2024-25 EOFY Tax Planning tips for businesses

Most businesses have payroll software that enables posting payroll expenses into the general ledger by the click of a button.

Employees are paid their net wage, but the superannuation contributions may be left in an unpaid superannuation account until the end of the month or quarter.

While most expenses are eligible for deduction when incurred, superannuation is only deductible when it is paid and received, on time, by a complying superannuation fund.

Superannuation contributions need to be received by the fund by the 28th day of each quarter (with significant penalties for late payment). The June quarter superannuation liability is due by 28 July. By making payment before 30 June will allow your business to receive this tax deduction for the 2024 financial year, instead of the following year.         

SGC rate to increase as of 1 July 2024

The SGC rate will increase a further 0.5% from 11% to 11.5% effective from 1 July 2024. Most payroll systems should update automatically with this adjustment, please check your system to ensure you remain compliant.

ATO’s release of Practical Compliance Guideline PCG 2021/4 outlines the new tax compliance approach to the allocation of professional firm profits.

The guidance applies to every ‘individual professional practitioner’, being an individual ‘professional’ that provides services to clients of a professional firm, or to the firm itself, and either alone or together with associates has a legal or beneficial interest in the firm.

This guidance is broad and states that a ‘professional’ is a member of any recognised profession, capturing many roles, including:

• Doctors
• Dentists
• Accountants
• Engineers
• Lawyers
• Real Estate Agents
• Architects
• Financial Advisors
• Management & Other Consultants

Read more on ATO’s new traffic light system, and why it matters, in this article.

From 1 July 2023, Temporary Full Expensing of depreciating assets has ceased to be available to taxpayers.  

As of 29 May 2024, there were no legislated enhanced depreciation concessions for taxpayers. However, a Bill was before the House of Representatives, which would enhance and extend the Instant Asset Write Off (IAWO) to taxpayers with aggregated turnover of less than $10m for assets up to $20,000 for the income year ending 30 June 2024, subject to all parameters of the existing IAWO measure. Although that Bill had not passed Parliament, a further extension of the enhanced IAWO to encompass the income year ending 30 June 2025 was announced as part of the 2024-25 Federal Budget. 

Senate amendments that would increase the aggregated turnover and asset value thresholds for the income year ending 30 June 2024 to $50m and $30,000, respectively, were under consideration by the House of Representatives as of 29 May 2024. 

For all taxpayers who have opted out of the simplified depreciation rules, or have an aggregated turnover of $50m or greater, assets purchased for $100 or more must be depreciated over their useful lives, noting that assets purchased for less than $1,000 are able to be added to a Low Value Pool. 

If the Instant Asset Write Off legislation is not passed, the simplified depreciation rules will only apply to taxpayers with an aggregated turnover of less than $10m, and for assets up to $1,000. All assets above this amount would be required to be added to a Small Business Pool. Similarly, if a taxpayer who has been using these simplified depreciation rules subsequently ceases to apply these concessions, they are prohibited from again accessing these concessions for a 5-year period and will be subject to the above $100 limit.

Small businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia. 

This measure applies for expenditure incurred until 30 June 2024. 

If you have a non-paying customer and there is a genuine concern regarding recovery of the debt, then some or all of the debt can be deducted in the current tax year provided it is written off before year end and was included as income at an earlier time.

Keep in mind that you may be entitled to a reduction in GST for the bad debt written-off. If you are registered for GST and have included the forgiven amount in a prior period Business Activity Statement, you are entitled to adjust down the GST payable in the period that you write-off the bad debt.

Businesses should review their fixed asset registers to ensure that they are not holding plant or equipment that they no longer require due to obsolescence. Even checking for assets that your business no longer holds could save you at tax time.

Depending on the written down value of the assets, a deduction can be claimed should the asset be ‘scrapped’ or disposed of prior to year-end.

It may be time to review how your business values stock on hand.

Perhaps the value of closing stock used for tax purposes is based on your management accounts that uses the higher of net realiable value or cost.

The ATO allows a business to value its closing stock at any of the following values:

• Replacement value
• Cost
• Market selling value

Depending on the stock valuation under these three methods a business can obtain a significant reduction in its tax liability by adopting a method that results in the lowest value.

In certain circumstances, a taxpayer may also be entitled to a deduction for a write-down of obsolete stock where appropriate valuations and measures are taken.

NOTE: Application of method can differ for different inventory items. Liaise with your RSM Advisor to determine most suitable options for your business.

It is common practice for a business to create a provision for payment of staff bonuses.

However, a tax deduction is only available for staff bonuses to the extent that the business is ‘definitively committed’ to paying the bonus. Therefore, a business looking to claim a deduction for current year bonuses should keep appropriate documentation to support approval of those bonuses prior to year-end.

Review any of your expenditure that is eligible for a discount if paid for the next year. 

Not only can you take advantage of this saving but depending on the expenditure it can also result in an immediate tax deduction.

From 1 July 2020, businesses with a turnover of less than $50 million are eligible to deduct any prepayment that has a service period of less than 12 months and all businesses can deduct prepayments that are either required under a Government law or cost less than $1,000.

Just because you haven’t paid for goods or services until the following tax year, doesn’t mean you can’t take advantage of the deduction this year.

To the extent that services are provided to you before year end even though they are invoiced after year end, and the cost can be reasonably estimated, the expenditure may be deductible in the year in which the service was provided.

If your business holds consumable stores or spare parts that are to be used within three months after year end, the ATO’s view is that businesses can deduct the costs of consumables in the year acquired, as opposed to having to include the amount in closing stock.   

It can be beneficial for businesses to review their consumables and claim upfront where possible.

If you started your small business during the current year (or will do before year end), the costs associated with starting the business will be deductible (e.g. accounting fees, legal costs, company incorporation costs and trust deed costs).