Imagine what you could do with the tax savings?
- Reduce your home loan
- Top up your super
- Save for a holiday
- Buy an investment property
- Pay for your children’s education
- A new car!
Here is a guide to the strategies you can use to minimise your business tax.
See also Key Dates for the 2024 tax season
IS YOUR BUSINESS A “SMALL BUSINESS ENTITY”?
Small businesses can access a range of tax concessions from the Australian Tax Office. To qualify as a “Small Business Entity”, the business must have an aggregated turnover (your annual turnover plus the annual turnover of any business connected/affiliated with you) of less than $10 million and be operating a business for all or part of the 2024 year.
REDUCTION IN COMPANY TAX RATES
The 2024 company tax rate for businesses with less than $50 million turnover is 25% if 80% or less of a company’s assessable income is “passive income” (such as interest dividends, rent, royalties, and net capital gains).
If you use a Trust structure, one strategy is to allocate profits to a “Bucket Company” and cap your tax at 25% for the 2024 year.
Note that: This company must qualify as a “base rate” entity to be eligible for the lower 25% company tax rate. Please discuss with us whether your company will qualify.
TAX STING – SALE OF ASSETS PREVIOUSLY 100% WRITTEN OFF
Until 30 June 2023, many businesses were able to claim 100% of assets purchased under the temporary full expensing or instant asset write-off tax laws.
When these assets are eventually sold, the amount received for it will be included in your income for the year, and any replacement asset you buy will generally be depreciated if it is $20,000 or more.
You may need to carefully plan for extra tax payable.
Tax Planning Part 1: Payroll and Super Planning
The concessional superannuation cap for 2024 is $27,500 for all individuals ($30,000 in 2025).Do not go over this limit, or you will pay more tax!
Note that employer super guarantee contributions are included in these caps. Where a concessional contribution is made that exceeds these limits, the excess is included in your assessable income and taxed at your marginal rate, plus an excess concessional contributions charge.
For the contribution to be counted towards the person’s 2024 contribution cap, it must be received by the fund by 30 June 2024.
Depending on your circumstances, there is now the opportunity to contribute catch-up contributions available from previous financial years. Contact us to see if you qualify.
AAG Wealth Management and Consulting Teams can help.
The ATO only allows tax deductions for super payments in the current financial year if the super fund receives them by the 30th of June.
So while your employees’ super payments for the June 2024 quarter aren’t due until 28 July 2024, bringing the payment forward can provide your business with a better tax deduction in the current financial year.
In our view, a business has this liability regardless of the timing of the payment, so paying before 30 June 2024 means you can claim the tax deduction in this financial year!
To claim the tax deduction for the June 2024 quarter, ensure that your employee’s superannuation fund receives the payment by 30 June 2024. We recommend paying the super by 21 June 2024 to allow time to process through the superannuation clearing houses to reach the end fund in time.
AAG Consulting Team can help.
If you have not paid your bonuses by 30 June, you may still be able to claim a deduction, provided you have an obligation to pay this. To substantiate this, ensure the amount is quantifiable and approved (via minutes), and the staff are notified of the bonus.
AAG Consulting Team can help.
Tax Planning Part 2: Plant and Equipment Review
The purchase of Tools of the Trade and other Fringe Benefits Tax-exempt items for business owners and employees can be an effective way to buy equipment with a tax benefit.
Items that can be packaged include handheld/portable tools of the trade, computer software, notebook computers, personal electronic organisers, digital cameras, briefcases, protective clothing, and mobile phones.
If structured correctly, the employer will be entitled to a tax deduction for the reimbursement payment to the employee (for the equipment cost), claim any GST input credit, and the employee’s salary package will only be reduced by the GST-exclusive price of the items purchased.
You should buy these items before 30 June 2024.
AAG Consulting Team can help.
Make payments for repairs and maintenance (business, rental property, employment) before 30 June 2024.
