As the tax year approaches its close on 30 June 2024, individuals are presented with an opportune moment to manage their finances and optimise their tax obligations.
By judiciously considering various avenues for tax planning, there may be opportunities to minimise tax liabilities while maximising financial well-being. Here are some key considerations to ponder:
Trust Management
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You must do trust distribution minutes before 30 June 2024 to allocate profit for the year. To make these decisions you need to forecast what your profit is likely to be for the year. Once your March 2024 BAS is completed, review the results for the year to date and estimate profit for the year.
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Explore the possibility of income streaming from family discretionary trusts. However, be mindful of potential implications under Division 7A or Section 100A, which may apply to certain arrangements
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Furthermore, trustees of family trusts should align their tax planning strategies with the unique considerations of trust management. It is imperative for trustees to verify the eligibility of each beneficiary to receive distributions from the trust and to meticulously document the allocation of income among beneficiaries by 30 June, maintaining detailed records of trustee distribution minutes.
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Additionally, trustees should assess the applicability of Division 7A or Section 100A to any unpaid present entitlements (UPEs) within the trust structure. Notably, beneficiaries should be aware that disclaiming a distribution after 30 June may not be feasible, underscoring the importance of timely decision-making and proactive tax planning measures.
Tax Deductions for Business
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Businesses with a turnover of less than $10M can claim an instant asset write-off of up to $20,000 for items of plant and equipment costing less than $20,000, allowing for a full deduction. Assets exceeding $20,000 can be depreciated at a rate of 15% in the first year and 30% annually thereafter.
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For businesses with a turnover exceeding $10M, assets must be depreciated over their effective life.
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To qualify for a tax deduction in the 2024 year, pay employee super before 30 June 2024. Ensure payments are processed through the clearing house and funds are sent to super funds before the deadline. Given the typical 10-day processing time, aim to make payments no later than 17 June 2024, estimating super payments for the maximum deduction.
Expenses & Debt for Business
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Document or pay employee bonuses before 30 June 2024.
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Small businesses with turnover less than $50M can prepay rent and other business expenses for up to 12 months.
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Engage in Continuing Professional Development (CPD) training or prepay for training within the next 12 months.
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Conduct a review of debtors and write off any bad debts before 30 June 2024.
Managing Dividends
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If applicable, consider how you will take profits out of your company, either as wages or dividends. Wages will have super and workers comp issues. Dividends need company tax paid to take out fully franked dividends.
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Strategise the declaration or postponement of franked dividends from private companies to optimise tax outcomes in alignment with your overall financial plan.
Utilising Salary Packaging and Sacrifice
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Investigate the advantages of salary packaging and salary sacrifice arrangements, such as for cars or additional superannuation contributions, to optimise tax efficiency while enhancing personal financial goals.
Protecting Income
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Evaluate the use of income protection policies as a means to safeguard against unforeseen financial risks while potentially enjoying tax benefits.
Capital Gains Management
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Mitigate potential capital gains tax (CGT) liabilities by offsetting capital gains with capital losses, adhering to Australian Taxation Office (ATO) regulations to ensure legitimate deductions.
Strategic Asset Sales
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Consider deferring the sale of CGT assets to after 30 June if feasible, thereby potentially deferring associated tax liabilities to the subsequent tax year.
Prepayment of Expenses
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Explore the option of pre-paying rent, interest, or insurance costs by 30 June, possibly allowing for deductions in the current tax year, subject to specific rules and limitations.
Deductible Expenses
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Review potential deductible expenses such as self-education costs or home office expenses, particularly relevant for those working remotely due to the pandemic.
Superannuation Contributions
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Assess the opportunity for additional contributions to superannuation, considering contribution thresholds for both yourself and your spouse, to potentially reduce taxable income while bolstering retirement savings.
Charitable Donations
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Consider donating to registered charities, or public or private ancillary funds to support worthy causes and potentially avail of tax benefits.
Rental Properties
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If you have rental properties, review expenses for the year and prepay any to get larger tax deductions this year. Review loans to check on the rates of interest you are paying. If you have not reviewed your loans in the last 2 years, do so now with your bank or mortgage broker.
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If you have an agent managing your rental property, get them to pay all property expenses so that they are recorded on one statement at year-end for your accountant.
Logbooks
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Do a new logbook now if yours is more than 5 years old or your pattern of work use has changed. Logbooks need to be started before the end of the tax year.
By proactively engaging in tax planning strategies tailored to individual circumstances, individuals can confidently navigate the tax system’s complexities, ensuring compliance and financial optimisation.
Interested in learning more about how to maximise your tax efficiency? Our team at Lee & Lee would be happy to help you with your financial questions and other matters. Contact us today.