2023 tax deductions can flow with these last-minute money moves

If you want more money back from the ATO this year, there is still time for some handy deductions, but the clock stops at 11.59pm Friday.

Tick. Tick. Tick. The countdown to the end of the financial year is in full swing, and some last-minute money moves in the final two days of 2022-23 can potentially deliver big tax deductions.

Most people have missed the boat for making tax-deductible superannuation contributions because their super fund’s cut-off dates has passed, but lucrative opportunities remain for workers, investors and small business owners.

Accounting specialists say tax refunds can be boosted by spending money on deductible expenses in the final days of the financial year, but do not buy things you don’t need.

WORKERS

H&R Block director of tax communications Mark Chapman says people are entitled to claim a tax deduction for any expense incurred in earning an income.

“If you have incurred a work-related expense, and you have the paperwork to prove it, don’t hesitate to claim it,” he says.

“You can claim a tax deduction this year for expenses which wholly or partly relate to next year.

Get your tax deduction timing right for the end of the financial year. Picture: iStock

“So, if you have some spare cash, consider paying things like union fees, professional subscriptions and annual insurance premiums in advance in order to accelerate the deduction.”

Working from home deductions have changed this year but still enable people to claim for things such as energy use, internet expenses, mobile phones, stationery and work uniforms if they have records and choose the right deduction method, Chapman says.

But be careful: “If your deduction claims are found to be incorrect, you will be required to repay the tax avoided, plus pay interest. If the ATO believes that you have acted carelessly, a penalty between 25 per cent and 95 per cent of the tax avoided may also be charged”.

INVESTMENTS

Investors can make some fancy tax moves too. Prepaying interest on investment loans is one strategy, while the timing of asset sales can reduce tax payable on capital gains.

“If you’ve disposed of shares or any other form of investment and you know you’ve made a capital gain, take a look at your investment portfolio and consider disposing of any assets which you own which you know are sitting at a loss,” Chapman says.

“The resulting capital losses can be offset against the capital gain. Be careful, though, if you sell shares sitting at a loss and then buy them back in the new tax year. The ATO takes a hard line against so-called wash sales.”

People with self-managed superannuation funds do not have to worry about super fund cut-off dates for deductible contributions, and can pump money into their fund right up until June 30.

Donations to registered charities are an expense that can be paid at 11.55pm on June 30 and generate a tax deduction from 12.01am on July 1.

Infinite Experts accountant Lovelin Gandhi says laptop bags, work tools and protective shoes can all be bought now for a quick deduction.

“If there is any expense you can pay for before July, you may as well pay for it in advance to claim that additional deduction,” says Gandhi, who provides services on online platform Airtasker, which has seen a 30 per cent jump in demand for accountants.

“With Aussies with multiple jobs hitting a record high, tax accountants are warning those with second, third jobs and side hustles to ensure all income is included as well as a record of deductions,” she says.

BUSINESS OWNERS

Gandhi says small business owners have until Friday night to spend money to take advantage of the temporary full expensing rules that can provide instant large deductions.

The ATO says to be eligible for the immediate deduction, the asset must already be in use.

“Even if you’ve paid a deposit or received an invoice, the asset must be installed ready to use by 30 June 2023. If the asset is not installed ready for use by the deadline, you may still be able to claim deductions under the general or simplified depreciation rules,” ATO Assistant Commissioner Emma Tobias says.

Accounting firm Hot Toast’s founder, Sarah Lawrence, says before spending money just to save tax, think it through.

“Remember, paying tax isn’t a negative thing – it’s a sign of profitability,” she says.

“Work with your accountant to evaluate your potential tax obligation carefully and determine whether depleting your cash reserves is indeed a wise move.”

Infinite Experts accountant Lovelin Gandhi says some business tax breaks end on Friday.

THINGS YOU DIDN’T KNOW YOU COULD CLAIM

• A handbag used for work purposes to carry iPads, calculators, phones and paperwork should deliver a tax deduction, just like a briefcase.

• Income protection insurance held outside of super is tax deductible, but life insurance, trauma insurance and total and permanent disability insurance cannot be claimed.

• Memberships and subscriptions if you are a member of a professional or trade association, including trade union fees and subscriptions to professional magazines.

• Self-education expenses if the course is related to your current job.

• Garden gnomes and decorations adding street appeal to a rental property are among the long list of deductions available to real estate investors.

Source: H&R Block

Originally published as 2023 tax deductions can flow with these last-minute money moves