Our year end tax thoughts

As we approach the end of the financial year it’s important to be thinking about tax and the things you need to do. We’ve put together a summary of the things you need to consider as they relate to:

• Individuals

• Trusts

• Investment and capital gains tax

• Companies

• Employment

• Tax accounting

• Compliance

Please remember that these are our overall thoughts. Please book in a meeting with your accountant if you would like further information as it relates to you and your position.

Individuals

Individual tax rates

There is no change to the income tax rates for the 2024/25 financial year.

The Medicare levy low-income thresholds have been announced to be increased from 1 July 2024 as follows:

Singles $27,222

Couples $45,907 with an additional $4,216 for each dependent child/student

Single seniors and pensioners $43,020

Family seniors and pensioners $59,886.

Income tax deductions

Taxpayers who are claiming home office expenses must comply with the Tax Office’s requirements which cover eligibility to claim additional running expenses, and expenses you cannot claim. The costs you cannot claim include general household items, employer provided items and employer reimbursed items.

Where you are claiming deductions for work related expenditure such as, travel expenses, car expenses and phone or internet expenses, you must comply with the substantiation provisions. These rules may require you to maintain logbooks and diaries, and to keep invoices and documentation.

$1,000 instant work-related tax deduction

Individual taxpayers earning income from their labour can claim an instant $1,000 work-related tax deduction without any substantiation of the expenses.

Superannuation

The Government indicated it will reintroduce the Bill to tax earnings at 30 per cent for Superannuation funds with balances above $3 million. It is assumed this will include the previous proposals to tax unrealised gains and not index the $3 million asset threshold, but this is yet to be confirmed. It’s not clear whether the start date for this proposal will still be 1 July 2025 or sometime in the future.

Trusts

Ensure all necessary actions regarding trust distributions and other principal trust taxation matters, are appropriately executed and documented by 30 June 2025

Investment and capital gains tax (CGT)

Timing and planning are important when it comes to assessing your CGT and calculating your CGT bill at the end of financial year:

Small business capital write-off: The small business instant capital asset write-off has a threshold of $20,000 for qualifying assets. Qualifying assets must be acquired and either used or be installed ready for use by 30 June 2025. Federal Election announcement to extend to 30 June 2026.

CGT cost base: Ensure all amounts that can be included in calculating the cost base of CGT assets have been identified. These include:

• Money paid for the CGT asset

• Incidental costs of acquiring the asset such as marketing, search fees, or borrowing expenses

• Costs of owning the asset including repairs and insurance premiums

• Capital costs to increase or preserve the value of your asset or to install or move it

• Costs of preserving or defending ownership of the CGT asset.

Date of CGT events: Ensure you identify the correct date of your CGT events. This is generally the date on which a contract is signed. If there is no contract of sale, the CGT event is usually when you stop being the asset’s owner.

CGT discount: Capital gains realised by individuals and trusts can be discounted by 50 per cent and by one third for super funds where the asset was held for at least 12 months. Where the assets sold were formerly used in a business, small business CGT discounts may also be available.

Pre CGT: Where assets were acquired prior to 20 September 1985, they may not be subject to CGT.

Companies

As we approach the end of the financial year, consider whether your company will pay a dividend, how many franking credits it has, and how those credits will be used.

Company tax and franking rates: Confirm whether the income tax rate and franking rate applicable to your company is 25 per cent or 30 per cent. Be aware that changing between rates could give rise to franking credits being trapped within the company.

Carried forward losses: The loss carried forward rules allow losses to be indefinitely carried forward to be offset against future income, subject to the company satisfying continuity of ownership tests or continuity of business tests.

Franking deficits tax and lodgement of franking account return: If the company’s franking account is in debit at the and of the tax year, franking deficit tax may be payable. Ensure you confirm whether your company has a franking deficit soon after year end, as franking deficits tax for the year ending 30 June 2025 is payable and the franking account return is required to be lodged by 28 July 2025.

Division 7A: Loans, debt forgiveness, payments and other forms of f inancial accommodation from private companies to their shareholders and shareholders’ associates may attract Division 7A and could give rise to deemed dividends. Ensure you have identified and documented all relevant arrangements between the private company and its shareholders or shareholders’ associates, and that you have made the relevant minimum repayments.

Employers

There have been some changes that employers need to consider.

Superannuation

Super guarantee charge (SGC) rate: The SGC rate for employer superannuation contributions is 11.5 per cent for the year ending 30 June 2025, this is scheduled to increase to 12 per cent on 1 July 2025.

Deductions for SGC contributions: Superannuation contributions are only deductible if they are paid by the employer by 30 June 2025.

SGC contribution date: Employer SGC contributions must be received by the fund no later than the twenty eighth day after the end of the relevant quarter. For the 30 June 2025 quarter, the contribution must be received by 28 July 2025.

SGC statement: Where there is a shortfall of SGC contributions, an SGC statement must be lodged no later than the twenty eighth day of the second month following the end of the quarter, for example, 28 August for 30 June.

Contractors

Where you engage independent contractors, ensure they are properly classified for pay as you go withholding (PAYGW) and SGC purposes. For PAYGW purposes, where the contractor is not an employee, you are not required to withhold PAYG and send it to the Tax Office. However, for SGC purposes, certain independent contractors who have been engaged primarily to supply their labour will be subject to the SGC rules, and the user of their service may be required to pay superannuation for them or pay SGC.

Tax accounting

There are a number of basic tax rules that need to be considered approaching the end of the financial year.

Income derivation: Confirm if you are a cash or accruals taxpayer. Can you defer the recognition of income? If you are in losses, can you accelerate the recognition of income? • Deductions incurred: Deductions for expenses are generally allowed when the expenses are ‘incurred’. Ensure you have incurred expenses prior to year-end. Provisions and most accrued expenses are not generally deductible.

Prepaid expenditure: Can you pay deductible expenditure prior to 30 June 2025? Immediate deductions will arise for prepayments of salary, amounts to be paid under a court order or law, and amounts under $1,000. Small and medium sized enterprises can generally deduct any prepaid expenditure when paid if the service period does not exceed 12 months. Other prepaid expenses are generally deductible over the service period.

Compliance

In addition to the traditional income tax compliance provisions, there are further compliance measures that should be considered approaching the end of the financial year.

Taxable payments reporting system: Certain businesses operating in a variety of industries, including construction, courier services, information technology and security that engage independent contractors may be required to lodge a Taxable payments annual report (TPAR) with the Tax Office.

Director penalties: Company directors should review their companies’ reporting mechanisms to ensure they are adequately informed of their companies’ financial position. The director penalty provisions may leave directors personally liable where their company fails to make PAYGW, SGC and GST payments by the due date.

If you have questions or need help just give me a shout paul@congdonfuzi.com.au