June 6, 2024

Your essential EOFY guide

As the end of the financial year rapidly approaches, it's crucial to be aware of areas under increased scrutiny from the Australian Taxation Office (ATO) and the opportunities available to maximise your deductions. Whether you're an individual taxpayer or a business owner, our comprehensive guide will help you navigate this tax season effectively and ensure you're making the most of every opportunity.

For You

Prepay deductible expenses: You can benefit from the higher tax rate by bringing your deductible expenses into the 2023-24 financial year. Prepaying expenses such as insurance premiums, subscriptions, or other business-related costs can make a significant difference.

Superannuation contributions: Now is the time to make any deductible superannuation contributions. If your total superannuation balance allows it, consider maximising your $27,500 cap. This cap includes superannuation guarantee contributions by your employer, any salary sacrificed amounts, and personal contributions that will be claimed as a tax deduction.

If your superannuation balance on 30 June 2023 was below $500,000, you might access unused concessional cap amounts from the last five years in 2023-24. For example, if you were $8,000 under the cap each year for the previous five years, you could contribute an additional $40,000 this financial year and claim the deduction at the higher tax rate.

Plan philanthropic gifts: Planning charitable donations before the end of the financial year can also be beneficial. These donations can help reduce your taxable income, allowing you to take full advantage of the tax cuts.

Donations over $2 to a registered deductible gift recipient (DGR) are tax-deductible. The higher your tax rate, the more valuable the deduction. For example, a $10,000 donation can create a $3,250 deduction for someone earning up to $120,000 but $4,500 for someone earning $180,000 or more.

Consider philanthropic giving through public or private ancillary funds, which offer immediate deductions and managed distribution overtime. These funds invest and manage your donation, distributing a portion of their net assets to DGRs each year.

  

Investment property owners

Ensure your investment property is genuinely available for rent to claim expenses. The ATO focuses on properties used by family or friends, taken off the market, or listed at unreasonable rental rates.

Be cautious when refinancing and redrawing loans. You can only claim interest on the amount borrowed for the rental property, not for personal expenses. The ATO matches data from financial institutions to identify discrepancies in claimed expenses.

Understand the difference between repairs and maintenance and capital improvements. Repairs and maintenance can often be claimed immediately, while deductions for capital works are generally spread over several years. Ensure your claims are justified and well-documented.

Ensure you have a depreciation schedule to maximise deductions for wear and tear on your property. This schedule helps calculate the deductions for the natural depreciation of your investment property.

Accurate record-keeping is essential to justifying your claims.

Work From Home expenses

Shortcut method: Claim a fixed 67c per hour for energy, internet, phone, stationery, and computer consumables. Keep accurate records of your work-from-home hours, as the ATO will not accept estimates.

Actual method: Claim actual additional expenses incurred above your normal running costs. Maintain detailed expense records anda work diary for at least four continuous weeks to represent your typical work pattern.

Gig economy income

Declare all income from platforms like Airbnb, Uber, andOnlyFans. Platforms must report transactions to the ATO. Ensure you declare all income before the ATO discovers discrepancies and applies penalties and interest.

 

For your business

Instant asset write-off: Small businesses with an aggregated turnover of less than $10 million can immediately deduct the total cost of eligible depreciating assets costing less than $20,000. This threshold, extended to 30 June 2025, significantly boosts cash flow and supports growth.

Energy incentive: An additional 20% deduction on eligible assets supporting energy efficiency. This incentive, pending legislative approval, encourages investment in sustainable business practices.

Skills and training boost: A 20% deduction for eligible external training provided to employees. Available for businesses with an aggregated turnover of less than $50 million, this boost supports up-skilling your workforce and enhancing business capabilities.

Write-off bad debts: Document bad debts on your ledger or with a minute by 30 June if customers are unlikely to pay. This helps clean up your accounts and provides clarity on your financial position.

Obsolete plant & equipment: Scrap obsolete plant and equipment on your depreciation schedule and write it off before 30 June. This will not only clean up your books but also maximise your deductions.

Bring forward tax deductions: Commit to directors’ fees and employee bonuses by resolution and pay June quarter super contributions in June. This strategy brings forward deductions, reducing your taxable income for the current financial year.

Tax debt and reporting obligations: Failing to lodge returns is a significant red flag for the ATO. Non-lodgement does not stop debt escalation. If your business struggles to meet obligations, we can assist by working with the ATO on your behalf. Addressing issues promptly can prevent penalties and maintain your business’s financial health.

Professional firm profits: The ATO reviews how profits flow through professional services firms, ensuring professionals are appropriately rewarded for their services. Structures diverting income to reduce tax liabilities are under scrutiny. Ensure your profit distribution meets ATO guidelines to avoid potential audits and penalties.

 

We’re here to help

If you need support or have questions, our team at Lead Advisory is here to help you optimise your tax strategies and ensure compliance with ATO regulations. If you need support or have questions, talk to us today about maximising your opportunities and mitigating your risks. Let’s work together to make this financial year-end your most successful yet!

 

 

Join us in the Push-Up Challenge for Mental Health!

This June, we're taking on The Push-Up Challenge and aiming to complete a heap of push-ups between 5-28 June 2024 to raise funds and awareness for mental health. You can show your support by making a tax-deductible donation to our fundraising page or by joining our team to be apart of the fun.

Every dollar helps #pushforbetter mental health outcomes inAustralia. Join us and make a difference! Support Us Here.

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