EOFY Tax Planning Checklist

We are fast approaching the end of the 2024 financial year!   

As we approach the conclusion of the financial year, it's a good time to highlight the variety of tax planning opportunities that can greatly affect year-end financial decisions. We've put together a collection of strategies aimed at tackling different tax implications. These strategies are meant to help make informed choices and improve financial results as the fiscal year ends.

Deferral of Income

If cashflow and business reality allows, consider sending sales invoices in the new financial year. Invoices issued after 30 June would be accounted for as sales in the new financial year.

Income Received in Advance

If your business has received any deposit on the work that has not been started or delivered, please ensure that you record such transactions as Deposits received rather than as income.

Income received in advance can be deferred until the services are provided.

Bad Debts

Review your trade debtors list prior to 30 June and write off any debtors which are unlikely be recovered. This ensures that you are not paying tax on the income that you are unlikely to recover.

Timing of Expenses

If you are waiting on any bills from suppliers, request all bills prior to 30 June so you can claim the expenses in the financial year. For business owners, expenses are deductible when there is a presently existing liability to pay the expense.

Prepaid Expenditure

Are there any expenses that you can prepay prior to 30 June such as rent, insurance, interest…etc. Prepaid expenditure incurred by a small business entity is immediately deductible if the eligible service period for the expenditure is 12 months or less.

For this purpose, an entity would be a small business entity if the aggregated turnover is less than $50 million.

Trading Stock

Prepare for a stock take on 30 June. Should there be any stock that are obsolete, record and write them off.

Capital Gains Tax (CGT)

Capital gains tax is calculated based on the profit that you made on sale of CGT assets.

If your portfolio of investments has assets that has declined in value since you have purchased, you could consider selling those investments prior to 30 June so you can offset against your capital gains.

If you would like to keep those investments, you can sell then buy back.

Superannuation Contribution – Timing of payment

Superannuation contribution is deductible when the contributions are received by the superannuation fund by 30 June.

Rather than paying the June 2024 quarter superannuation contribution in July, you can bring the deduction in 2024 financial year by paying all superannuation contribution for the quarter ended 30 June 2024 before 30 June 2024.

If you process the superannuation contribution via accounting program such as Xero, Intuit, Reckon, MYOB, and Quickbooks, please note that most of the providers require superannuation contribution to be processed by mid June 2024.

Superannuation Contribution – Maximising deduction

For 2023-24 financial year, Individual taxpayer can make deductible concessional contributions (inclusive of employer contributions already made on their behalf) of up to $27,500.

Concessional Superannuation contribution cap will increase to $30,000 for 2024-25 year.

Superannuation Contribution – Carry forward unused Concessional Contributions

If your total superannuation balance was less than $500,000 as at 30 June 2024 and you have not contributed up to the concessional contribution cap since 2018-19 year,

Carry forward rules allow you to make extra concessional contributions – above the general concessional contributions cap – without having to pay extra tax.

The carry forward arrangements involve accessing unused concessional cap amounts from previous years. An unused cap amount occurs when the concessional contributions you made in a financial year were less than your general concessional contributions cap.

Instant Asset Write Off

Please note that these measures are not yet law.

Small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2025.

The $20,000 threshold will apply on a per asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $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 after that.

The Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Bill 2023 containing the Small Business Support – $20,000 instant asset write-off measure for the 2023–24 income year is currently before Parliament.

If the law does not get passed, the threshold applicable for small business will remain at $1,000.

Company – Income Tax Rate

Base Rate entity companies (companies that has less than $50 million in aggregated business turnover with less than 80% of income as passive income for the 2023/2024 year) will pay tax at 25%.

Companies other than base rate entity companies will pay tax at 30% of their taxable income.

Company Loans – Division 7A

Any payments, loans or debts forgiven from private companies to shareholders and their associates could be deemed to be an unfranked dividend.

If you have drawn money from the company rather than as wages or dividends, it would be ideal to repay the money back into the company prior to 30 June.

If such loans can not be fully paid, the loans need to be documented (loan agreements) and minimum repayment and interest need to be calculated and processed.

Corporate Beneficiaries with Retained Earnings

For taxpayers that have corporate beneficiaries with retained earnings from prior years, consider establishing a new corporate beneficiary to receive distributions of active business income.

This ensures that the corporate beneficiary can continue to frank dividends declared from its retained earnings at 30% rather than 25%.

Restructuring Inefficient Business Structures

We often see that the initial structure that was set up when the business was first established is often no longer effective due to changes in business circumstances or personal circumstances.

There are various tax rollovers and tax concessions that can be used to restructure inefficient business structures without triggering any Capital Gains Tax Implications.

It is never too late to consider the change and implement the new structure as required.

Trust Distributions

Trustees of discretionary trusts need to determine how the income of the trust will be distributed to beneficiaries before 30 June by way of trustee resolution.

We will further provide guidance to our trust clients about the trust distributions before 30 June.

We hope this information is of value to you. If you have any questions or need assistance, don't hesitate to reach out!

Thank you for your continued support and trust in JY!