As the 2024 tax year winds down, we recommend taking time to consider your affairs for tax planning purposes.

For individuals and businesses alike, year-end tax planning offers a valuable opportunity to assess financial positions, identify potential tax-saving strategies, and make informed decisions to optimise tax liabilities. However, it’s important to consider your ultimate personal and business goals together with your cash flow before implementing any tax planning strategies. Spending money for a deduction in the current financial year may not be the best value for money.

Key areas to be considered and potentially addressed by individuals and businesses include:

INDIVIDUALS

• Revisit retirement planning
• Increase in superannuation guarantee (SG) rate
• Increase in tax on super balances >$3 million
• Super contributions – individuals
  • Concessional contributions
  • Non-concessional contributions
• Individuals with multiple employers – Opt out of receiving SG
• Rental properties
• Working from home expense deductions

 BUSINESSES

• Super guarantee – employers
  • Employer superannuation contributions
  • SG rate changes
• Personal exertion income
• Allocation of professional profits
• Personal loans from companies
• Fringe benefits tax – Exemptions and lodgement of a nil return
• Trust distributions
• Bad debts
• Year-end finalisation report
• Prepayments
• Stock and depreciating assets
• Tax File Number reporting
• Payroll tax – Queensland
• Skills and Training Boost
• Small business energy incentive

INDIVIDUALS

Revisit retirement planning

Review your wealth creation structures, ensure that they remain appropriate and continue to meet your requirements prior to 30 June 2024. If you have started a pension from superannuation, it is important that you have drawn the required minimum pension for the current financial year before 30 June 2024. The minimum pension payments for the 2024 financial year are based on the member account balance as at 30 June 2023, and are as follows:

There is no maximum limit, except for transition to retirement pensions which is limited to 10%. The payment amount will be calculated based on the member account balance as at 30 June 2023.

Increase in Superannuation Guarantee rate

As of 1 July 2024, the Superannuation Guarantee (SG) rate rises to 11.5%, with a further increase to 12% on 1 July 2025.  Employees should review their employment agreements to determine the impact the SG percentage increase may have on their take-home pay.

Increase in tax on super balances >$3 million

The Government has proposed a change to tax on superannuation ‘earnings’ for those with total super balances above $3 million. This will effectively increase tax payable to 30% (from 15%) to be implemented from 1 July 2025. In preparation for this change, we recommend reviewing you super balances and where possible determine if implementing an early strategy such as equalising spouse balances is beneficial. See here for further details on the proposed changes.

Super contributions – individuals

Concessional contributions

Individuals are able to make personal concessional contributions from pre-tax funds to claim a tax deduction in their income tax returns for the year ended 30 June 2024. The tax deduction is only deductible in the 2024 tax return where the superannuation fund receives the contribution by 30 June 2024. The general concessional contributions cap is $27,500 for the 2024 financial year (moving to $30,000 from 1 July 2024).

Where you have an unused concessional cap amount from the 2019 through to 2023 financial years, the carry-forward arrangement may be utilised to make extra concessional contributions in the 2024 financial year. This arrangement is available if your total superannuation balance as at 30 June 2023 was less than $500,000 and you have, or are planning to, make concessional contributions in the 2024 year that exceed the general concessional contributions cap.

The additional concessional contributions relate to any unused cap amounts from previous years starting from the 2019 financial year. The unused cap is able to be carried-forward and used in a future year, although it expires after five years. Any unused concessional contributions remaining from the 2019 year will expire on 30 June 2024 if not utilised before this date.

When making any additional concessional contributions before 30 June 2024, it is important to:

1. Identify your specific contribution cap – is it limited to $27,500 or can you access the carry-forward arrangement?;
2. Confirm the amount of superannuation contributions that have been received by your superannuation fund during the financial year; and
3. Understand what your employer (if applicable) will still contribute prior to 30 June 2024.

This will assist with ensuring the concessional contributions cap is not exceeded for the period ended 30 June 2024. If a taxpayer exceeds the 2024 cap of $27,500 (and any carry-forward cap), the excess amount is included in their 2024 income tax return and taxed at their marginal tax rate.

