Navigating EOFY 2023: Essential Tax Deductions for Australian SMEs

Introduction:

Tax time is almost here, and the Australian Taxation Office (ATO) has made some important updates for EOFY 2023 that will affect small and medium-sized businesses (SMEs) in Australia. Businesses must understand these changes to plan effectively, reduce their financial obligations, and take advantage of potential tax benefits.

In this blog, we will explain these updates in simple terms, so you can confidently and efficiently navigate the end of the financial year. We'll cover everything from new tax benefits to strict compliance requirements, providing you with a roadmap for your tax planning.

Four Crucial Insights for Small Businesses Prior to 30 June

As the EOFY rounds the corner, the ATO has made it easier for SMEs to claim deductions and reduce their tax burden. Let's explore three crucial insights small businesses should consider before 30 June 2023.

Small Business Boosts

The Australian government is offering a valuable Technology Investment Boost and Skills and Training Boost to small businesses with an aggregated annual turnover of less than $50 million.

Under the Technology Investment Boost, these businesses can deduct an additional 20% of the expenses incurred for the purposes of business digital operations or digitising its operations on business expenses and depreciating assets such as portable payment devices, cyber security systems or subscriptions to cloud based services.

There is a cap of $100,000 per year on this deduction. The boost applies to expenses incurred between March 29, 2022, and June 30, 2023.

The Skills and Training Boost allows small businesses to deduct an additional 20% on eligible external training courses provided to their employees by registered providers in Australia. These courses must be provided by registered providers in Australia. This boost is applicable to expenses incurred between March 29, 2022, and June 30, 2024.

These boosts aim to support small businesses in embracing digital advancements and enhancing their workforce's skills and capabilities. By taking advantage of this opportunity, small businesses can maximize their tax benefits while investing in their future growth and success.

The End of Temporary Full Expensing (TFE)

The Temporary Full Expensing (TFE) program will conclude on June 30, 2023. Until that date, small businesses have the opportunity to claim immediate deductions for eligible assets that are first used or installed ready for use. This program has been beneficial in supporting small businesses by allowing them to deduct the full cost of assets upfront, providing financial flexibility.

However, after June 30, other deduction options like general or simplified depreciation rules will be available. To maximize deductions, it's important for businesses to take prompt action and ensure their eligible assets meet the requirements.

Motor Vehicle Related Deductions

Starting from July 1, 2023, the Australian Taxation Office (ATO) has made some updates for the 2023-24 tax year. If you're a business owner using or leasing a car for work, you can now claim depreciation on it up to a limit of $68,108.

Also, when you calculate your tax deductions for car expenses, you can now use a rate of 78 cents for every kilometer you drive for business purposes.

Work From Home Deduction

For those running a business from home, there are two ways you can claim tax deductions for your work expenses: the actual cost method or the fixed rate method.

The fixed rate method has been updated. Now, for every hour you work from home, you can claim 67 cents, which is an increase from the previous 52 cents. This rate covers costs like your electricity, gas, phone, internet, and stationery.

But that's not all. You can also claim extra deductions for things like the decrease in value of your home office equipment (like your computer or office furniture), any costs you have for fixing or maintaining these items, and even the cleaning costs for your dedicated home office space. The best part is, you don't need a specific room for your office to claim these deductions.

Key Strategies for Navigating EOFY 2023

Navigating the end of the financial year can feel overwhelming, especially this year due to the tax updates mentioned above. But with a few key strategies, you can confidently traverse through this period and benefit from potential tax deductions.

1. Review your current tax obligations:

   Start by studying the updates and changes that are applicable to your business. This review should include looking at your financial records so you can accurately plan for income and expenses.

2. Make sure you keep proper records:

   Good record-keeping is essential for claiming deductions on things like car expenses, WFH expenses, and digital transformation incentives. Make sure you have detailed records of all expenses related to your business, including invoices, receipts, and any other relevant documents.

   At CleanSlate, we understand the importance of good record-keeping for SMEs. Let us help you maintain accurate and comprehensive records, ensuring you maximize your tax deductions and simplify financial assessments. Trust us for efficient and reliable bookkeeping solutions tailored to your business needs.

3. Consider engaging a professional:

   Considering the complexity of these changes, it is recommended that SMEs seek advice from registered tax professionals. They can provide guidance tailored to your circumstances, ensuring you make the most of these new tax guidelines.

4. Plan ahead:

   Start preparing for the financial year ahead by creating a budget and forecasting your income. This will help you plan for your tax obligations and ensure you're taking advantage of available deductions.

By taking these steps, small businesses can make sure they are well-prepared for EOFY 2023. With the right strategies in place, they can maximize their deductions and reduce their tax burden.

Conclusion

EOFY 2023 brings both opportunities and challenges for Australian SMEs. But remember, these changes are not just about meeting regulatory requirements. Instead, they're opportunities for growth and digital transformation. With thorough understanding and preparation, you can optimise your tax returns and confidently navigate into the new financial year.

The rapidly evolving tax landscape may seem daunting, but you don't have to face it alone. CleanSlate, as a trusted tax agent, provides tailored guidance, ensuring you're well-equipped to take advantage of all appropriate tax incentives. Our robust digital solutions streamline record-keeping and compliance, aligning perfectly with ATO's push for digital transformation.

Don't let the complexity of tax changes unsettle you. Partner with CleanSlate today, and turn these changes into opportunities for your business's growth and success. Contact us to schedule a consultation or learn more about our services.