Prepay and Plan Ahead
- Bring Forward Deductions:
Prepaying up to 12 months of interest on investment loans before June 30, 2024, can be a smart financial move. By doing this, you can claim the prepayment as a deduction in the current financial year, which may reduce your taxable income and increase your tax refund.
Home Office Deductions
- Remote Work Expenses:
With the rise of remote work, it’s essential to take advantage of deductions for home office expenses. The ATO’s revised fixed-rate method simplifies the process of claiming a portion of your home office costs, including electricity, internet, and office supplies. Consult a tax advisor to ensure you claim all entitled deductions. The ATO provides a detailed guide on calculating these expenses.
Vehicle Expenses
- Maintain a Detailed Logbook:
If your job requires frequent travel using your own vehicle, keeping a detailed logbook can enhance your motor vehicle deduction. The logbook method allows you to claim the work-related portion of your car expenses, such as fuel, maintenance, and depreciation. The logbook should cover 12 consecutive weeks and be updated every five years or when your vehicle use changes. Accurate records are vital for maximizing deductions.
Charitable Contributions
- Donations to DGRs:
Contributions to Deductible Gift Recipients (DGRs) can reduce your taxable income while supporting worthwhile causes. Ensure your donations are made to registered DGRs and keep receipts for tax time. Verify the organization’s DGR status before making a donation to ensure deductibility.
Reconsider Income Protection Insurance Arrangements
- Review Your Protection:
Evaluate your current income protection insurance and consider increasing it if you have had a pay raise or additional business profits. This insurance is tax-deductible, making it a beneficial addition to your financial planning.
Additional Superannuation Contributions
- Boost Your Super:
Consider making voluntary contributions to your superannuation in addition to compulsory employer payments. These additional contributions are tax-deductible, subject to the concessional contribution cap of $27,500. Note that from FY 2025, the cap will increase to $30,000.
EOFY Tax Strategies for SMEs
- Maximise Asset Write-Offs:
The Government has extended the $20,000 instant asset write-off for small businesses until 30 June 2025. Assets under $20,000 can be fully written off, while those exceeding this amount can be added to the general small business pool.
- Submit BAS and STP Reports Promptly:
Timely submission of your Business Activity Statements (BAS) and Single Touch Payroll (STP) reports is crucial to avoid penalties and ensure compliance with ATO regulations.
- Advance Super Contributions:
Although super contributions are due by 28 July 2024, paying them before 30 June allows you to claim the deduction in this financial year.
- Adhere to Division 7A Regulations:
Be aware that the ATO monitors the use of company funds or assets for personal purposes. Personal expenses paid by a private company for a shareholder might be deemed dividends. Understand Division 7A implications to avoid complications.
- Write Off Irrecoverable Debts:
Assess and write off any bad debts before 30 June to claim them as deductions in the 2024 financial year.
- Review and Manage ATO Debts:
Examine any outstanding debts with the ATO and take necessary steps to manage them. Note that certain tax debts can now appear on commercial credit reports and potentially impact your credit rating.
- Reevaluate Business Structure:
Tax time is an ideal period to reconsider your current business structure. If you feel you’re paying too much tax or considering a new partner or shareholder, consult with us before 30 June for professional advice.
- Eliminate Obsolete Equipment:
Take the opportunity to review your asset register and discard any obsolete machinery or equipment before 30 June. This allows you to claim an immediate write-off deduction.
- Conduct Inventory Review:
Perform an inventory of your stock to identify and write off slow-moving or obsolete items before 30 June.
- Pre-pay Future Expenses:
Take advantage of tax deductions for pre-paid business expenses, such as rent, insurance, and subscriptions, that will be incurred within the next 12 months.
- Utilize Skills & Training Boost:
Until 30 June 2024, small businesses with an annual turnover under $50 million can claim an additional 20% deduction for eligible training expenses provided by registered Australian providers.
- Prepare for Superannuation Rate Increase:
From 1 July 2024, the rate of compulsory super contributions will increase from 11% to 11.5%. Ensure your business is ready for this change.
ATO’s Focus Areas This Tax Time
The ATO is closely monitoring three common areas of errors this tax season:
1.Work-Related Expenses
- Revised Fixed Rate Method:
Taxpayers must have comprehensive records to substantiate claims, including the actual number of hours worked from home and additional running costs incurred.
2.Rental Properties
- Repairs vs. Capital Expenses:
Immediate deductions are allowed for general repairs and maintenance. However, initial repairs on newly purchased properties are considered capital expenses and are not immediately deductible.
3.Income Reporting
- Include All Income:
Taxpayers should avoid rushing to lodge their tax return on July 1. Ensure all income from multiple sources is pre-filled in your tax return before lodging to avoid omissions.
If you have any questions or need assistance with your tax planning, please contact us at Number Solutions Tax & Accounting.