Non-concessional contributions

Individuals are able to make non-concessional contributions for the year ended 30 June 2024 where their superannuation balance is less than $1.9 million at the end of the previous financial year. These contributions are not tax deductible and are not taxable in the superannuation fund. The non-concessional contributions cap for the 2024 financial year is $110,000 (moving to $120,000 from 1 July 2024).

If you are under 75 years of age, you may be eligible to make contributions above this annual non-concessional contributions cap by gaining access to future year caps under the bring-forward arrangement. This is reliant on the bring-forward arrangement not being utilised in the previous three years.

The bring-forward arrangement allows you to make extra non-concessional contributions without the requirement of paying extra tax. The availability of this arrangement in this financial year will depend on your age and total superannuation balance as at 30 June 2023. The relevant bring-forward limits for the 2024 financial year are as follows:

Individuals with multiple employers – Opt out of receiving SG

If you are an individual with multiple employers, you may be eligible to opt out of receiving SG from some of your employers. This may help you prevent unintentionally going over the concessional contributions cap and avoid paying extra tax. To opt-out, the ATO must receive the employee’s application for a shortfall exemption certificate a minimum of 60 days before the first quarter for which the exemption is wanted. While the application period for the quarter beginning 1 July 2024 has past (being 2 May 2024), employees may apply until 2 August 2024 to receive the exemption certificate for the quarter beginning 1 October 2024.

If you are considering applying for an exemption certificate, discuss this with your employer first. The employer is able to choose to disregard the exemption certificate and continue to pay SG.

Rental properties

For rental property owners, it is important to begin assembling relevant documentation including expenditure receipts to prepare for your 2024 tax return. This includes determining deductible expenses and considering what capital gains tax implications may arise in the event of a sale. The timing of the deductions available may vary for eligible expenses such as rates, property management fees, capital works and depreciation.

Subject to sufficient cash availability, you may consider prepaying interest or paying for other expenditure before 30 June 2024 to crystallise a tax deduction in the 2024 income tax return.

It is also important to review loans and policies to ensure that any interest-only periods are not nearing expiry.  Further, consider if any loans have been refinanced for other purposes as a portion of the interest may not be deductible.

Working from home expense deductions

For the 2024 income year individuals must utilise either the actual costs or the fixed rate method to calculate a deductible working from home amount. The fixed rate method is 67 cents per hour worked from home and covers energy expenses, internet, stationery and computer consumables, without the requirement for a dedicated home office. Additional deductions can be claimed for the decline in value of assets such as computers and office furniture; repairs and maintenance of these assets; and cleaning costs for a dedicated home office.

To claim a working from home expense deduction, you must keep the relevant records. The record requirement is different depending on which method you choose:

1. Fixed rate method – taxpayers are required to keep a record of all hours worked from home for the entire income year together with evidence that the taxpayer paid for all expenses covered under the fixed rate method. Further, records for other expenses claimed as a separate deduction must be held.
2. Actual costs method – taxpayers are required to keep a record of all hours worked from home for the entire income year or a 4-week representative diary together with evidence of expenses being deducted such as receipts, bills and how the amount was calculated.

BUSINESSES

Super guarantee – employers

Employer superannuation contributions

Superannuation is deductible when paid. Therefore, to claim superannuation as a tax deduction for the June quarter (or month where the business pays superannuation monthly), the business must ensure that this superannuation is paid before 30 June.

Importantly, if you use a clearing house such as the Small Business Superannuation Clearing House, you may have to make the superannuation payment to the clearing house by 21 June 2024 to ensure the payment is made to the employees’ funds by 30 June.

SG rate changes

Employers need to be aware of changes to superannuation in the new financial year. From 1 July 2024, the SG rate is set to increase by 0.5% to 11.5% for all employees.  The SG percentage will increase to 12% the following financial year (as at 1 July 2025), being the last of the scheduled increases.

Due to the business cash flow implications of these changes, it is important for employers to factor these changes in when negotiating new salary and wage packages.  Employers should also understand if the change in superannuation rates for current employees will result in a change in the allocation of their employment package or an additional payroll cost.

Personal exertion income

Broadly, personal exertion income is income derived by the personal efforts or skills of an individual. Typical industries where personal exertion income is derived include (but are not limited to) medical professionals, financial professionals, information technology consultants and engineers.

