2024 End of Year Tax Planning

End of Financial Year

In a previous article (see here), we discussed the ideal timing for tax planning.  It is crucial to regularly assess your business performance and implement strategies that optimise tax outcomes.  We recommend conducting a minimum quarterly review of your business to allow ample time for the implementation of growth and tax-related strategies.

If you haven’t yet reviewed your business performance and tax outcomes for this financial year, now is your final opportunity to make a difference before 30 June.

When we engage in end of year tax planning for our clients, we begin by evaluating their year-to-date performance.  This analysis provides insights into their projected financial position at year-end and estimates their tax liability for the year.

Outlined below are some key tax planning ideas for 2024, along with upcoming changes that will come into effect on 1 July 2024. 

Remember, there is still time to schedule an end-of-year tax planning meeting with us.

Depreciation of assets


Small Businesses (Aggregated turnover < $10 million)

Between 1 July 2023 and 30 June 2024, the 2023-24 Budget, the Federal Government announced that small businesses with an aggregated turnover of less than $10 million can claim the instant asset write-off for assets acquired for less than $20,000.  This was extended to 30 June 2025 as part of the 2024-25 Federal Budget.  However, the legislation for this $20,000 threshold has not yet been passed. 

Assets valued at more than $20,000 can be added to a small business depreciation pool and depreciated at 15% in the first year and 30% thereafter.

Without legislation passing, the threshold for immediate deduction of assets if $1,000.

Large Businesses (Aggregated turnover > $10 million)

For businesses with an aggregated turnover above $10 million, a deduction can be claimed for depreciation of assets based on their effective life.

EOFY Tax tip: If you are looking to acquire capital assets for your business, we recommend doing so prior to 30 June.  You may be eligible for an instant asset write-off or, if not, a deduction for depreciation.

Business tip: If you have sold an asset that you have previously written off, the sales proceeds are assessable income in full, in the year of sale.

Business tip: The tax depreciation deduction is only available once the asset is installed and ready for use.  Getting assets installed and ready for use by 30 June might be difficult for some businesses given the current lack of supply for equipment and vehicles.

Employee super

The June quarter superannuation guarantee liability is required to be paid by 28 July.  However, a business can only claim a tax deduction for employees’ superannuation when it is actually paid.  As such, to ensure you get a deduction in the current year, you need to pay your employees’ June superannuation guarantee liability prior to 30 June (cashflow permitting).  We recommend that the payment be made by 20 June (to ensure it is received and processed by the recipient superfund). 

EOFY Tax tip: Pay your employee June quarter superannuation by 20 June to get a deduction in the current financial year.

Business tip: The ATO are currently allocating considerable resources to reviewing employer compliance with paying employees’ superannuation guarantee.  There are significant penalties that apply if you pay your employee superannuation late. 

Business tip: The payment of your June quarter superannuation liability does not impact on your profit and loss position (as the superannuation liability has already been recorded in your profit and loss).  The payment before 30 June simply brings the tax deductibility of the payment forward to the current financial year.  If you make the payment after 1 July (and before the 28 July cut-off), the payment will be deductible next financial year.

Business tip: From 1 July 2024, the superannuation guarantee rate increases to 11.5%.  This will continue to increase by 0.5% per year until it reaches 12%.  This will have flow-on implications for payroll tax, workcover etc. 

Personal superannuation

You may also want to make personal contributions to super.  For the 2023/24 financial year, the maximum concessional (deducted) contribution cap is $27,500.

However, if your superannuation balance was less than $500,000 as at 30 June 2023, it may also be possible for you to contribute more super by taking advantage of the unused concessional cap carry forward rules (read our article to find out more).  You have until 30 June 2024 to make contributions to catch-up on the 2019 carried forward concessional cap.

EOFY Tax tip: If you have unusually high income during the 2024 financial year, consider whether making additional deductible superannuation contributions fits within your personal financial plan.  We recommend speaking with your financial adviser regarding your superannuation contributions.

Trade debtors

You should review your trade debtors as at 30 June.  You must ensure that any debts that are uncollectible are written off prior to 30 June in order to claim a tax deduction for the write-off in the current financial year. 

EOFY Tax tip: To write off a bad debt – you must have made reasonable and commercial attempts to recover the debt and have now determined it is uncollectible.  You then need to make a decision in writing to write off the bad debt (eg. you have removed the debt from the customer’s account and have recognised a bad debt expense).

Prepay or bring forward your expenses

Make sure you review all of your expenses and bring forward any expenses to June (where possible).  For example, stock up on stationery and office consumables, prepay your insurance and interest (if applicable) and look at any other expenses you may be able to pay in June.  By bringing these expenses forward to June, you are obtaining a tax deduction in the current financial year which will reduce your overall tax bill for the 2024 year.

EOFY Tax tip: If your business is in a loss position, it may not be advantageous to bring forward expenses to the current financial year.  Please contact us to discuss whether this strategy is appropriate for you.

Defer assessable income

Consider whether it is possible to defer your assessable income (being mindful of cashflow implications) to next financial year. 

Motor vehicles

If you are using a vehicle for a high percentage of work-related travel, make sure you keep a logbook.  Without a logbook, an individual is limited to claiming a maximum of 5,000km at $0.85 (or $4,250) in the 2024 financial year.  If you keep a logbook, you can claim the business percentage of the operating costs of the vehicle (petrol, registration, servicing, depreciation, interest etc).

Logbooks must be kept for 12 continuous weeks and remember to record your vehicle’s opening and closing odometer readings each year.

