12+ Year End Tax Planning tips

It is hard to believe that the end of the financial year is within sight. Below are some important tax planning opportunities to consider in the lead-up to 30 June 2024.

$20K instant asset write-off for small businesses in FY24 extended to 30 June 2025.

$20K instant asset write-off concession is extended for another 12 months to 30 June 2025.  The $20k limit is currently in place from 1 July 2023 to 30 June 2024.  This measure allows small businesses with turnovers capped at $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose .

Resident tax rates and thresholds improved – from 2024-25

Individual income tax rates are reduced from 1 July 2024.  The 19% tax rate has been reduced to 16%; the 32.5% tax rate has been reduced to 30%; the 37% tax rate threshold has been increased from $120,000 to $135,000; and the 45% tax rate threshold has been increased from $180,000 to $190,000. More information here at taxcuts.gov.au

Superannuation contributions*

  • Employers wishing to get the full tax deduction in FY24 for Superannuation Guarantee contributions, should ensure those contributions are received by the employees funds by 21 June 2024.
  • Individuals wishing to make contributions up to the concessional cap ($27,500) and/or non-concessional cap ($110,000, or up to $330,000 “brought forward”) should do so by 21 June 2024.
  • Consider Carried forward unused concessional caps – With a superannuation balance of less than $500,000 on 30 June of the previous financial year, you may contribute more than the $27,500 concessional contribution limit for any unused amount from the year ended 30 June 2019.  Unused amounts are available for a maximum of 5 years.

* Note this is general tax advice only and you should seek professional financial advice specific to your circumstances regarding superannuation contributions

Division 7A loan agreements and minimum repayments

Where individuals and/or trusts have borrowed money from a private company in the year ended 30 June 2023, the loans must be fully repaid or be documented in a Division 7A-complying loan agreement before the due date of the company’s 2023 income tax return.

Trust Distribution planning and Minutes

Trust distribution minutes should be prepared and signed before 30 June. Distribution planning may be required if you are planning on distributing capital gains and/or franked dividends to different beneficiaries.  Planning also needs to be made in the context of the recent ATO guidance on Trust distributions.

Sale of capital assets

Consider postponing the sale of assets with unrealised gains and bring-forward asset sales with unrealised losses.

QBCC Financial Requirements

Ensure your entity’s QBCC minimum financial requirements of Net Tangible Assets and Current Ratio are met by 30 June 2024.

Consider your business structure

As the Company tax rate is now 25%, many businesses are considering the move to a Company from their current structure.  With current tax and duty rollover exemptions,  you may consider this an opportunity to change or update to your business entity structure for FY25.

Other key tax planning considerations;

  • Bad debts must be written off in your accounts before 30 June
  • Defer invoicing and the receipt of income
  • Prepay expenses for up to 12 months –rent, insurance, interest, subscriptions.  Small businesses (turnover less than $10m) can claim expenses prepaid up to 12 months in advance.
  • Wages paid to family members must be reasonable for the work performed.
  • Review valuations of trading stock in the lead up to 30 June. Best practice is generally to value stock at the lower of cost or market selling value.
  • Loans, payments and debts from Private Companies to their shareholders and associates will require minimum loan repayments to minimise deemed dividend income. Shareholders and entities should consider repaying loans and/or making minimum loan repayments on loans by 30 June 2024.
  • Self-Managed Superannuation Funds in pension mode should ensure the minimum pension amounts have been paid to members in the year ended 30 June 2024.
  • If your business is trading through a Discretionary Trust and 2024 has been a large income year, consider the use of a “Bucket Company” to establish if needed by 30 June 2024.
  • Realise capital losses by 30 June to offset FY24 capital gains.
  • Review your asset register to write off any obsolete or destroyed items.
  • Staff Bonuses.  For accrued staff bonuses to be deductible in the 2024 tax year the decision to pay the bonus and the determination of the bonus must be made and documented prior to 30 June 2024.