Where personal exertion income is derived through structures such as trusts, partnerships or companies, the income (less certain deductions) is attributed to the individual who performed the services. It is important to ensure that profits earned from personal efforts when operating via a trust, partnership or company are appropriately paid out to the relevant individuals before 30 June 2024.

Allocation of professional profits

Further to the above personal exertion rules, from 1 July 2022 the ATO has commenced a new compliance program as outlined in PCG 2021/4 in relation to the allocation of professional firm profits. Professional firms include but are not limited to those providing services in the accounting, architectural, engineering, financial services, legal, medical and management consulting professions.

These guidelines are concerned with whether there is a risk that professional profits are not appropriately taxed to the individual professional practitioner or where particular arrangements lack a commercial rationale and/or exhibit certain “high risk” features.

If your industry is affected by these guidelines, you should consider where you may stand and whether this aligns with the level of audit risk that you are willing to accept. Alternatively, changes to your structure or further decisions may be required to change your risk profile going forward based on the ATO’s commentary in PCG 2021/4.

Should you have concerns regarding your professional profits allocation or require assistance here, we recommend contacting your Pilot advisor to assess your risk level in line with ATO guidance prior to 30 June 2024.

Personal loans from companies

If you are a shareholder or associate of a private company and have borrowed money from the company, it is important you have made the necessary minimum loan repayments before 30 June 2024 to ensure no adverse tax consequences arise.

Additionally, any new loans created during the current year will be required to be repaid or put on a complying loan agreement before the earlier of:

• the date the company lodges its 2024 tax return; or
• the lodgement due date of the 2024 tax return.

The interest rate for these loans (known as Division 7A loans) has increased to 8.27% for the 2024 financial year.

Fringe benefits tax

Exemptions and lodgement of a nil return

Fringe benefits tax (FBT) broadly applies to non-cash benefits provided to an employee unless an exemption applies. The commonly applied exemptions include (but are not limited to):

• minor and infrequent benefits provided for less than $300;
• private use of a panel van, ute or other commercial vehicle (broadly being, one not designed principally to carry passengers where the private use is limited);
• the provision of portable electronic devices mainly for use in the employee’s employment;
• private use of an eligible electric car.

Where employers are providing non-cash benefits to employees that are exempt from FBT and not lodging FBT returns, we recommend lodging an FBT return annually to limit the amendment period.

The ATO has the right to audit and amend FBT relating to prior years, for a period of up to six years from the date of an FBT assessment. If an entity has never lodged an FBT return, and therefore never received an assessment, the ATO can audit the entity for an unlimited number of prior years. This exposure can be limited by lodging an FBT return for the year ended 31 March 2024, thereby generating an FBT assessment.

Trust distributions

Discretionary trusts (and some fixed trusts) are required to prepare and execute distribution minutes prior to 30 June for each financial year. These distribution minutes detail how the income of the trust will be distributed to beneficiaries for the relevant financial year. Minutes must be prepared in accordance with the trust deed and detail any use of income streaming. For the 2024 financial year distribution minutes to be effective, they must be prepared and executed by 30 June 2024.

When preparing the trust distribution minutes, it is recommended to prepare the minutes in a way to retain a nominal amount in the trust for the 30 June 2024 income year. This will assist with generating a notice of assessment for the trust and effectively limiting the amendment period to 4 years (or 2 years for trusts that are considered a small business entity).

Broadly, the amendment period is a particular tax period that the ATO and taxpayer is able to review and amend tax forms to include any under or overpayment of tax. The period is determined from the date of relevant notices of assessments. Where there is no retention of income, trusts are generally not taxable and therefore do not receive notices of assessment. As such, without completing the distribution minutes and retaining a nominal amount in the trust by 30 June 2024, the amendment period may be greater than 2 or 4 years.

Bad debts

Bad debts should be identified before 30 June 2024 to understand the commercial and tax implications. Therefore, a review of trade debtors should be conducted to identify any amounts that are considered uncollectable and these should be written off prior to 30 June 2024.