EOFY Tax tip: A logbook started prior to 30 June can be used to support a logbook claim even if the logbook isn’t completed until after 30 June.

Working from home

If you worked from home during the 2024 financial year, you may be able to claim a deduction for a percentage of the running costs of your home.  There are two different methods you can use to calculate your deduction:

(1) Revised Fixed-Rate method ($0.67 per hour) – this method covers electricity, internet, mobile and home phone, stationery and computer consumables.  It does not cover depreciation of office equipment.  If you are using this method, you must have a diary of your actual hours worked from home.

(2) Actual cost method – you can calculate and claim the work-related portion of your actual expenses provided you have kept appropriate records.

For more information about your working from home deduction – see our earlier article.

EOFY Tax tip: You must have a diary to record your hours working from home.  If you do not have diary evidence, we cannot claim a deduction for these hours.

EOFY Tax tip: The ATO will be specifically reviewing deductions for working from home during the 2024 year.  Ensure you have appropriate documentation for your hours and you are not claiming twice (eg. by claiming the rate per hour ($0.67) plus a deduction for your phone).

Trust minutes

Prior to 30 June, make sure the trustees of your discretionary trusts decide how they are going to distribute their income and capital.  This decision must be documented in a trust minute before 30 June (or as otherwise specified in your trust deed).  It is important that you review your trust income for the 2024 financial year to ensure that the trust minute accurately reflects the trustee’s intention.  Given the recent announcements from the ATO with regards to the distribution of income to adult children and other tax advantaged beneficiaries, it is important that you get tax advice for your end of year tax minutes.

EOFY Tax tip: Your trust minutes must be prepared prior to 30 June to evidence the trustee’s decision regarding the distribution.  Keep this minute with your tax records.

Rental properties

For your rental properties, if you have any expenses coming up in the next few months, try to pay these prior to 30 June – this will bring the deduction into the current tax year and will help you to reduce your 2024 tax bill.

In relation to any interest you are claiming on your rental property, make sure you only claim the interest on the loan that was used to purchase the property.  If you have drawn down on the same loan for private purposes (eg. for a holiday), the interest that relates to the private usage is not deductible.

EOFY Tax tip: Consider getting a depreciation report for your rental property.  You may be able to claim additional tax deductions for the cost of the building and potential its fixtures and fittings.

EOFY Tax tip: Consider undertaking repairs to your property prior to 30 June.

EOFY Tax tip: Rental property deductions are being specifically reviewed by the ATO during the 2024 year.  Make sure your rental expenses are correct and that you have appropriate supporting documentation.

Cryptocurrency

It is important to ensure you include all cryptocurrency transactions on your tax return.  If you have had any cryptocurrency gains in the current financial year, you may wish to consider some additional tax planning measures before 30 June to reduce any tax liability.

EOFY Tax tip: Make sure you have all of your documentation available for all cryptocurrency transactions.  Noting that changing your investment from one cryptocurrency to another constitutes a transaction which may result in a tax liability. 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore, it should be regarded as confidential and not be made available to any person without our consent,

Federal Budget 2024-25

On Tuesday night, 14 May 2024, Federal Treasurer Jim Chalmers handed down his third Federal Budget for the Labor Government.  If anything, it was quite an underwhelming budget, leaning towards higher spending particularly over the upcoming year.  While this is the second consecutive budget surplus for the Labor Government, there is a forecast $28.3 billion deficit for the next financial year.  In fact, for the four years after the current year surplus, the forecast is for a combined deficit of $122 billion.

The economic story though is all about inflation at the moment: “When will we be rid of it?”  “And how much damage has it done along the way?”

Energy bill relief – $2.6 billion – yes it makes your electricity bills cheaper today, but will this lead to upwards inflationary pressure over the longer period?

The Government indicates inflation will be under control by Christmas 2025, but many economists and perhaps, more importantly, the RBA may not agree with that.

We would still call for more broader tax reforms including reducing state based taxes like transfer duty and payroll taxes, and replacing it will greater broad based consumption taxes (like GST).

Production tax credits and critical mining projects and fast-tracked investment processes were helpful wins for the top end of town.

We’ve outlined below some of the measures that were announced in the Budget that will impact on our clients.  As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government.  We will keep you updated on the status of any proposed measures.

Impact for individuals

Individual income tax rates

As previously announced by the Treasurer, the Stage 3 individual income tax rates were amended to provide tax relief to all taxpayers. 

The current tax rates (to 30 June 2024) are as follows:

 

From 1 July 2024, the reduced tax rates are as follows:


The tax savings for certain income levels are as follows:

 

The last table shows the difference between the tax payable for the 2024 financial year, compared to the tax payable for the 2025 financial year and how much that translates to a weekly saving.

Energy bill relief

A $300 rebate will be applied to all Australian households towards their electricity bills.  This will be a $75 credit on each quarterly electricity bill in the 2024-25 financial year.  Eligible small businesses will receive a credit of $325.

HECS

Another measure that was announced last week was the change to the HECS indexation rate.  Currently, HECS debts are indexed each year on 1 June using the Consumer Price Index (CPI).  Given the high rates of inflation, this resulted in an indexation rate of 7.1% applied to HECS debts on 1 June 2023.

The Budget announcement is to use the lower of CPI and Wage Price Index (WPI) to index HECS debts (backdated to 1 June 2023).  This means that the 7.1% CPI indexation rate used last year will be replaced with a 3.2% WPI (and a credit applied to HECS accounts to reflect the lower indexation at 1 June 2023).

