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New Measures to Reduce your Tax Bill

By Zilla Efrat

Most people's idea of tax planning is what Sam Ayoubi, director tax services at KPMG, calls symptom relief, problem solving or putting out fires. But as we move into a new financial year, it’s vital to ensure you are making the most of some new incentives now available.

One of these is temporary full expensing. Announced by the government in its October 2020 budget, this allows businesses with a turnover of less than $5 billion to immediately deduct the business portion of the cost of eligible new depreciating assets.

"Due to the overwhelming success of people going out and spending, and our economy apparently becoming one of the fastest rebounding economies in the world, they've extended this measure," says Ayoubi.

"It was originally slated to expire on 30 June 2022, but they've extended that to 30 June 2023."

Another measure is the loss carry back. "It allows you to use a loss that you make in 2022 or 2023, or even in 2021, and, and carry it back into a prior year," says Ayoubi.

"Most of the time you have to carry forward your tax losses into the future, and they don't really do you much good if your business goes under and you've paid all these taxes in the past. So, the government has said, look, if you've paid tax in the past in certain years and you make a loss in the future, we'll let you carry that back. However, you've also got to also have sufficient franking credits."

Various measures to stimulate innovation have also been announced. One allows companies with intangible assets such as patents, registered designs, copyrights or in-house software, to self-assess the effective lives of these assets after 1 July 2023.

"At the moment, those assets have fixed effective lives and you have to depreciate them over a set period –for example, over 20 years for a copyright,” says Ayoubi. “But be aware of self-assessing. There has to be a justifiable basis upon which you have set a shorter, effective life."

Another change affects the rules of self-managed super funds (SMSFs).

"Sometimes SMSFs trip up and cause themselves to not be eligible to receive contributions from their members because their members happen to be working overseas temporarily," says Ayoubi.

"This measure will allow temporarily absent members of Australian super funds to continue to make contributions from overseas, without triggering a problem."

Ayoubi advises starting your tax planning as early as possible. "Sometimes you need to balance a couple of things at the same time," he says. "Importantly, as we come up to year end, you should already be starting the processes and thinking about them. In my experience, these things take more than a couple of days to resolve, especially if you've got several decision-makers involved."

Many of Ayoubi’s clients believe they run a business. "They don't know that their business is actually operated by a trust, which has something called a trust deed," he says.

"We need to ensure that we do what's required by the trust deed. It is an area of focus for the tax commissioner who will often say in any review of a trust, 'step one, give me a copy of your trust deed'. 'Step two, give me a copy of your trustee resolutions to show me how you distributed that income.'

"So if you're aware that you have a trust somewhere in your structure, and you're aware that people get benefits from this trust, then you should probably be having a really good think about how you are going to distribute earnings."

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