For small businesses where every dollar counts, the end of the financial year often brings a frantic search for deductions to lower tax liability. Multi-national audit, tax and consulting firm RSM senior manager Cameron Sloan has some general advice for businesses looking to make the most of deductions.
In October 2020, the federal government of the time introduced expensing and asset write-off rules to help businesses make large capital purchases to invest in their business during the height of the pandemic. The new rules introduced no limit to the purchase price for plant and equipment assets held from October 6, 2020, that could be instantly claimed as an immediate deduction. These rules are set to expire in 2023, and the current government has so far given no indication if they will be extended. "All the additional tax deductions you are able to claim by purchasing a vehicle or plant and equipment will [likely] end by 2023," Mr Sloan said. He said it's important to remember this isn't an extra deduction; it's just bringing forward deductions from future years, which could have tax implications later on.
...additional tax deductions you are able to claim by purchasing a vehicle or plant and equipment will [likely] end by 2023.- Cameron Sloan, senior manager, RSM
Only available to businesses operating as a company, the loss carry back tax offset provides greater flexibility for taking advantage of a tax loss. You may be familiar with the concept of companies carrying a loss forward, meaning tax losses from the current financial year can be applied to future financial years. However, the carry back tax offset allows companies to apply losses from either the 2021, 2022 and 2023 financial years to previous years. "If you paid tax in 2021, and in 2022 you buy lots of equipment and claim deductions with the current depreciation rules, so much so that you've unconsciously created a tax loss, you can go back to previous tax returns you've paid tax on and claim some of that tax back. So instead of carrying it forward, you can take advantage of some of the losses now," Mr Sloan said. This advice is general in nature, and you should speak with a qualified tax accountant or adviser for specific advice relating to your business.
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