It is also forecasted for the WPI to be 4% for the 1 June 2024 indexation.

Please read our article for more information about the indexation of HECS debts and whether it is beneficial to repay some or all of your debt.

Medicare Levy Low-Income Thresholds

The Medicare Levy low-income thresholds for singles, families, seniors and pensioners will also be increased from 1 July 2023.  The family income threshold will also now be increased by $4,027 per child (up from $3,760).

Rent Assistance

The Commonwealth Rent Assistance maximum rates have been increased by 10% from 20 September 2024 to address rental affordability challenges.

Paid Parental Leave

$1.1 billion was allocated in the budget towards paying superannuation on Commonwealth Funded Paid Parental Leave for births and adoptions on or after 1 July 2025.

Impact for businesses

The Budget contained a few measures to help small businesses:

Instant asset write-off threshold extended

From 1 July 2023, the instant asset write-off threshold was due to reduce to $1,000.  Last budget, this threshold was increased to $20,000 for businesses with an aggregated turnover of less than $10 million.  The increased threshold was to apply until 30 June 2024.  The announcement in this budget was to extend the $20,000 threshold to 30 June 2025.  We note that the announcement from last year’s budget (to increase the threshold to the $20,000) has still not passed by Parliament, leaving this measure uncertain as we close in on the end of the financial year.

We also note that, assets acquired for more than $20,000 can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first year and 30% thereafter.

ATO Counter-Fraud Strategy

$187 million has been allocated to the ATO Counter Fraud Strategy, including allocating funds to:

  • Identify and block suspicious activity in real time
  • Recover lost revenue from fraud
  • Counter fraud
  • Extend the period for which the ATO can withhold GST refunds (extended from 14 days to 30 days)

ATO Tax Avoidance Taskforce

The ATO Tax Avoidance Taskforce has been extended for 2 years from 1 July 2026.  The task force pursues key tax avoidance risks from multinationals, large public and private businesses and high-wealth individuals.

Foreign Resident CGT regime

The foreign resident capital gains tax (CGT) regime will be strengthened to provide greater certainty about the operation of the rules.  The amendments will apply to CGT events on or after 1 July 2025 and will:

  • Clarify and broaden the types of assets that foreign residents are subject to CGT on
  • Amend the point-in-time principal asset test to a 365-day testing period
  • Require foreign residents disposing of shares and other membership interests exceeding $20 million to notify the ATO, prior to the transaction being executed

Supporting Small Businesses

$41.7 million has been specifically allocated to supporting small businesses, as follows:

  • $25.3 million to support the Payment Times Reporting Regulator;
  • $10.8 million to extend the Small Business Debt Helpline;
  • $3 million to implement the Government’s response to the Review of the Franchising Code of Conduct;
  • $2.6 million for the Australian Small Business and Family Enterprise Ombudsman to support unrepresented small businesses to navigate business-to-business disputes through alternative dispute resolution.

We will keep you up-to-date with the progress of the implementation of these Budget measures.

If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Rental Properties – Getting the Best Tax Outcome in 2024

Rental Properties

Getting the Best Tax Outcome in 2024

 

To get the best tax outcome from your rental property, we recommend paying any upcoming expenses before 30 June. 

Any deductible expense that is paid prior to 30 June can be claimed in this financial year.  If you pay the same expense after 30 June, it can’t be claimed as a deduction until next financial year.

With the individual tax rates decreasing after 30 June 2024, you will get an even bigger advantage in paying your rental property expenses prior to 30 June (as a deduction is worth more in the 2024 year than the 2025 year).  For example, a $5,000 expense will get you a $125 greater tax deduction in 2024 than in 2025:

2024 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2024 return) = $1,625
Net out of pocket = $3,375

2025 year deduction

$5,000 repairs

Paid before 30 June
Individual earning $120,000

Repair total (deduction) = $5,000
Tax refund (2025 return) = $1,500
Net out of pocket = $3,500

Rental expenses

For rental properties, examples of some of the deductible expenses you might be able to pay before 30 June include:

  • Repairs and maintenance
  • Cleaning
  • Gardening
  • Pest control
  • Smoke alarm review and maintenance
  • Servicing costs – eg. air conditioner, pool

Have a chat with your property manager to see if there are any expenses that can be paid prior to 30 June.

Depreciation

We also recommend getting a depreciation schedule for your property.  Contact a qualified quantity surveyor to prepare a depreciation schedule for your property (for example – BMT Tax Quantity Surveyors or Deppro).  The cost of the report can be claimed as a deduction and the report will also provide you with the details of the depreciation you can claim in your tax return.

What should you do now?

  1. Talk to your property manager about any expenses that you can pay for your property prior to 30 June;
  2. Book in any relevant services now to ensure that they are completed and paid prior to 30 June (keep a valid tax invoice for all services that you want to claim as a tax deduction);
  3. Contact a quantity surveyor to get a depreciation report for your property;
  4. Start compiling records for the expenses already paid for your property during this financial year.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Tax Planning with Decreasing Tax Rates

Tax Planning with Decreasing Tax Rates


The basic principles of tax planning essentially remain the same every year – maximise and bring forward your deductions, and try and defer your income.  Often this just results in you deferring your tax liability (not necessarily reducing it).  However, in times of decreasing tax rates, you can take advantage of the decreasing rates to reduce your tax bill.

Tax Rates

Below is a comparison of the tax rates for the 2023-24 financial year and the rates currently being legislated for the 2024-25.

With decreasing tax rates, there are steps you can take prior to 30 June 2024 to reduce your overall tax liability.

