2024 Year End Tax Planning Guide (Part 1)
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Areas of tax planning to be considered:
- Key Tax Minimisation Strategies.
- Round Up of Other Year End Tax Issues.
- Other Tax Effective Strategies for Businesses to Consider.
- Superannuation Tax Planning Opportunities.
- Immediate Write Off & Temporary Full Expensing for Individual Small Business Assets.
Key Tax Minimisation Strategies
Delay Deriving Assessable Income
One effective strategy is to delay deriving your income until after June 30, 2024. Consider the following:
a. Delaying the Timing of the Derivation of Income until after June 30.
b. Timing of Raising Invoices for Incomplete Work (Businesses)
This tactic needs thought as it can adversely affect your cash flow and lead to issues better left alone. Invoices raised before 1-7-2024 are income in this financial year. Please note, not banking amounts received before June 30 until after June 30 do NOT qualify because the income is deemed to have been earned when the money is received, or the goods or services are provided (depending on whether you are on a cash or accruals basis of accounting).
· Cash Basis Income - Some income is taxable on a cash receipts basis rather than on an accruals basis (e.g. rental income or interest income in certain cases). You should consider whether some income can be deferred.
· Consider delaying your invoices to customers until after July 1 which will push the generation of the income into the next financial year and defer the tax payable on it. If you operate on a cash basis, you simply need to delay receiving the money from your customers until after June 30.
· Lump Sum Amounts - Where a lump sum is likely to be received close to the end of a financial year, you should consider whether this amount (or part thereof) can be delayed or spread over future periods.
2. Bringing Forward Deductible Expenses or Losses
Prepayment of Expenses
In some circumstances, small businesses and individuals who derive passive type income (such as rental income and dividends) should consider pre-paying expenses prior to 30 June 2024. A tax deduction can be brought forward into this financial year for expenses like:
- Employee Superannuation Payments including the 11% Superannuation Guarantee Contributions for the June 2024 quarter (any such contribution MUST be received by the Superannuation Fund by June 30, 2024 if a tax deduction is to be claimed).
- Superannuation for Business Owners, Directors, and Associated Persons.
- Wages, bonuses, commissions, and allowances.
- Contractor Payments.
- Travel and accommodation expenses.
- Trade creditors.
- Rent for July 2024 (and possibly future additional months – speak to your accountant to see if this is possible in your case).
- Insurances including Income Protection Insurance.
- Printing, Stationery and Office Supplies.
- All forms of advertising and promotion.
- Utility Expenses - Telephone, Electricity & Power.
- Motor Vehicle Expenses - Registration and Insurance.
- Accounting Fees.
- Subscriptions and Memberships to Professional Associations and Trade Journals.
- Repairs and Maintenance to Investment Properties.
- Self Education Costs.
- Home Office Expenses – desk, chair, computers etc. This area of expenses has changed significantly in recent years. Speak to your accountant about your situation.
- Donations to deductible gift recipient organisations.
- If appropriate, consider prepaying any deductible investment loan interest. This could include interest payments on an investment loan for either an investment or commercial property or an investment portfolio you hold.
A deduction for prepaid expenses will generally be allowed where the payment is made before 30 June 2024 for services to be rendered within a 12-month period. While this strategy can be effective for businesses operating on a cash basis (not accruals basis).
Superannuation Contributions - some low or middle-income earners who make personal (after-tax) contributions to a superannuation fund may be entitled to the government co-contribution. The amount of government co-contribution will depend on your income and how much you contribute.
Capital Gains/Losses – Note that the contract date (not the settlement date) is usually the key sale date for capital gains tax purposes. Here are several important points regarding the management of capital gains and capital losses on a sale of your assets from a tax planning perspective:
i. If possible, consider deferring the sale of an asset with an expected capital gain (and applicable capital gains tax liability) until it has been held for 12 months or longer. By doing so, you could reduce your personal income tax. For example, if you hold an asset for under 12 months, any capital gain you make may be assessed in its entirety upon the sale of that asset.
| The Capital Gains Tax (CGT) Calculation Method* | |||
| Individual Taxpayer | Date of CGT event | CGT payable on an asset held < 12 months | CGT payable on an asset held ≥ 12 months |
| From 21/09/1999 | Tax on 100% of nominal gain | Tax on 50% of nominal gain | |
ii. * A capital gain will be assessable in the financial year that it’s realised.
iii. If possible, consider deferring the sale of an asset with an expected capital gain (and applicable capital gains tax liability) to a future financial year. By doing so, you could help reduce your personal income tax for the current financial year. This could also be of benefit if, for example, you expect that your income will be lower in future financial years compared to the current financial year.
iv. If appropriate, consider offsetting a realised capital gain with an existing capital loss (carried forward or otherwise) or bringing forward the sale of an asset currently sitting at a loss. By doing so, you could reduce your personal income tax in this financial year. Note that a capital loss can only be used to offset a capital gain.
Accounts Payable (Creditors) - If you operate on an accruals basis and services have been provided to your business, ensure that you have an invoice dated June 30, 2024, or before so you can take up the expense in you accounts for the year ended 30th June 2024.
Please do not hesitate in contacting us if you have any questions on the above or other tax related matter.