7 tax tips for businesses in 2023

It also means no more leniency and if you have tax debts, you need to pay up or risk potentially severe consequences.

According to CPA Australia's head of policy and advocacy, Elinor Kasapidis, tax policy changes this year are few and far between but one thing is certain – the ATO is keeping a firm eye on taxpayers and will be scrutinising every detail, from asset deductions to income declarations and tax debts.

“In the last three years, because of COVID, there has been plenty of tax changes and leniency to help taxpayers, but now we’re back to pre-pandemic conditions,” she says.

“And so the situation has shifted from what’s available to help, to what you need to do to stay out of trouble with the tax office.

“The main message is to make sure you’re getting your tax return right. And if you need help, go and see a tax agent.”

Here are some of the key things you need to know and do this tax time.

It perhaps came as no surprise that the government has wound back generous temporary full expensing and re-introduced a much smaller instant asset write-off scheme in its place, allowing small business owners with a turnover of less than $10 million to immediately deduct assets valued at $20,000 or less.

Business owners have until June 30 to take advantage of the temporary full expensing scheme, with the caveat that the asset must be delivered and ready for use by that date.

From July 1, the new instant asset write-off comes into effect, meaning any assets bought on or after that date and valued at more than $20,000 will need to be deducted over several years instead of in one go.

If you are claiming a range of deductions such as on assets and travel, ensure you keep detailed records and receipts to back up your claims.

According to Kasapidis, the ATO has received plenty of federal budget funding for compliance activities and will therefore be checking more returns than they have in the past. Hence, it is more important than ever to have all your records on hand and in one place so you can produce them easily if the ATO comes knocking.

On that note, Kasapidis urged businesses that have yet to go digital to make the transition sooner rather than later.

“Get yourself onto accounting software, keep digital records, make sure you set up your systems right throughout the year so that when it comes to tax time, everything’s in the right place,” she says.

“What you don’t want to be doing is running your business off a spreadsheet or having paper receipts and documents that can disintegrate over time.

“Even just for broader business things like your cash flow management, looking at your debtors, issuing invoices… the improvements and insights that you can gain from going digital are more than just tax-related. They will really help the business and give you better control.”

According to Kasapidis, too many business owners and individuals do not report their income correctly or are not reporting all of their income.

“Make sure to include cash you’ve received as well as the value of barter or payments-in-kind as income,” she says.

“The ATO has sophisticated data analytics that checks every single return and look out for things that are out of the ordinary, and they also have all these other sources of data that they can match to you and your group.

“And if things don’t look right and they find out you haven’t disclosed income, the penalties and interest can be high.

“If you’re in construction, there’s something called the ‘taxable payments reporting system’ where payments to certain contractors are reportable. Who you work for might actually be reporting your income to the ATO, so if you don’t put it on your tax return, you’ll get caught out.”

If your business is owing the ATO money, don’t keep your head in the sand.

The ATO has ramped up its debt recovery efforts in recent years and is not slowing down anytime soon. So if you have tax debts sitting around, it is imperative that you get in touch with the ATO and work out a plan to pay them off.

“It’s important for businesses to stay on top of cash flow and not let their tax debt slide,” Kasapidis said.

“Make sure you pay your tax and employee entitlements including super on time, as there can be serious consequences for non-reporting or non-payment including director penalty notices.”

If you operate a trust, you need to keep affairs in order and make your resolutions by June 30.

“The ATO has a close eye on trusts so if you use one, make sure that your resolutions are done by June 30 and that you’re up to date with the rules for distributions,” Kasapidis says.

“In the past, trustees may do it 11 months after the end of the income year, but they’re not allowed to do that anymore.”

According to the ATO, if a trustee makes no beneficiary entitled to trust income as of June 30, then the trustee will be assessed on the trust’s taxable income.

“Private use of assets is an ongoing issue, and ATO will be looking at that closely,” Kasapidis says.

As an example, if you are claiming deductions on a ute you bought for your business that you also use privately, you can only claim for the portion of the expenses related to your business and not for the entire vehicle.

Or if your company owns a boat and you lend it to family or friends for their private use from time to time, you cannot claim against that portion of private use either. You will need to work out the portion spent on private use and exclude it from your calculations when filing your tax return.

“Again, the ATO has data matching processes in place, so they’re collecting a lot of information about you, what assets you have and the amount of income that’s coming from those assets,” Kasapidis says.

“They’re looking at debts such as loans that you’ve taken out from the bank for property or for investment purposes, for example. They also check your lifestyle, your income and they match it against your business and use things like benchmarks to determine if you’ve been truthful in your return.”

If you’re unsure about something, or wondering if there are certain items you can claim or if there’s something you need to declare, talk to your tax agent or accountant.

“Tax can be complex and the end of the year is a good time to make sure your accounting and tax systems are working correctly,” Kasapidis says.

“Seek advice from a registered tax agent to make sure you’re reporting correctly, maximising your deductions and keeping the right records.”

If you have lodged your tax return and realised you’ve made mistakes or have failed to declare something, correct it right away with the ATO as the organisation can reduce penalties for voluntary disclosures.

Super guarantee: The super guarantee rate will increase from 10.5 per cent to 11 per cent for all employees eligible to receive superannuation. Small business owners will need to use the new rate to calculate super on payments made to employees on or after July 1, even if some or all of the pay period is for work done before that date. The SG rate is legislated to increase to 12 per cent by 2025.

Employers are responsible for checking their payroll and accounting systems have been updated to ensure they correctly calculate their employee’s super guarantee entitlement. Payments must be received by the employee’s super fund by July 28.

National Minimum Wage and Award Rate: The National Minimum Wage will increase to $882.80 a week, or $23.23 an hour. Award rates of pay will increase by 5.75 per cent.

Both changes are effective from the first full pay period starting on or after July 1.

PAYG and GST uplift rate: The PAYG and GST uplift on quarterly payments will reduce from what would have been 12 per cent to 6 per cent for the 2023-24 income year in a move that should help assist cash flow for small businesses.

Single Touch Payroll: Employers are required to finalise employees’ Single Touch Payroll data by July 14. The ATO advises small business owners to check they are finalising STP data for the 2022-23 financial year.

It says employers are required to report pay-as-you-go (PAYG) withholding information every time they pay employees through Single Touch Payroll. From July 1 these amounts reported through STP will be used to pre-fill labels W1 and W2 in activity statements in ATO online services.

Paid Parental Leave scheme: The entitlement of 18 weeks of paid parental leave pay will combine with the Dad and Partner Pay entitlement of two weeks’ pay. This means partnered couples will be able to claim up to 20 weeks of paid parental leave between them. Parents who are single at the time of their claim can access the full 20 weeks.

These changes will affect employees whose baby is born or placed in their care on or after July 1.

More information is available via the Australian Government's Support for Businesses in Australia website.

The information in this article is general in nature. If in doubt, seek professional tax advice.