Bring Forward Deductions

Any deductions that you claim in the 2024 financial year get you a higher refund than the same deduction claimed next year.

For example, let’s say you’re earning $100,000 per year.  If you paid $100 for stationery for your employment on 30 June 2024, and claimed a full tax deduction for this expense, you would receive a tax refund of $32.50 for the stationery deduction.  If you purchased the same $100 stationery on 1 July 2024 (the very next day), you would only receive a tax refund of $30.  So if you are earning $100,000, there is a $2.50 reduction in your tax refund for your deductions between 2024 and 2025.  It is better to claim as much as you can prior to 30 June 2024 to get a tax benefit at the higher tax rates.

Examples of deductions to bring forward

  • Prepaying interest on rental properties or margin loans
  • Repairs to your rental property
  • Additional deductible superannuation contributions (to be reviewed with your financial planner
  • Annual payment of income protection insurance
  • Expenses due in July that you may be able to pay early
Defer income
 

With the personal tax rates decreasing after 30 June, this means that any income that you make in this financial year, will be taxed at a higher rate than if you earned the same income next year.

As we are talking about individual tax rates, we need to consider if there is any income in our individual name that we can defer until after 30 June.

A good example of deferring income is the delaying sale of capital assets (for example, an investment property).  When selling capital assets, the relevant date for the capital gains tax, is the date that the contract is entered into.  For example, if you are selling an investment property, you are deemed to have disposed of it on the date you enter into the contract for the sale (not the date of settlement).

Examples of income to defer

  • Sale of capital assets like property or shares (ensure the contract date is after 30 June, irrespective of the settlement date
  • Customer / client invoicing

Client example

We had a client recently ask us to calculate how much additional tax they would need to pay if they sold their investment property. 

If they entered into a contract to sell their investment property now, their total extra tax payable would be $38,000. 

If they delayed entering into a contract until after 30 June, their total extra tax payable would reduce to $30,000 (assuming the sale price remains the same). 

This is a tax savings of $8,000 simply by selling the property after 30 June and taking advantage of the lower tax rates.

Just remember – you need to enter into the contract for sale after 30 June for the income to be included as part of next year’s tax return.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Navigating FBT at Christmas Time

Navigating Fringe Benefits Tax at Christmas

 

Fringe Benefits Tax (FBT) is a tax that employers pay for non-cash benefits they provide to their employees.  Rather than taxing the employees on these benefits, the employer pays fringe benefits tax.

Christmas provides employers with a great opportunity to reward their staff.  Understanding the key FBT considerations during Christmas time is crucial to avoid potential pitfalls and optimise tax outcomes.

Christmas parties

Hosting a Christmas party is also a great way to celebrate the end of the year.  However, there may FBT implications associated with the party.

The costs associated with Christmas parties (for example, food and drink) are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. 

Alternatively, if you hold your Christmas party away from your business premises, the party will be exempt if it costs less than $300 per employee.

Christmas presents

Gifts that are given to employees can attract FBT.  However, if the value of the gift is below $300 per employee, it is exempt. 

Tax deductions and GST

You can only claim a tax deduction and GST on benefits that are subject to FBT.  So, if the benefits you are providing to your employees (gifts and/or Christmas party) are under $300 and exempt from FBT, they will not be tax deductible nor can you claim any GST on the cost.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Technology Investment Boost

Small Business Technology Investment Boost

Legislation was passed on 23 June 2023 to enable small businesses to claim an additional 20% deduction for eligible technology expenditure.

What is the boost?

Small businesses (who have an aggregated turnover of less than $50 million) will be able to claim an additional 20% deduction for expenses incurred to support their digital operations.

The boost is available for expenditure incurred between 29 March 2022 and 30 June 2023 and is capped at $100,000 per income year.  The maximum bonus deduction is $20,000 per income year.

Eligibility

To be eligible for the additional deduction, you must meet the following conditions:

  1. You have an aggregated turnover of less than $50 million for the income year in which you incur the expenditure;
  2. The expenditure is “eligible expenditure” (see below);
  3. The expenditure is deductible for your business under Australian tax law;
  4. The expenditure has been incurred between 29 March 2022 and 30 June 2023.

Eligible expenditure

Eligible expenditure may include (but is not limited to):

  • digital enabling items;
  • digital media and marketing;
  • e-commerce;
  • cyber security.

At the end of this article we have included a table of example expenditure that may be eligible for the boost.

What cannot be claimed?

You cannot claim the following expenses towards the boost:

  • Salary and wages
  • Capital works costs
  • Financing costs
  • Training or education costs (but these may be eligible for the Small Business Skills and Training Boost)
  • Expenses that form part of your trading stock.

Cap on the deduction

There is an annual cap of $100,000 on eligible expenditure (with the bonus deduction capped at $20,000).

When do you claim the deduction

For any expenditure incurred between 30 March 2022 and 30 June 2022, you claim 100% of the deduction in the 2022 tax return and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2022 and 30 June 2023, you claim both the 100% deduction and the 20% bonus in the 2023 tax return.

What do you need to do?

To check your eligibility for the boost, we recommend you take the following steps:

1. Review your technology expenditure from 29 March 2022 to 30 June 2023;

2. Identify any expenditure that has been incurred to help digitise your business;

3. If you use online accounting software, attach a copy of the invoice to the transaction in your software;

4. Provide us (your accountant) with the details of all relevant costs incurred that meet the eligibility criteria.

Provided we have the relevant documentation to prove eligibility to the boost, we will claim the additional 20% deduction in your tax return.

