The end of the financial year is fast approaching. The following is a list of the EOFY tax planning matters you may wish to consider.
Small Business Tax Saving Strategies
In order to minimise liability to taxation for the current year, the general strategy options for most taxpayers are as follows:
- Delay deriving assessable income;
- Pay wages before 30 June;
- Make superannuation contribution payments for the June quarter before 30 June (It is safe to pay the super contributions to the Super Clearing Account by 23 June to allow processing time for the employees’ super funds to receive the payments by 30 June);
- Consider instant asset write off for assets purchased during the financial year;
- Pre-pay expenses before they are due (e.g. Insurance premiums, membership of organisation, travel, advertising and interest);
- Bring forward repairs and maintenance by 30 June;
- Write off bad debts;
- Make donations – donations of $2 or more to a deductible gift recipient are tax deductible.
Business Checklist
- Finalisation of Single Touch Payroll by 14 July;
- Preparation of Taxable Payment Annual Report by 28 August (building and construction services, cleaning services, courier services, security services & IT services only);
- Preparation of Stock Take Report as at 30 June;
- If you use a car in producing your income you may need to:
- Record Motor Vehicle Odometer readings at 30 June;
- Prepare a 12-week log book if your existing one is older than 5 years.
- If your Directors Loan Account in your business is in debit, you must either:
- Fully repay the loan before the earlier of the due date for lodgment and the date of the lodgment of the lender’s tax return for the year of income or
- Have Division 7A loan agreement in place.
- Dates and cost of any purchases made during the year and/or proceeds from the sale of any plant equipment or property and details of any finance arrangements including hire purchase or chattel finance;
- details of any government-related payments, grants or rebates (including support payments or grants);
- Copy of statements for all loans owed by the business (and total interest paid for the year), with balances as at 30 June.
Family Trust
If you are a trustee and you make beneficiaries of a trust entitled to trust income by way of a resolution,
- The trustees must make the resolution and have evidence of this by 30 June at the latest;
- The trustee must lodge a TFN report with the ATO by the last day of the month following the end of the quarter where the distribution is either paid or resolved to be paid to a new beneficiary for the trust.
Instant Asset Write-Off Threshold of $20,000 extended
For small businesses (group-wide turnover less than $10 million), the cost of eligible assets costing less than $20,000 (excluding any GST credit) that are first used or installed for use between 1 July 2023 and 30 June 2024 will be fully deductible. The threshold of $20,000 will apply on a per-asset basis. Effectively, small businesses will be able to claim a tax deduction for the full cost of multiple assets. The Government will extend this initiative for a further year, until 30 June 2025.
Assets costing $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
Please be aware that a car limit applies to the cost of passenger vehicles designed to carry a load less than one tone and fewer than 9 passengers. The car limit is $68,108 for the 2023-24 year. You cannot claim the excess cost over the car limit. The limit applies whether the vehicle is new or second hand.
Energy bill relief
The Government will provide further energy relief to eligible small businesses in the form of a $325 rebate to be applied to energy bills in quarterly instalments from 1 July 2024. Rebate eligibility is contingent on small businesses meeting their state or territory’s definition of a ‘small customer’ as determined by their annual electricity consumption threshold. The thresholds differ across states and territories and are based upon annual consumption in MWh. Eligible small businesses will receive their energy bill rebate automatically and won’t be required to take further action.
Small business skills and training boost
An eligible business will be able to deduct an additional 20% of expenditure incurred on external training courses provided to its employees. The training course must be provided to employees in Australia or online and delivered by entities registered in Australia. The deduction will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
Small business energy incentive
Businesses with an annual turnover of less than $50 million will receive an additional 20% deduction on investments that support energy-efficient practices and implementing energy-saving technologies. The purpose is to encourage making investments like electrifying heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.
Up to $100,000 of total expenditure will be eligible, allowing a maximum bonus tax deduction of $20,000 per business.
Eligible assets or upgrades will need to be installed and ready for use between 1 July 2023 and 30 June 2024 to qualify for the bonus 20% deduction.
Compulsory Superannuation Guarantee Increase
From 1 July 2024, the Superannuation Guarantee (SG) rate for compulsory superannuation contributions by employers will increase from the current 11% to 11.5%. The SG rate will continue to rise by 0.5 percent each year until it reaches 12% by 1 July 2025.
From 1 July 2026, employers will be required to pay an employee’s superannuation at the time that they pay their wages. This change will affect all employers, but the Government has provided a three-year lead-in period in order to allow employers adequate time to adjust their systems accordingly.
Recast Stage 3 tax cuts
The recasting of the State 3 tax cuts was legislated earlier this year, with the changes coming into effect from 1 July 2024. These changes will:
- reduce the 19 per cent tax rate to 16 per cent
- reduce the 32.5 per cent tax rate to 30 per cent
- increase the 37 per cent tax threshold from $120,000 to $135,000
- increase the 45 per cent tax threshold from $180,000 to $190,000.
Crystallise capital losses
A taxpayer with realised capital gains would sell some of their shares that have unrealised losses to make those losses realised and offset current year capital gains by 30 June. Be mindful of the “wash sales” prohibition. If you were to sell shares, and then repurchase the same, or similar amount back in a short period of time, this may be classified as a wash sale.
Defer capital gains
Consider taking advantage of lower personal tax rates that apply in 2024-25 by deferring the realisation of capital gains beyond 30 June 2024.
Energy bill relief
From 1 July 2024, all Australian households are eligible for a $300 credit that will be automatically applied in quarterly instalments to their energy bills. Households in embedded networks (such as caravan parks, retirement villages, etc.) will be eligible for an equivalent rebate through an application to their state or territory government.
Personal Super Contribution
From 1 July 2017, most people, regardless of their employment arrangement, will be able to claim a full deduction for personal super contributions they make to their super until they turn 75.
You may be eligible to claim a tax deduction for your personal super contributions up to $27,500. If you wish to claim a tax deduction for personal contributions, you must complete and lodge a ‘Notice of intention to claim a tax deduction’ with your super fund and have this notice acknowledged (in writing) by your fund. From 1 July 2024, the concessional contributions cap will increase from $27,500 to $30,000.
Please note that the contributions that you claim as a deduction will count towards your concessional contributions cap ($27,500, including superannuation guarantee, additional employer contributions and any salary sacrificed contributions). If you exceed your cap, you will have to pay extra tax and any excess concessional contributions will count towards your non-concessional contributions cap.
However, your cap may be higher if you did not use the full amount of your cap in earlier years. This is called the carry-forward of unused concessional contributions. You can check your available concessional contributions cap on ATO online services (accessed via myGov).
Super Co-contribution
If you’re a low or middle-income earner (with taxable income less than $58,445 for 2023-24FY) and make personal (after-tax) contributions to your super fund, the government also makes a contribution based on 50% of your contributions up to a maximum amount of $500.
Commonwealth Parental Leave Pay Scheme
On Thursday, 7 March 2024, the government announced alongside the release of the Working for Women strategy, from 1 July 2025 it will pay superannuation on the government-funded Paid Parental Leave (PPL) which will be administered by the ATO.
Additional tax on higher super account balance
From 1 July 2025, an additional 15% tax on the “earnings” will apply to individuals with a Total Superannuation Balance (TSB) of more than $3 million on any subsequent 30 June.
The additional tax will be assessed to the individual, who can pay it personally, or choose for the tax to be paid from their superannuation fund.
Individuals with a TSB balance of less than $3 million at 30 June in a year will not be affected.