The financial year is drawing to a close, which means tax time is just around the corner! To help you get ready for the new financial year, we’ve compiled a comprehensive list of practical tips and advice for this period. Whether you’re a business owner or an individual taxpayer, nobody wants to pay more tax than necessary.
While there are certain regulatory requirements and obligations that must be met by all businesses and income earners in Australia, there are also steps you can take to help legally minimise the amount of tax that you or your business are liable to pay.
Seeking expert tax planning advice from qualified and experienced tax accountants, such as our team at The Quinn Group, is the best way to ensure that you are taking advantage of every available opportunity for your specific circumstances.
Tax planning can be done at any point during the year, but with the end of financial year fast approaching, now is the ideal time to act. By seeking professional advice from us, you could potentially reduce your tax liability for the current financial year.
Our tax tips and action points cater to everyone; whether you’re seeking advice for small business tax tips, investment tax tips or individual tax tips, keep reading to discover what you should consider before the tax year ends.
Of course, this is not an exhaustive list of all the possible ways to legally minimise your tax and prepare for the end of the financial year. Rather, it is a general compilation of the most common items to be considered. Be sure to contact the team of tax accountants and tax lawyers at The Quinn Group for personalised advice tailored for your individual situation.
Tax Tips for Small & Medium Sized Enterprises (“SME”)
- Purchase business assets – The Government has announced that it will extend the $20,000 instant asset write off for small businesses until 30 June 2025. This measure allows for an immediate deduction for assets that are first used or installed ready for use by 30 June 2025. A $20,000 threshold, per asset, is effective for the 2024/25 financial year. If you are looking to purchase business assets in the near future, it may be prudent to take action in order to benefit from the immediate deduction. Assets exceeding the $20,000 threshold can be included in the general small business pool and depreciated at 15% in the first year of income, followed by 30% in subsequent income years. Additionally, the suspension of the five-year lockout rule for small businesses opting out of the simplified depreciation rules will be extended to 30 June 2025.
- Comply with Division 7A: The ATO is vigilant on businesses that use funds or assets of a company for their personal purposes. Any personal expenses that are paid by a private company in respect of a shareholder may be treated as a deemed dividend to the shareholder. Ensure that you understand Division 7A implication and are aware how to address it.
- Get rid of obsolete equipment: check your asset register and scrap any obsolete machinery or plant and equipment prior to 30 June and take advantage of an immediate write-off deduction.
- Conduct a stocktake: Take an inventory of your stock to identify slow moving or obsolete stock and write them off before 30 June.
- Pre-pay business expenses: small businesses can claim a tax deduction for certain business expenses that will be incurred within the next 12 months. You can pre-pay for expenses such as rent, insurance and subscriptions.
- Review your cyber security: A cyber security incident can have devastating impacts on an SME. Therefore, we recommend to familiarise yourself with the Essential Eight strategies developed by The Australian Cyber Security Centre (ACSC).
- Small Business Skills & Training Boost: The 20% deduction boost for skills and training will apply until 30 June 2024. Businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.
General Business Tax Tips
- Write off your bad debts: If you are carrying bad debts, now is the best time to review them. If you decide they are irrecoverable, write off any bad debts before 30 June so you can claim them as a deduction in the 2024 financial year.
- Review ATO Debts: review any outstanding debts that you have with the ATO and where necessary, engage with the ATO to manage those debts. Did you know that certain tax debts can now be made available on commercial credit reports, which could, in turn, negatively impact your credit rating?
- Pay your super contributions prior to 30 June: Whilst your employee superannuation contributions are not due until 28 July 2024, pay them before 30 June so you can claim a deduction this financial year. Payment after this date means you won’t be able to claim them until 2025 FY.
- Reconsider your business structure: Tax time is a good time to re-evaluate your current business structure. If you think you’re paying too much tax or are wanting to take on another partner/shareholder, speak to us before 30 June so that we can advise you of the advantages and disadvantages of each structure.
- State Payroll Tax: Under Payroll Tax legislation, all payments to subcontractors are subject to payroll tax unless an exemption applies. You should review your subcontractor payments to ensure that you are meeting your payroll tax obligations.
- Get ready for changes to superannuation guarantee: From 1 July 2024, the rate of compulsory superannuation contributions is increasing from 11% to 11.5%.
Tax Tips for Trusts
- Review your trust deeds: Make sure you comply with the requirements of your trust deed in declaring distributions to ensure the distributions are valid. Also, check your trust is still working as you expect it to, including making sure the person or entity that has the power to replace the trustee, known as the Appointer, is still the right person.
- Consider distributing up to $416 to minors (under the age of 18): You can distribute $416 tax free money to your child who is under 18 years of age for the 2024 FY.
Investments & Capital Gains Tax (CGT) Tips
- Get your rental deductions right: It’s critical that rental property owners have their books up to date and in order before 30 June. Make sure you are only claiming deductions for expenses incurred for the period when the property is rented or available for rent and in the year of the tax return.
