General tax planning tips from Holmans for the year Ending 30 June 2024
Do I need to do Tax Planning?
The end of financial year is fast approaching and its generally time to consider whether there are actions you can take prior to 30 June to minimise your tax liabilities or just to get a handle on potential group tax liabilities so you know how much of your cash at bank at the end of the year is yours v what you’ll owe the ATO.
Tax planning provides an opportunity to assess potential tax liabilities and provides the opportunity to implement tax minimisation strategies pre 30 June. After 30 June, your accountant is simply recording history and can’t do anything proactive to help reduce tax, so we highly recommend reaching out to your accountant ASAP.
Purchasing Assets Under $20k - The Small Business Immediate Asset Write Off limit has changed! Small businesses with less than $10m turnover will receive an Instant Asset Write-Off (IAWO) for each eligible asset costing less than $20k. This write off is installed and ready for use between 1 July 2023 and 30 June 2024. For assets valued at $20k or more, no immediate deduction is available and will depreciated over the life of the asset.
Prepayment of Expenses
Small businesses may claim a deduction for prepaid expenditure where the service will be provided within 12 months of year end (so by 30 June 2025). Some things which you may be able to prepay and claim as a tax deduction in the current year are insurance premiums, potentially interest (chat to your bank), accounting fees, Subscription Fees (Resly Fees), Website Fees, etc.
Employee Superannuation
Ensure all employee superannuation is paid (and receipted by the various super funds) prior to 30 June 2024 to benefit from the tax deduction in the 2024 tax year i.e. pay ahead of the due date of 28th July.
Personal Superannuation Contributions
If you are considering making personal superannuation contributions and would like to claim as a tax deduction, you need to ensure the payments are within your contributions threshold (including any employer super) and that they are received by your fund(s) on or before 30 June 2024.
This year the concessional contribution limit is $27,500.
Also additionally, if you are eligible and have a superannuation balance of less than $500,000 and haven’t reached the concessional contribution limit in the past 5 years, you may be able to contribute even more (called the carry-forward rule) and make a ‘catch-up’ contribution, being the ‘unused’ portion of the 2019, 2020, 2021, 2022 & 2023 concessional limits.
You should verify the amount you are entitled to contribute with your superannuation fund or accountant PRIOR to making any contributions to avoid adverse tax consequences and potential penalties.
Note, the 2019FY will drop off from next financial year, so use it this year, or lose the opportunity to contribute extra to super. If you are in a position to utilise the unused cap, and make a catch-up concessional contribution to super, this is a great opportunity to do so.
Rental Properties
Do you have a rental property? Consider commissioning a Quantity Surveyor to prepare a tax depreciation report to allow you to claim the Building Write-Off and Plant & Equipment Write Off, if the property was constructed after 18 July 1985. Note, claiming Capital Works deductions may have Capital Gains Tax Implications and strongly recommend you chat to your accountant.
Electric Vehicles Fringe Benefits Tax (FBT) Exemptions
Generally, if a vehicle is owned by a company or trust, and the company makes the vehicle available for private use, the private use generally attracts Fringe Benefits Tax. To negate any Fringe Benefits Tax, a "Reimbursement" is accounted for from the individual using the vehicle to the company or trust, to the value of the private use on running expenses, which you or your entity pays tax on. If you purchase an electric vehicle, there is potentially no Fringe Benefits tax on the vehicle (provided you meet all of the eligibility criteria). Eligibility criteria is as follows;
- Ensure it is fully electric vehicle, hydrogen fuel cell electric vehicle or a plug-in hybrid electric vehicle (NOTE: From 1 April 2025, a plug-in hybrid electric vehicle will not be considered a zero or low emissions vehicle under fringe benefits law, and FBT will apply)
- Ensure its original price is below $89,332 and ensure no luxury car tax was/is paid on the original purchase.
- Further, it must need to be designed to carry a load less than one tonne (i.e a car, not a ute)
- First use of the vehicle is post July 2022. So essentially, the vehicle can’t be older than 1 July 2022. i.e. Used for the first time
- Used by a current employee or their associate.
Ensure delivered and available for use prior to 30 June 2024 to receive a tax deduction for the depreciation in the 2024 Financial Year. Limit on a motor vehicle tax deduction over the life of the asset is $68,108.
Note, you can buy a second-hand electric vehicle, you just have to ensure no luxury car tax was paid on the vehicle (i.e. ensuring it was below the $89,332 Luxury Car Tax Limit) and that it was used for the first-time post July 2022.
Pocket money for the kids
Consider making the kids work in the business and pay them pocket money via payroll i.e. as bona fide employees. They learn the value of work, money, and you get a deduction for the funds you pay them.... instead of it being private. IMPORTANT: The work they do must be suitable for their age and given school/sport commitments and must officially be on the payroll. So, it is pretty minor, but can work all round.