Please do not hesitate to contact us if you would like further information about the boost.

Examples of Possible Eligible Expenditure

Category

Example expenditure

Digital enabling items

Computer and telecommunications hardware

  • Desktop and laptop computers
  • Digital tablets
  • Computer keyboards
  • Webcams
  • Computer mouse, trackpads, stylus
  • Computer cables
  • Powerpacks
  • Electrical and power adapters
  • Repairs and improvement costs to computer hardware and equipment

Digital enabling items

Telecommunications hardware and equipment

  • Landline phones
  • Mobile phones
  • Smart watches
  • Telephone accessories
  • Repair and maintenance costs

Digital enabling items

Software

  • Initial purchase
  • Annual subscriptions (eg. accounting software subscriptions, Office 365, anti-virus, ServiceM8)

Digital enabling items

Internet

  • Usage costs
  • Connection costs
  • Repair costs

Digital enabling items

Computer systems

  • Subscriptions to support digital capabilities
  • Help desk support fees and charges
  • IT support charges
  • Repairs and improvement costs

Digital media and marketing

  • Audio and visual content creation
  • Web page design
  • Web page update costs
  • Search engine optimisation fees
  • Email marketing fees
  • Photo stock fees
  • Music royalty fees

E-Commerce

  • E-commerce website setup
  • E-commerce website optimisation
  • Setup of social media store functionality
  • Costs associated with setting up online methods of payment
  • Photography costs for online display
  • Photostock fees
  • Portable payment devices
  • Digital inventory management
  • Subscription to cloud-based services
  • Advice on digital operations

Cyber Security

  • Cyber security consultant fees
  • Cyber security software (eg. anti-virus)
  • Cyber security installation and implementation costs
  • Cyber security backup management
  • Cyber security monitoring services

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

Small Business Skills and Training Boost

Small Business Skills and Training Boost

Legislation was passed on 23 June 2023 to enable small businesses to claim an additional 20% deduction for expenditure on staff training.

What is the boost?

Small businesses (who have an aggregated turnover of less than $50 million) will receive an additional 20% deduction for expenditure on external training courses delivered to employees by registered training providers.

The additional deduction will apply to expenditure incurred between 29 March 2022 to 30 June 2024.

Eligibility

To be eligible for the additional deduction, you must meet the following conditions:

  1. You have an aggregated turnover of less than $50 million for the income year in which you incur the expenditure;
  2. The training is provided to employees of your business (the boost does not apply to training provided to sole traders, partners in a partnership or independent contractors);
  3. The training is provided either in-person in Australia or online;
  4. The training is provided by a registered training organisation that is not you or an associate of yours – you can check here for registered providers: https://training.gov.au/
  5. The expenditure is deductible for your business under Australian tax law;
  6. The expenditure has been incurred between 29 March 2022 and 30 June 2024.

Expenses you can claim

The boost applies to expenditure on training and also incidental costs (for example: books or equipment).

When do you claim the deduction

For any expenditure incurred between 30 March 2022 and 30 June 2022, you claim 100% of the deduction in the 2022 tax return and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2022 and 30 June 2023, you claim both the 100% deduction and the 20% bonus in the 2023 tax return.

For any expenditure incurred between 1 July 2023 and 30 June 2024, you claim both the 100% deduction and the 20% bonus in the 2024 tax return.

What do you need to do?

To check your eligibility for the boost, we recommend you take the following steps:

1. Review your training expenditure from 29 March 2022 to 30 June 2023;

2. Identify any expenditure that has been provided by a registered training provider (refer: https://training.gov.au/)

3. If you use online accounting software, attach a copy of the invoice to the transaction in your software.

4. Provide us (your accountant) with the details of all relevant training costs incurred that meet the eligibility criteria.

Provided we have the relevant documentation to prove eligibility to the boost, we will claim the additional 20% deduction in your tax return.

Please do not hesitate to contact us if you would like further information about the boost.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

2023 End of Year Tax Planning

End of Financial Year

In a previous article (see here), we discussed the ideal timing for tax planning.  It is crucial to regularly assess your business performance and implement strategies that optimise tax outcomes.  We recommend conducting a minimum quarterly review of your business to allow ample time for the implementation of growth and tax-related strategies.

If you haven’t yet reviewed your business performance and tax outcomes for this financial year, now is your final opportunity to make a difference before 30 June.

When we engage in end of year tax planning for our clients, we begin by evaluating their year-to-date performance.  This analysis provides insights into their projected financial position at year-end and estimates their tax liability for the year.

Outlined below are some key tax planning ideas for 2023, along with upcoming changes that will come into effect on 1 July 2023. 

Remember, there is still time to schedule an end-of-year tax planning meeting with us.  This will enable us to provide specific advice tailored to your business – click to book in with Jeanette or Troy.

Depreciation of assets

For businesses with a turnover under $50 million, up to 30 June 2023 you can claim a deduction for the acquisition of any eligible depreciating assets (there is no limit for most assets).

For small businesses (turnover under $10 million) that use simplified depreciation rules, the balance of your small business pool can be written off at the end of the income year.

We note that there is still a cost limit on certain assets – for example, you can only claim a maximum deduction of $64,741 for a passenger vehicle during the 2023 financial year.  A passenger vehicle is a vehicle that is designed to carry a load less than one tonne and fewer than 9 passengers.

From 1 July 2023, the depreciation limit changes to $20,000 – this means you can only claim a full deduction at time of purchase for assets that cost $20,000 or less.  After 1 July 2023, any assets that you acquire for more than $20,000 will need to depreciated for tax purposes.

