As the end of the 2024 financial year draws closer, now is the perfect time to start thinking about ways to potentially reduce your taxes and implementing year-end tax planning strategies. We have put together a list of items worthwhile considering and taking advantage of before 30 June 2024.
Prepay deductible expenses – Pay any expenses that are tax deductible before 30 June to bring forward deductions to the current financial year. This can include things such as subscriptions, insurance premiums, interest on investment loans or professional membership fees. The tax laws favour businesses over employees as generally there are more concessions, deductions available to businesses than there are for employees. For businesses, this is also dependent on whether you report on an accruals or cash basis.
For eligible small business owners, consider & be aware of the following:
- Businesses with an aggregated turnover of less than $10 million can immediately deduct the business portion of the cost of eligible depreciating assets costing less than $20,000. Purchasing these assets & ensuring they are ready for use before 30 June 2024 can qualify you for a 2024FY tax deduction.
- Review your fixed asset register against the physical assets of your business and write off any plant or equipment that is obsolete or no longer in use.
- Consider your old receivables, are they recoverable? If not, write off your bad debts to obtain the tax deduction assuming you are reporting on an accrual’s basis for tax purposes.
- Complete a stocktake as at 30 June 2024.
- The super guarantee percentage increases from 11% to 11.5% from 1 July 2024.
Prepaid income – For business owners, if deposits have been paid by customers for services yet to be performed or products yet to be delivered, there is a possibility these funds can be treated as prepaid income which would result in the income being deferred into the next financial year. This would assist in minimizing the business taxable income for the 2024 financial year and as a result minimise the income tax liability.
Planning to retire, or stop working? – if so, consider deferring your plans to stop working until after 1 July 2024. Any lump sums you receive from your employer such as payments for accrued annual and long service leave will be taxed in the year they are received. If your taxable income is likely to drop in the 2025 financial year, deferring leaving work may result in a lower amount of tax being payable.
Superannuation contributions – If you are going to make superannuation contributions, ensure you are eligible to do so. For super contributions to be counted towards the current financial year, they need to be deposited into your superfund account by 30 June 2024. Superannuation contributions are tax deductible in the financial year they are paid and receipted by the superfund. Ensure you adhere to the relevant contribution caps and ask us about the ‘’carry forward unused concessional contributions’’ that may be available to you.
Contribute to your spouse’s superannuation – Consider contributing to your spouse’s superannuation fund, especially if they have a low income or are not working, to qualify for a tax offset and potentially reduce your overall tax liability.
Family/discretionary trusts – Make sure that any beneficiaries you intend on distributing profits to from your Trust are eligible under the trust deed & ensure you have your profit distribution resolutions in place by 30 June 2024. Section 100a also needs to be considered.
Investment properties – Obtaining a depreciation report prepared by a quantity surveyor can bring tax advantages. Included within the depreciation report are depreciation calculations on the various depreciable assets as well as the building. Note also, the depreciation calculations span across numerous financial years.
Private health insurance – having your own private health insurance cover may deliver a number of benefits including:
- Eligibility to receive the private health insurance rebate on premiums paid;
- Avoiding the Medicare levy surcharge; and
- Avoiding the lifetime health cover loading if the insurance is taken out before turning 31.
Superannuation pensions – For those drawing a superannuation pension, you need to ensure the minimum pension is withdrawn from your superfund by 30 June 2024.
Rent to your superfund – If your business is renting commercial premises from your own SMSF, ensure commercial rent is being paid & that the lease is up to date.
Donations – if you intend on making any donations ensure they are paid by 30 June 2024 and generally the organisation needs to be a deductible gift recipient (DGR) for it to be 100% tax deductible.
Company tax rate – A reminder the company tax rate for small businesses is currently 25%. Otherwise, it remains as 30% for those companies that are not classified as ‘’small businesses’’.
Capital gains tax – If you have sold any real estate, cryptocurrency or shares that fall under the capital gains tax (CGT) provisions, note that the contract date is when the asset is considered to be sold for tax purposes not the settlement date.
Other superannuation matters – There are a number of other measures in relation to superannuation such as the first home super saver scheme, $1.9mil general transfer balance cap, downsizer contributions etc. – contact us to discuss.
Bookkeeping software – For those running bookkeeping software, ensure you review what you currently have in place and account for the impact of the upcoming tax changes on you or your business. Ensure the software is up to date along with the relevant rates embedded within.
Investment structures – Review your business structure and personal assets, and where your investments are held. Some structures can take advantage of reduced or capped tax rates. For example, a company investment structure is currently capped at a 30% tax rate, which can make a big difference if your investments are generating significant income.
Working from home – A deduction is available for fulfilling employment duties while at home. Two methods are available: the revised fixed rate method or the actual cost method. Ensure the relevant records are kept.
Government grants – It is vital for businesses to ensure they itemise these transactions as part of the bookkeeping process. Some of these items are treated as “tax free’’, for example certain state grants and we want to avoid businesses being assessed on tax free income.
Maintaining complete records – there is nothing more frustrating than not being able to find receipts and payment records when tax time arrives. Consider using an app or other web-based solutions for recording expenses and maintaining your vehicle logbook.
Tax planning is an essential part of financial management and needs to be carefully considered to suite your individual financial circumstance, needs and objectives. It is important to always seek professional advice when you consider any of the points listed above. If you have any questions about the strategies mentioned in this email or would like to discuss opportunities tailored to your situation, please don’t hesitate to contact us.
