 5% deposit areas (subject to the passage of enabling legislation).

From

April 2022

A one-off $250 ‘cost of living payment’ will be provided to Australian resident recipients of the following payments and concession card holders:

  • Age Pension 
  • Disability Support Pension 
  • Parenting Payment 
  • Carer Payment 
  • Carer Allowance (if not in receipt of a primary income support payment) 
  • Jobseeker Payment 
  • Youth Allowance 
  • Austudy and Abstudy Living Allowance 
  • Double Orphan Pension 
  • Special Benefit 
  • Farm Household Allowance 
  • Pensioner Concession Card (PCC) holders 
  • Commonwealth Seniors Health Card holders 
  • Eligible Veterans’ Affairs payment recipients and Veteran Gold card holders.

    The payments are exempt from taxation and will not count as income support for the purposes of any income support payment. An individual can only receive one payment.

From

1 July 2021 to 30 June 2022

The low and middle income tax offset (LMITO) currently provides a reduction in tax of up to $1,080 for individuals with a taxable income of up to $126,000.

The tax offset is triggered when a taxpayer lodges their 2021-22 tax return.

For the 2021-22, the LMITO will be increased by $420 which means that the proposed new rates for individuals are as follows:

 

Taxable income 

Offset 

$37,000 or less 

$675

Between $37,001 and $48,000 

$675 plus 7.5 cents for every dollar above $37,000, up to a maximum of $1,500

Between $48,001 and $90,000 

$1,500

Between $90,001 and $126,000 

$1,500 minus 3 cents for every dollar of the amount above $90,000 

From12.01am 30 March 2022

There are a few jokes going around social media about the price of fuel.

As widely predicted, the Government will temporarily reduce the excise and excise-equivalent customs duty rate that applies to petrol and diesel by 50% for 6 months from Budget night. That is, the current 44.2 cents per litre excise rate will reduce to 22.1 cents per litre from Budget night. However, the measure is subject to the passage of the enabling legislation so don’t expect to see a change right away. 

 The reduction extends to all other fuel and petroleum based products except aviation fuels.

At the conclusion of the 6 months on 28 September 2022, the excise and excise-equivalent customs duty rates revert to previous rates including any indexation that would have applied during the 6 month period. 

The Australian Competition and Consumer Commission (ACCC) will monitor the price behaviour of retailers to ensure that the lower excise rate is passed on to consumers.

The measure comes at a cost of $5.6bn.

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