EOFY Tax tip: If you are looking to acquire capital assets for your business, we recommend doing so prior to 30 June to get the deduction in the current financial year.  If the deduction puts your company in a loss position – consider the loss carry-back provisions below.

Business tip: While you get the benefit of deducting the full cost of the asset in the current financial year, this means that you will not receive any depreciation on this asset in future years.  It also means that when you sell the asset, any income from the sale will be subject to income tax.

Business tip: The tax depreciation deduction is only available once the asset is installed and ready for use.  Getting assets installed and ready for use by 30 June might be difficult for some businesses given the current lack of supply for equipment and vehicles.

Company loss carry-back

Companies that make a loss in the 2020 to 2023 financial years, can carry this loss back to reduce taxable profits made on or after the 2019 financial year.  The company can then elect to receive a refund of the tax paid in that year when lodging the later year tax return.

EOFY Tax tip: Your company may be able to take advantage of the asset depreciation rules to write off the full value of new assets purchased.  If the depreciation puts your company into a loss, this loss may be applied against the taxable profits from 2019 to 2022.  You may then receive a refund of tax paid in those financial years.

Employee super

The June quarter superannuation guarantee liability is required to be paid by 28 July.  However, a business can only claim a tax deduction for employees’ superannuation when it is actually paid.  As such, to ensure you get a deduction in the current year, you need to pay your employees’ June superannuation guarantee liability prior to 30 June (cashflow permitting).  We recommend that the payment be made by 20 June (to ensure it is processed by the recipient superfund). 

EOFY Tax tip: Pay your employee June quarter superannuation by 20 June 2023 to get a deduction in the current financial year.

Business tip: The ATO are currently allocating considerable resources to reviewing employer compliance with paying employees’ superannuation guarantee.  There are significant penalties that apply if you pay your employee superannuation late. 

Business tip: The payment of your June quarter superannuation liability does not impact on your profit and loss position (as the superannuation liability has already been recorded in your profit and loss).  The payment before 30 June simply brings the tax deductibility of the payment forward to the current financial year.  If you make the payment after 1 July (and before the 28 July cut-off), the payment will be deductible next financial year.

Business tip: From 1 July 2023, the superannuation guarantee rate increases to 11%.  This will continue to increase by 0.5% per year until it reaches 12%.  This will have flow-on implications for payroll tax, workcover etc. 

Personal superannuation

You may also want to make personal contributions to super.  For the 2022/23 financial year, the maximum concessional (deducted) contribution cap is $27,500.

However, if your superannuation balance was less than $500,000 as at 30 June 2022, it may also be possible for you to contribute more super by taking advantage of the unused concessional cap carry forward rules. 

EOFY Tax tip: If you have unusually high income during the 2023 financial year, consider whether making additional deductible superannuation contributions fits within your personal financial plan.  We recommend speaking with your financial adviser with regards to your superannuation contributions.

Trade debtors

You should review your trade debtors as at 30 June.  You must ensure that any debts that are uncollectible are written off prior to 30 June in order to claim a tax deduction for the write-off in the current financial year.  This is particularly important given the on-going effect of COVID-19 on many businesses.

EOFY Tax tip: To write off a bad debt – you must have made reasonable and commercial attempts to recover the debt and have now determined it is uncollectible.  You then need to make a decision in writing to write off the bad debt (eg. you have removed the debt from the customer’s account and have recognised a bad debt expense).

Prepay or bring forward your expenses

Make sure you review all of your expenses and bring forward any expenses to June (where possible).  For example, stock up on stationery and office consumables, prepay your insurance and interest (if applicable) and look at any other expenses you may be able to pay in June.  By bringing these expenses forward to June, you are obtaining a tax deduction in the current financial year which will reduce your overall tax bill for the 2023 year.

EOFY Tax tip: If your business is in a loss position, it may not be advantageous to bring forward expenses to the current financial year.  Please contact us to discuss whether this strategy is appropriate for you.

Defer assessable income

Consider whether it is possible to defer your assessable income (being mindful of cashflow implications) to next financial year. 

Motor vehicles

If you are using a vehicle for a high percentage of work-related travel, make sure you keep a logbook.  Without a logbook, an individual is limited to claiming a maximum of 5,000km at $0.78 (or $3,900) in the 2023 financial year.  If you keep a logbook, you can claim the business percentage of the operating costs of the vehicle (petrol, registration, servicing, depreciation, interest etc).

Logbooks must be kept for 12 continuous weeks and remember to record your vehicle’s opening and closing odometer readings each year.

EOFY Tax tip: A logbook started prior to 30 June can be used to support a logbook claim even if the logbook isn’t completed until after 30 June.

Working from home

If you worked from home during the 2023 financial year, you may be able to claim a deduction for a percentage of the running costs of your home.  There are two different methods you can use to calculate your deduction:

(1) Revised Fixed-Rate method ($0.67 per hour) – this method covers electricity, internet, mobile and home phone, stationery and computer consumables.  It does not cover depreciation of office equipment.  From 1 March 2023, if you are using this method, you need to have a diary of your actual hours worked from home.

(2) Actual cost method – you can calculate and claim the work-related portion of your actual expenses provided you have kept appropriate records.

For more information about your working from home deduction – see our earlier article.

EOFY Tax tip: From 1 March 2023, You must have a diary to record your hours working from home.  If you do not have diary evidence, we cannot claim a deduction for these hours.

