As the financial year draws to a close, it’s crucial for business owners to address several key areas to ensure compliance and optimise financial performance. Remember, in the realm of tax planning, the phrase “time is money” truly applies.
Effective Tax Planning
This period leading up to the end of the financial year is critical for tax planning. Discussing strategies promptly is essential to capitalise on potential tax savings. Successful implementation of these strategies requires action before the financial year ends, potentially resulting in substantial savings.
Proactive EOFY Preparation
Take action now to steer clear of last-minute rushes; it’s wise to prepare well in advance of June 30, especially considering it falls on a Sunday this year. Importantly, submitting your EOFY superannuations contributions by June 14 is optimal, as it allows ample time for the funds to be processed by clearing houses. Being proactive ensures all financial tasks are completed in time.
Super Contributions: Preparing for Changes and Maximising Benefits
- Employee Contributions: Ensure all employee superannuation contributions are paid and processed by the fund by June 30 to claim a deduction for this financial year.
- Rate Increase: From July 1, 2024, the superannuation guarantee rate will increase to 11.5%.
- Personal Contributions: You may be eligible for a deduction for personal super contributions paid from after-tax income. The concessional contributions cap is $27,500 for the 2024 income year. If underutilised in previous years, you might be able to catch up unused caps to increase your deductible contributions this year.
- Personal contributions can only be claimed if received by your super fund by 30 June, a notice is sent to your super fund and it has been confirmed in writing by them.
- Reserving Strategy: Consider a strategy to prepay next year’s super contributions, allowing you to claim a deduction for two years’ contributions in one financial year.
- Government Co-Contribution: Low-income earners making personal super contributions may qualify for a government co-contribution of up to $500 for a $1,000 contribution.
Managing Debts, Invoices and Income
- Bad Debt Write-Off: If debtors are not recoverable, and all action has been taken to resolve, then write off the bad debt before 30 June to bring to account the expense. Ensure GST is adjusted.
- Credit Invoices: Issue necessary credit notes before the year-end to correct any invoicing errors.
- Deposits/Payments in advance: For businesses that have received deposits or advance payments for work not started or not completed by June 30, it may be advisable to defer recognising part or all of this income to the financial year when the work is expected to be finished
Prepayments
- Prepayment Rules: Small and medium businesses can claim the full amount of certain prepaid expenses if the service period does not exceed 12 months.
Tax Planning Strategies
- Stage 3 Tax Cuts: Stay informed about upcoming tax changes to strategically plan your contributions and tax liabilities. Read more about them here.
- Instant asset write-off: Businesses with a turnover of up to $10 million can claim an immediate tax deduction for the full cost of eligible assets priced under $20,000. To qualify, these assets must be installed and operational between July 1, 2023, and June 30, 2024
- Utilise unrealised capital losses: Consider if any losses can be used to reduce current year gains, otherwise these will be carried forward until they can be offset against gains in either the same year or a future year.
The EOFY is not only a period for compliance but also an opportunity for strategic decisions that can enhance your business’s financial health. For tailored advice, reach out to Core Business Accountants to effectively prepare for the EOFY deadlines.
Core Business Accountants specialise in business advice for growing and mature family-owned and small and medium-sized businesses. Please contact with us on (07) 5438 8088, email mail@corebusiness.com.au or visit www.corebusiness.com.au
