The financial year is drawing to a close, which means tax time is just around the corner! 

It is now time to start thinking about whether your year-end tax planning is in order. Tax planning requires not only a consideration of income and deductions for the year but also looking forward to opportunities ahead of 1 July.

Tax planning is a crucial aspect of your personal and business finance, aimed at minimising tax liability while ensuring compliance with current laws. When completing your tax planning, we have put together a list of things to consider.

Instant asset write-offs

The limit for instant asset write-off is $20,000 and applies on a per asset basis.

Under this provision, small businesses with an aggregated turnover of less than $10 million may claim an immediate deduction for eligible depreciating assets costing less than $20,000, provided the assets are first used or installed and ready for use by 30 June 2025.

ATO interest charges no longer tax deductible

From 1 July 2025, the General Interest Charge (“GIC”) and Shortfall Interest Charge (“SIC”) will become non-deductible, significantly affecting taxpayers with overdue tax liabilities or tax shortfalls, by increasing the after-tax cost of ATO interest charges. GIC (currently at 11.17% p.a.) applies to various unpaid tax and superannuation liabilities, accruing daily. SIC (at 7.17% p.a.) is imposed on tax shortfalls from amended assessments and accrues daily from the original due date until the amended assessment is issued. While the charges accrue daily, they are often imposed on a single day, meaning their deductibility may depend on whether the notice of assessment is issued before or after 1 July 2025. Certain business taxpayers with tax debts that have been assessed but remain unpaid should consider refinancing these tax debts which may result in replacing non-deductible GIC with deductible interest expenses, or bringing forward the repayment of tax liabilities to avoid accruing further non-deductible interest

Review bad debts

Review your list of debtors to identify any amounts unlikely to be recovered. Writing off these bad debts before the end of the financial year can allow you to claim a tax deduction for that period.

Keep in mind, the debt must be truly unrecoverable—not just uncertain—and the decision to write it off needs to be properly documented before the financial year ends to qualify for the deduction.

Working from home deductions

The ATO has released updated guidance on an approved method individuals can use to calculate deductions for working-from-home expenses. This provides an alternative to the actual expenses method, which involves calculating the specific additional costs incurred while working from home.

From 1 July 2024, taxpayers can use the updated fixed rate of 70 cents per hour (increased from 67 cents) to claim deductions for working-from-home expenses, provided certain conditions are met. To be eligible, the individual must:

• Be performing substantial employment duties or actively running a business from home;
• Have incurred additional running costs that are deductible; and
• Maintain appropriate records to support their claim.

Deductions for superannuation contributions

For employers to claim a deduction for superannuation contributions (concessional contributions), the payment must be received by the fund on or before 30 June.

The Superannuation Guarantee (SG) rate rose to 11.5% of an employee’s ordinary time earnings from 1 July 2024 and is set to increase again to 12.0% starting 1 July 2025.

Super contributions

From 1 July 2024, the general concessional contributions cap rose to $30,000 for all individuals regardless of age. It was previously $27,500.

Many individuals may have unused contribution caps from previous years, which can offer a valuable chance to both enhance your tax position and increase your superannuation savings.

Individuals who want to claim a deduction for personal superannuation contributions must submit a notice of intent to their fund and receive acknowledgment before either lodging their tax return or by 30 June of the following income year, whichever comes first.

Company tax and franking rates

Australia now has a two-tiered company tax rate, with Base Rate Entities subject to a 25% tax rate, and all other companies subject to the default 30% tax rate. Similar rules apply to the franking of dividends. Some companies may have historically paid tax at 30%, but can only frank dividends at 25%, resulting in the risk of a permanent franking surplus.

Ensure that each group company is reviewed prior to declaring dividends, to confirm the correct franking rate. Dividends may be able to be delayed, or brought forward, to achieve a different franking rate outcome.

Complying with Division 7A

Transactions involving a company and an associated entity (individual, trust or partnership) to which Division 7A might apply (e.g. a payment, a loan, forgiveness of a debt or use of the company’s assets) should be carefully considered to determine whether a deemed dividend arises and, if so, what action could be taken to avoid that consequence. Ensure that Minimum Yearly Repayments (“MYRs”) are made before 30 June in respect of complying Division 7A loans made in prior years. Where dividends need to be declared by 30 June to enable MYRs to be made, ensure that all necessary resolutions are made, and any assignment and offset agreements entered into before year end.

Anti-avoidance rules

Finally, it is worth noting that tax planning should be tempered by an awareness of the many anti-avoidance provisions and integrity rules available to the ATO.

What are the next steps?

It is critical that clients consider their position and how the rules apply. Clients should contact CloudForce to review their situation and determine what action is required before 30 June.

It is also important to start getting your documentation ready for your 2024/25 Tax Return, make sure you have detailed your income and expenditure, as well as completed items such as your logbook (if applicable) so that your 2024/25 Return can be prepared as efficiently as possible.

 

Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.