EOFY Tax tip: The ATO will be specifically reviewing deductions for working from home during the 2023 year.  Ensure you have appropriate documentation for your hours and you are not claiming twice, by claiming the rate per hour ($0.67) plus a deduction for your phone for example.

Trust minutes

Prior to 30 June, make sure the trustees of your discretionary trusts decide how they are going to distribute their income and capital.  This decision must be documented in a trust minute before 30 June (or as otherwise specified in your trust deed).  It is important that you review your trust income for the 2023 financial year to ensure that the trust minute accurately reflects the trustee’s intention.  Given the recent announcements from the ATO with regards to the distribution of income to adult children and other tax advantaged beneficiaries, it is important that you get tax advice for your end of year tax minutes.

EOFY Tax tip: Your trust minutes must be prepared prior to 30 June to evidence the trustee’s decision regarding the distribution.  Keep this minute with your tax records.

Rental properties

For your rental properties, if you have any expenses coming up in the next few months, try to pay these prior to 30 June – this will bring the deduction into the current tax year and will help you to reduce your 2023 tax bill.

In relation to any interest you are claiming on your rental property, make sure you only claim the interest on the loan that was used to purchase the property.  If you have drawn down on the same loan for private purposes (eg. for a holiday), the interest that relates to the private usage is not deductible.

EOFY Tax tip: Consider getting a depreciation report for your rental property.  You may be able to claim additional tax deductions for the cost of the building and potential its fixtures and fittings.

EOFY Tax tip: Consider undertaking repairs to your property prior to 30 June.

EOFY Tax tip: Rental property deductions are being specifically reviewed by the ATO during the 2023 year.  Make sure your rental expenses are correct and that you have appropriate supporting documentation.

Cryptocurrency

The ATO have specifically announced that they will be reviewing cryptocurrency transactions in the 2023 tax returns.  It is important to ensure you include all cryptocurrency transactions on your tax return.  If you have had any cryptocurrency gains in the current financial year, you may wish to consider some additional tax planning measures before 30 June to reduce any tax liability.

EOFY Tax tip: Make sure you have all of your documentation available for all cryptocurrency transactions.  Noting that changing your investment from one cryptocurrency to another constitutes a transaction which may result in a tax liability. 

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice.  Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information.  We recommend that our formal advice be sought before acting in any of the areas.  The article is issued as a helpful guide to clients and for their private information.  Therefore, it should be regarded as confidential and not be made available to any person without our consent,

Federal Budget 2023-24

On Tuesday night, 9 May 2023, Federal Treasurer Jim Chalmers handed down his second Federal Budget for the Labor Government.  According to the Budget papers, the Budget has returned “into the black”, delivering a surplus for the first time in 15 years.  Our country’s financial position has benefited from high commodity prices and a stronger than expected jobs market.  Similar to last year, the Treasurer has cast the Budget with aims to provide cost of living relief whilst not placing additional pressure on inflation.

Some wins from the Budget will be for those eligible for the Government’s energy relief package.  High income earners are also winners with no mention of changing or removing the stage 3 income tax cuts legislated to come into effect on 1 July 2024.

Those not so happy with the budget will be middle income earners who lost the low and middle income tax offset (LMITO) in the October 2022 budget and who are ineligible to share in most of the incentive packages announced in this budget.

The Treasurer warned of more “difficult decisions” to come.  Hopefully those difficult decisions are answered from a position of fiscal responsibility and not just a politically motivated standpoint.  Difficult decisions do need to be made around a well-rounded, broad tax revenue base in years to come.

We’ve outlined below some of the measures that were announced in the Budget that will impact on our clients.  As with all budgetary measures, these measures are not final until the relevant legislation has been passed by the Government.  We will keep you updated on the status of any proposed measures.

Income tax measures

The previously legislated stage 3 tax cuts for individuals starting 1 July 2024 remain untouched.

There was no extension announced to the low and middle income tax offset (LMITO) beyond the 2021-22 year.  As such, the LMITO has now ceased.  Consequently, low-to-middle income earnigns (incomes up to $90,000 but phasing out up to $126,000) will see their refunds reduced between $675 and $1,500 from the 2023 year onwards.

The Medicare Levy low-income thresholds will marginally increase from 1 July 2022 (which increases the point from which the Medicare Levy will start to apply). 

Business measures

The Budget contained a few measures to help small businesses:

Instant asset write-off threshold increased to $20,000

From 1 July 2023, the instant asset write-off threshold was due to reduce to $1,000.  This budget measure has increased this threshold to $20,000 for businesses with an aggregated turnover of less than $10 million.  The increased threshold will apply until 30 June 2024.

Assets acquired for more than $20,000 can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first year and 30% thereafter.

Small Business Energy Incentive

Small businesses with a turnover of less than $50 million can deduct an additional 20% of the cost of eligible depreciating assets that promote greater energy efficiency.

A range of depreciating assets will be eligible for the incentive (including energy efficient fridges, heat pumps and electric heating or cooling systems, batteries and thermal energy stores).  The assets will need to be first used (or installed ready for use) between 1 July 2023 and 30 June 2024.

Up to $100,000 of total expenditure will be eligible for the incentive (which will provide a maximum bonus deduction of $20,000).

Energy Price Relief Plan

Small businesses customers of electricity retailers will benefit from $1.5 billion in funding that the Government has committed to provide energy bill relief.

Payday Super

From 1 July 2026 employers will be required to pay their employees’ super guarantee at the same time as their salary and wages.

