As the financial year 2025 begins, many business owners find themselves at a crossroads, balancing the immediate challenges of managing day-to-day operations with the overarching need to plan for the future. In a landscape where economic conditions fluctuate and regulatory frameworks evolve, the path to financial stability often seems fraught with complexity. Yet, the start of a new fiscal year offers a unique opportunity – a clean slate to set clear, actionable financial goals that not only safeguard your current operations but also pave the way for long-term success.
Crafting a well-thought-out financial strategy is more than a necessity in today’s dynamic business environment – it’s a lever for transformation. Whether your focus is on boosting revenue, streamlining expenses, optimising cash flow, or ensuring compliance with tax and superannuation laws, setting precise short-term goals is the first step toward turning these aspirations into reality. However, true stability requires the foresight to look beyond the immediate horizon. For those considering significant moves like business succession or ownership transitions within the next 3-5 years, understanding the full financial landscape through an independent business valuation can illuminate paths to enhance value and address potential gaps.
But where does one start, and how can you ensure that your financial goals align with your business vision? At Core Business Accountants, we believe that every successful financial journey begins with expert guidance and a robust plan tailored to your unique business needs. This article aims to navigate you through some essential strategies.
Maximising Your Superannuation Contributions
Optimising superannuation contributions is vital for a secure financial future. Consider these strategies:
- Catch-Up Contributions: Utilise provisions for concessional contributions from previous years.
- Bring-Forward Contributions: Make additional non-concessional contributions if eligible.
- Downsizer Contributions: If over 55 and selling your home, consider contributing to superannuation.
- Early Contributions: Pay concessional contributions early to avoid a cash flow crunch.
- Employee Contribution Rate Increase: Note the rise to 11.5% from July 1, 2024, with a progressive increase to 12% on July 1, 2025. Ensure compliance with super guarantee obligations to avoid penalties and maintain good employee relations.
- Personal Contributions: Make additional personal contributions while adhering to caps and deadlines.
These strategies offer tax benefits and enhance retirement savings but should be balanced with short-term cash flow needs. Timely superannuation contributions prevent ATO penalties and improve employee satisfaction. Professional advice can streamline this process, allowing you to focus on core business activities.
Australian Tax Concessions for Small to Medium-Sized Businesses
Tax concessions present valuable opportunities for small to medium-sized businesses to reduce tax liabilities and strengthen financial standing. Understanding and leveraging these concessions can significantly enhance tax planning strategies.
- Instant Asset Write-Off: Eligible businesses can deduct the full cost of qualifying assets up to $20,000 immediately. This is particularly beneficial for investing in equipment and machinery. Businesses that have previously claimed an immediate deduction can also deduct new costs added to the asset (second element costs) if:
- The cost is incurred after the asset was written off,
- The amount is less than $20,000,
- The expense was incurred between July 1, 2023, and June 30, 2024. The $20,000 threshold applies per asset, allowing multiple assets to be written off instantly. Assets over $20,000 can be added to the simplified depreciation pool, depreciated at 15% in the first year and 30% in subsequent years. Pool balances under $20,000 at the end of 2023–24 can also be written off.
- Lower Company Tax Rates: The Australian government offers reduced tax rates for businesses with turnover below a certain threshold. This concession supports growth and competitiveness by lowering tax burdens, allowing companies to retain more profits for reinvestment or expansion.
- Small Business Concessions: Based on aggregated turnover, small businesses can access various concessions:
- Under $2 million: Small business CGT concessions.
- Under $5 million: Small business income tax offset.
- Under $10 million: Small business restructure roll-over. There is generally a 2-year period from the date of assessment to object or amend for businesses with turnover under $10 million. From July 1, 2021, a 2-year limit also applies to financial year assessments for turnover under $50 million.
- Research and Development (R&D) Tax Incentive: This incentive offers tax offsets for eligible R&D expenses, encouraging investment in innovation and technological progress.
- Small Business CGT Concessions: Available for businesses disposing of active assets, these concessions can significantly lower or eliminate CGT on qualifying asset sales, helping maximise after-tax proceeds and reinvest in operations.
FBT Exemption Changes
From April 1, 2025, plug-in hybrid electric vehicles (PHEVs) will no longer be exempt from Fringe Benefits Tax (FBT). Only fully electric vehicles will qualify for FBT exemptions. PHEVs purchased before this date and covered by a binding financial agreement, such as a lease that extends beyond April 2025, will remain exempt. Extensions of these agreements will be subject to FBT once the original agreement ends.
Strategic Tax Planning and Compliance for Business Owners
Advance tax planning is essential to maximise benefits and avoid stress. Effective cash flow management is crucial for the financial stability and long-term success of small to medium-sized businesses. By adopting strong cash flow practices and using accounting software, businesses can enhance performance and strengthen tax planning efforts.
As you plan for the upcoming year, remember that proactive planning and expert advice are key. Set clear goals, optimise your superannuation contributions, plan your taxes early, and build a strong advisory team to navigate your financial journey confidently. For personalised advice, contact Core Business Accountants to prepare effectively for EOFY deadlines.
Core Business Accountants specialise in business advice for growing and mature family-owned and small and medium-sized businesses. Please contact us on (07) 5438 8088, email mail@corebusiness.com.au or visit www.corebusiness.com.au