- Arrange tax depreciation schedule: to increase deductions for your rental property engage a registered quantity surveyor to prepare a tax depreciation schedule for the property. We can help you with this.
- Minimise the CGT you pay on investments: When calculating the value of assets for CGT purposes, be sure all relevant costs of acquiring the asset – purchase price, capital improvements, stamp duty, legal costs, advertising expenses and commission fees – are taken into account to ensure the assessment is as low as possible.
- Timing of Capital Gains Tax (CGT) Events: If you are planning to sell an asset, you should consider whether to defer the sale until after 30 June. Depending on your individual circumstances, the timing of the disposal could have significant tax implications.
- General 50% CGT discount: When selling an asset, be aware of the 50% CGT discount that is available for assets that have been held for at least 12 months.
- Transfer ownership of investment: Put income earning investments like term deposits and shares into a family member/spouse’s name with a low income.
Individual Tax Tips
- Tax Rates are decreasing from 1 July 2024: the changes won’t affect anything for the current financial year, but it is important to be aware of how the changes may affect you next year.
From 1 July 2024, the tax cuts 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 threshold above which the 37 per cent tax rate applies from $120,000 to $135,000
- increase the threshold above which the 45 per cent tax rate applies from $180,000 to $190,000
You can see a comparison of the current brackets and rates and the new figures here.
- Appointment of tax agent: If you don’t already have a tax agent, be sure to appoint one before 31 October 2024. We can help you in this regard.
- Additional Superannuation Contributions: Consider making voluntary contributions to your superannuation in addition to the compulsory payments made by your employer. Any additional payments that you make are tax deductible. Be aware of the concessional superannuation contribution cap of $27,500. From 2025 FY, the cap will increase to $30,000.
- Reduce your taxable salary by packaging FBT exempt items: Consider salary packaging a laptop, iPad or phone if you are using them predominately for work-related purposes.
- Gifts and Donations: Is there a registered charity that is particularly close to your heart? Make your donation of $2 or more to a charity that is registered with the ATO before June 30 as it’s tax deductible!
- Deduct working from home expenses: Tougher guidelines came into effect at the beginning of 2023 so make sure that you are aware of the new requirements for claiming work from home deductions to ensure that you are able to correctly make your claim.
- Reconsider income protection insurance arrangements: Review your current level of protection and determine whether an increase may be appropriate in regard to a pay increase or additional business profits. This insurance is tax deductible.
- Know your deductions: This includes work-related expenses such as uniforms, tools, and equipment, as well as self-education expenses directly related to your current job.
- Prepay expenses: Consider prepaying deductible expenses, such as interest on investment loans or professional memberships, to bring forward the tax deduction into the current financial year.
- Optimise your tax offsets: It pays to know what offsets you are entitled to, as they directly reduce your tax payable and can add up to a sizable amount. Depending on your circumstances, you may be eligible for the following offsets:
- low income offset.
- offset for superannuation contributions made on behalf of a low income spouse.
- Delay income until after 30 June 2024: Delaying income until after the 30 June 2024 may help reduce the amount of tax for individual taxpayers, especially if you’re expecting a bonus or other one-time income. For example, if your salary is $90,000, delaying any bonus income until after 30 June 2024 may save you 2.5% in tax.
- Start your 2024 motor vehicle log book: If you need to maintain a log book for 2024FY for a newly purchased car, or your logbook for your existing vehicle is more than 5 years old you must start a new log book before 30 June 2024 in order to apply it to 2024FY.
- Take advantage of carry forward unused contribution cap amounts: Carry forward unused contribution cap amounts can potentially contribute more than the current year’s cap to your superannuation for future years. This can be beneficial for catching up on contributions or maximising your superannuation savings closer to retirement. If you have unused concessional cap amounts from previous years, you may be able to carry them forward to increase your contribution caps in later years. You’re eligible to do this if you have both:
- A total superannuation balance of less than $500,000 at 30 June of the previous financial year.
- Unused concessional contributions cap amounts from up to 5 previous years.
The unused cap amounts you can carry forward depends on the amount you have contributed in previous years, starting from 2018–19. You can carry forward unused cap amounts from up to 5 previous financial years, including when you were not a member of a super fund.
Unused cap amounts are available for 5 years and expire after this. For example, a 2018–19 unused cap amount that is not used by the end of 2023–24 will expire.
Schedule a Tax Planning Meeting – Legally Minimise your Tax
As both an accounting and legal firm, The Quinn Group offers a range of taxation, accounting and legal services in one convenient location. Our taxation specialists can provide tailored tax, and tax planning, advice to legally minimise the amount of tax that you are required to pay.
Call us on 1300 (QUINNS) or + 61 2 9223 9166 or submit an online enquiry form to schedule a tax planning appointment.
