As mentioned in our first article in this two-part series, year-end tax planning offers a valuable opportunity for individuals and businesses alike to assess financial positions, identify potential tax-saving strategies, and make informed decisions to optimise tax liabilities.

The second article in our two-part series will focus on the key areas to be considered and potentially addressed by businesses:

  • Super guarantee - employers (employer superannuation contributions and 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

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.

Super guarantee 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.

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 to discuss any of this in more detail, reach out to Pilot Chartered Accountants via your Credabl consultant, or contact us on 1300 27 33 22.