Tax Planning to Preserve Your Tax Deductions and other Obligations
- Prepayments – Immediate Deductions
- Prepay Income Protection Insurance Premiums
- Stock – Old Stock
- Bad Debts
- Deferring income
- Bring forward expenses
- Trustee resolution
- Franking and Dividends
- Private Company (“Div 7A”) Loans
- Skills and training boost for small business
- Investment Property Depreciation
- Motor Vehicle Logbook
“Small Business Concession” taxpayers can make prepayments (up to 12 months) on expenses (e.g. loan interest, rent, subscriptions) BEFORE 30 June 2024 and obtain a full tax deduction in the 2024 financial year.
AAG Finance Team can help.
Review your stock on hand and identify any obsolete stock. You should conduct a detailed physical stock take of all stock on 30 June. Retain your detailed stock sheets as part of your taxation records.
Talk to us about your different options for valuing Stock, and how they affect your tax payable.
AAG Consulting and Client Care Teams can help.
Review your Trade Debtors listing and write off all bad debts BEFORE 30 June 2024. Therefore, it is crucial to review your receivables to see what invoices (if any) should be written off as unrecoverable.
You will also need to factor in any GST adjustments that need to be made due to writing-off debt.
Prepare a management meeting document listing each bad debt, as evidence that these amounts were written off prior to year-end and enter these into your accounting system before 30 June 2024.
AAG Consulting and Client Care Teams can help.
The ability of a business to defer income will depend on each business, cash flows, and the type of income derived.
However, if possible, defer issuing further invoices and receiving cash/debtor payments until after 30 June 2024.
This strategy pushes tax payable to future years.
If possible, arrange for the Contract Date for the sale of Capital Gains assets, to occur after 30 June 2024.
The Contract Date is generally the key date for working out when a sale occurred, not the Settlement Date!
AAG Consulting Team can help.
Purchase consumable items before 30 June 2024. These include marketing materials, consumables, stationery, printing, office and computer supplies. Spend the money now and get the deduction this year.
AAG Client Care Team can help.
Trustees of discretionary or family trusts must make valid distribution Resolutions before 30 June to effectively distribute trust income to eligible beneficiaries.
Ensure that the Trustee Resolutions made in accordance with the Trust Deed and comply with your Trustee obligations are prepared and signed BEFORE 30 June 2024 for all Discretionary (“Family”) Trusts.
The ATO released several Tax Rulings that may affect trust distributions to adult children, so tax planning for 2024 will be vital for anyone using a Family Trust.
If you have not made a valid distribution by 30 June 2024, the Trustee may be liable to pay tax on the trust’s taxable income at the highest marginal tax rate.
Read more on these tax rulings here:
ATO’s aggressive stance on trusts and trust distributions
Avoiding extra tax with a Trust Distribution Resolution
AAG Consulting Team can help.
If you plan on paying any dividends in your company before the financial year-end, it is essential to ensure that you have met the documentation/notification requirements.
You must have sufficient Franking Credits to avoid paying Franking Deficits Tax later.
AAG Consulting Team can help.
Business owners who have borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by 30 June 2024.
Current year loans must be either paid back in full or have a loan agreement entered in before the due date of lodgement for the company return, or risk having it counted as an unfranked dividend in the return of the individual.
AAG Consulting Team can help.
Under the Skills and Training Boost, small businesses can also deduct an additional 20% of the expenditure incurred on external training courses provided to their employees.
This applies to eligible expenditures incurred between 29 March 2022 and 30 June 2024. The external training courses must be provided to employees in Australia or online and delivered by entities registered in Australia.
Some exclusions do apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.
AAG Consulting Team can help.
If you own a rental property and haven’t already done so, arrange for the preparation of a Property Depreciation Report to allow you to claim the maximum amount of depreciation and building write-off deductions on your rental property.
AAG Client Care can help.
Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2024. You should make a record of your odometer reading as at 30 June 2024 and keep all receipts/invoices for motor vehicle expenses.
An alternative (with no logbook needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.
AAG Client Care can help.
We are here to help
This is general advice only and does not consider your financial circumstances, needs and objectives.
Before making any decision based on this document, you should assess your circumstances, seek advice from your financial adviser, and seek tax advice from your accountants at AustAsia Group.
Information is current at the date of issue and may change.
Contact our Consulting Team today, well before the 30 June deadline, at (08) 9227 6300 or Contact Us for assistance in reducing your tax!