Help to manage tax instalments

The GDP adjustment factor for PAYG tax instalments and GST instalments will be 6% for the 2023-24 financial year (down from 12% under the statutory formula).

Startup support

$431.9 million is being provided over 4 years to support small and medium businesses and startups to commercialise their ideas and grow their operations.  This funding will be targeted at businesses operating in the priority areas of the National Reconstruction Fund.

Register of beneficial ownership

$1.9 million provided to establish a public register of beneficial ownership of companies and other legal vehicles (including trusts).

Expanded ATO Compliance Programs

Funding is being provided to extend several ATO compliance programs. 

Personal Income Tax Compliance Program

$90.2 million will be provided to the ATO and Treasury to extend the Personal Income Tax Compliance Program for 2 years from 1 July 2025 and to expand the scope from 1 July 2023.  This enables the ATO to continue to deliver a combination of proactive, preventative and corrective activities in key areas of non-compliance, including over-claiming of deductions and incorrect reporting of income. 

GST compliance

$588.8 million will be provided to the ATO from 1 July 2023 for the ATO to continue a range of activities that promote GST compliance. 

Debt collection

Additional funding will be provided to the ATO to facilitate engagement with taxpayers who have high-value debts over $100,000 and aged debt older than 2 years.

Lodgement penalty amnesty

Small businesses with an aggregated turnover of less than $10 million will have failure to lodge penalties remitted for outstanding tax statements lodged between 1 June 2023 and 31 December 2023 (where those statements were originally due between 1 December 2019 and 29 February 2022).  This is designed to encourage small business owners to re-engage with the tax system.

Superannuation guarantee compliance

$40.2 million provided to the ATO in the 2023-24 year to assist with enforcing superannuation guarantee compliance.  The ATO will continue to use data matching to identify superannuation guarantee underpayment.

Superannuation

Tax changes for super account balances above $3 million

The Government confirmed their commitment to increasing the tax rate for earnings on superannuation accounts in excess of $3 million from 1 July 2025.  Earnings that correspond to the proportion of an individual’s superannuation balance over $3 million will be taxed at 30%.  Earnings that relate to assets below the $3 million threshold will continue to be taxed at 15% (or 0% if held in a retirement pension account).

Other measures of interest

Some other measures of interest include:

  • Increase to certain government payments
    • The base rate of the working age and student payments will increase by $40 per fortnight from 20 September 2023 (this applies to JobSeeker, Youth Allowance, Parenting Payment, Austudy, ABSTUDY, Disability support pension, special benefit).
    • The maximum rates of Commonwealth Rent Assistance allowance will increase by 15%.
    • Parenting Payment (single) will be extended to single principal carers with a young child under 14 years of age (currently, the payment only supports single principal carers with a child under 8 years of age).
  • Household Energy Upgrades
    • $1.3 billion in funding is being provided to establish the Household Energy Upgrades Fund which will provide low-cost finance and mortgages (in partnership with private institutions) for home upgrades to save energy.
  • Childcare
    • $72.4 million in funding over 5 years to support the Early Childhood Education and Care sector to build and retain their workforce.
  • Aged Care
    • From 30 June 2023, there will be a 15% increase to the award wages for many aged care workers. 
    • Over $1.1 billion provided to improve the in-home aged care system and the delivery of aged care services.

We will keep you up-to-date with the progress of the implementation of these Budget measures.

If you would like to discuss the tax implications of the budget proposals, please call us on (07) 56656469.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.

When Should I think about End of Year Tax Planning?

End of year tax planning – when should I think about this?

 

There is always a rush at the end of the financial year for businesses to book in to speak to us about their end of year tax planning options.

Rather than rushing around in June to implement strategies to optimise your tax position, you should regularly review the financial performance of your business and plan for upcoming tax liabilities.  Set aside specific time on a regular basis (eg. at the end of each month or each quarter when you are preparing your BAS) and use this time to review how your business is performing.

When you are reviewing your business for tax, think about:

  • What profit has your business made?
  • What is your estimated tax liability on your profit?
  • Are you paying tax instalments to the ATO towards this tax liability?  If not, have you made provisions for this tax liability within your cashflow forecasting?
  • Are there proactive steps you can take throughout the year to optimise your tax position?

While we sit down with business clients in May/June to review their results and plan for year end tax, there are things that you can do throughout the year to get a better tax outcome, for example:

  • If you want to purchase a new vehicle and can claim a deduction for the vehicle – it needs to be ready for business use prior to 30 June (this may mean ordering the vehicle now so it is here in time).
  • If you want to put more money into super, you may need to build this into your cashflow forecasts (or put the money in on a regular basis) so it is not a large cash drain in June.
  • If you want to pay directors an appropriate salary for their services, this should be recorded and paid throughout the year and reported via single touch payroll to the ATO.  If this is left to June, there will be a significant cashflow burden for the withholding tax and super liability.

These are just some of the examples of things you can do throughout the year to help your tax position.

So while we may refer to it as “end of year” tax planning, it is better to think of it as year round tax planning. 

We are happy to sit down with you on a regular basis to help you review your business performance, cashflow and tax planning – just give us a call to discuss.

DISCLAIMER: The information in this article is general in nature and is not a substitute for professional advice. Accordingly, neither TJN Accountants nor any member or employee of TJN Accountants accepts any responsibility for any loss, however caused, as a result of reliance on this general information. We recommend that our formal advice be sought before acting in any of the areas. The article is issued as a helpful guide to clients and for their private information. Therefore it should be regarded as confidential and not be made available to any person without our consent.