Broadly, where a bad debt is written off and been determined unlikely to be recovered through any reasonable and commercial attempts prior to 30 June 2024, you may claim a tax deduction for it in the 2024 financial year. This is on the basis that the debt is still in existence and has not been waived, forgiven, sold or extinguished in any other way.

However, the bad debt may not be deductible where there has been a change in ownership or control of a company or trust, unless the continuity of business tests are satisfied.

Year-end finalisation report

Employers should have procedures in place to ensure they are able to lodge the Single Touch Payroll (STP) year-end finalisation report by 14 July 2024. This will allow their employees to complete their tax returns.

Remember to include fringe benefits provided to employees in the STP finalisation report where the benefit provided is more than $2,000.

Prepayments

Broadly, businesses with an aggregated turnover below $50 million may deduct prepaid expenditure for the 2024 income year where:

1. The total period covered by the prepaid expenditure is 12 months or less; and
2. The period covered by the prepaid expenditure ends in the following income year (i.e. by 30 June 2024).

Businesses with an aggregated turnover below $50 million should review their expenses and, subject to cash availability, consider bringing forward any payments which are currently being paid monthly such as subscriptions and insurance.

In order to claim a deduction for this financial year, determine what expenses may be prepaid prior to 30 June 2024 using excess cash available.

Stock and depreciating assets

For tax purposes, most businesses that trade stock are required to do an annual stocktake as at 30 June. It is important to plan and execute a stocktake in a way which gives a reliable and accurate stock figure. As part of stocktake, you should identify any old, obsolete or damaged stock which can be written off or written down.

The fixed asset register should also be reviewed to write off obsolete, scrapped or damaged depreciating assets before 30 June 2024.

Tax File Number reporting

Closely held trusts (including family trusts) are required to report the Tax File Number (TFN) and other personal details of any new beneficiaries. This is done by completing a TFN Report for the quarter the beneficiary quotes their TFN to the trust. The TFN report must be lodged by the end of the month following the relevant quarter. As such, any beneficiaries of a trust for the year ended 30 June 2024 that have not quoted their TFN should do so by 30 June 2024. This will ensure the trust is able to lodge the June 2024 quarter TFN report by 31 July 2024.

Where a beneficiary’s TFN has not been quoted, the trustee is required to withhold tax at the top rate from any payments or distributions made to them.

Payroll tax – Queensland

Where a business has Australian taxable wages that exceeded $1.3 million for the 2024 financial year, the entity must lodge the Queensland annual payroll tax return by 21 July 2024. If the entity has overpaid tax for the year, the amount will be applied to other outstanding debts or refunded.

It is important to note that a business must register for payroll tax within seven days after the end of a month in which the Australian taxable wages exceed $25,000 a week. This is required even if the business expects the Australian total taxable wages for the financial year to be less than the $1.3 million threshold.

Skills and Training Boost

The 2024 financial year is the last year that the Skills and Training Boost is available to provide an additional deduction of 20% of eligible expenditure incurred on external training courses provided to employees by registered training providers. This boost is only available to small businesses with an aggregated annual turnover of less than $50 million with eligible expenditure.

Small businesses with an aggregated annual turnover of less than $50 million should review their training costs incurred for the period 1 July 2023 to 30 June 2024 to see if this boost will benefit them and their cash flow.

Small business energy incentive

In the 2023 Federal Budget, the Government announced a new incentive which may allow for greater business deductions on eligible expenses for small business with an aggregated annual turnover of less than $50 million. This measure is not yet law.

If legislated, it will allow small businesses to claim an additional 20% of expenditure incurred to support “electrification and more efficient use of energy”. However, electric vehicles, energy generation assets (such as solar panels) and fuel powered assets are all excluded under the draft legislation.

The incentive will be available for eligible expenditure up to $100,000 incurred from 1 July 2023 until 30 June 2024.

Learn more

Now is the time to contact your advisor to understand the timing and quantum of your tax liabilities. Tax planning should be considered annually in June or earlier to take advantage of relevant strategies where it is commercially practical for you and/or your business.

If you would like assistance with tax planning or have any questions, please contact Kylee Smith or your Pilot advisor on 07 3023 1300.

For a summary of the key tax planning areas to address prior to 30 June, see our infographic.