Business Year-End Tax Planning

Future-Focused Tax Planning for Your Business

Tax planning isn’t just about now; it’s about securing your financial future. With a Gild Group advisor, you’ll uncover strategies to maximise tax benefits and improve your cash flow moving forward.

Act fast on asset purchases! Assets ready by 30 June 2024 are fully deductible, and the full expensing provisions last until 30 June 2025. But watch out: the instant asset write-off cap drops from $20,000 to $1,000 on 1 July 2024.

Choosing the right entity matters. Trusts should manage income smartly to use losses and distribute franking credits. Companies can’t use loss carry-back provisions anymore, so new strategies are needed.

Finally, know your costs. Differentiate between those adding to an asset’s cost base and general deductions to optimize your tax savings.

Stay ahead, act now, and secure a better tax position for the future!

Here are some key topics to consider:


Expense Prepayments.

Business’ prepayments are deductible to businesses with an aggregated turnover less than $50m. Therefore, where you prepay up to 12 months in advance for annual expenses (e.g. insurance, loan interest) before 30 June 2024 you may get a full tax deduction.  

Where the business exceeds $50m turnover, there may be certain prepayment opportunities available where properly structured. 

Bad Debt Write-Offs.

A debt will generally need to be considered ‘bad’ before it can be written-off and deducted. 

You need to document that you have taken action to recover the debt to conclude it is reasonable the debt will not be recovered prior to 30 June 2024. You generally don’t need to have commenced legal actions.  

Where you are not able to show evidence of recovery, it may be possible to determine that the debt was doubtful when raised such that the income should not have been accrued. This will depend on the circumstances of each case.  

You may also request a refund of GST paid on the debt on your BAS.  

Key Considerations for Trust Distribution.

To ensure effective and tax-efficient trust distributions, trustees need to act by 30 June. While the resolution can be documented later per the trust deed, best practice is to finalise it by 30 June 2024. You also need to be mindful of how distributions are made to beneficiaries (cash or loan) and potential unforeseen tax implications.

  1. Understand the Trust Deed: The trust deed outlines the trustee’s powers with how to address Trust Distributions. Ensure any distribution strategy aligns with the deed to be effective.
  2. Define Goals and Beneficiaries: Confirm that recipients are actual beneficiaries, especially if there’s a Family Trust Election (FTE). Ensure beneficiaries will receive the distribution benefits to avoid ATO scrutiny under Section 100A.
  3. Optimise Income and Capital Reclassification: Use streaming provisions to direct different income types to suitable beneficiaries. For example, stream franked dividends and capital gains to entities that benefit most. Ensure an FTE is in place for effective streaming of franked dividends. 

Additional Points to Keep in Mind: 

  • The ATO requires beneficiaries to be in a position to benefit from distributions, not just for tax purposes. 
  • Professional practice distributions may attract ATO attention if not made to the professional individual. 
  • Children turning 18 before 30 June 2024 can receive higher distributions without penalty tax rates. 
  • Special needs children may also receive higher distributions without penalty rates. 
  • Distributing to entities with tax losses can be effective if managed within anti-avoidance rules. 

Dividend Payments

To ensure dividends are counted within the 30 June 2024 financial year, they generally need to be paid before this date. Allocating Dividend Payments to Loan Accounts can also constitute dividend payments when no cash is transferred. This strategy can be effective to assist with further common Tax Compliance issues such as Division 7A minimum Loan Repayments.

Additionally, it’s essential to verify that there are sufficient franking credits available.  

We can assist in reviewing and documenting tax-effective dividend payments, so seeking advice on your dividend strategy is crucial. 

Private Company Loan Compliance.

Where you have existing private company loan agreements in place (Division 7A) you will need to ensure that minimum statutory repayments are made prior to 30 June 2024 to avoid adverse tax consequences.  

There are various methods available to evidence a repayment of a loan which do not necessarily require a cash payment.  

Please contact your Gild Group advisor to determine the appropriate repayment strategy for your loans.

A complying loan agreement must be appropriately drafted and reviewed annually to avoid being taxed on the loan balance as an unfranked dividend. The requirements for a complying Loan Agreement are as follows:

  • Must be in writing.
  • Have a maximum term of 7 or 25 years, depending on the security.
  • Adhere to benchmark interest rates per the ATO.
  • Require a repayment of principal & interest.

Executive Bonuses.

To qualify for an income tax deduction, an employer must be definitely committed to paying a bonus to an employee by 30 June 2024.

This commitment can be documented in a contract or director’s resolution before this date, even if the bonus has not yet been paid or if the financial metrics have not been finalised.

Employee Accommodation.

  • Financial Accommodation and Division 7A: If your company provides financial accommodation to you as a shareholder (or to an associate of a shareholder), it could trigger Division 7A, resulting in immediate taxation on the benefit.  
  • Scope of Financial Accommodation: Financial accommodation extends beyond loans. It includes using company-owned assets and instances where a trust distributes income to a company without physically paying the amount.
  • Limited Exemptions: There are some exemptions from Division 7A rules, but they are very limited.
  • Managing Financial Accommodation: To manage financial accommodation, you can enter into a ‘complying loan arrangement’ to repay the amount or the value of the accommodation received.

Superannuation expenses are generally only deductible where the amount has been paid and received by the superannuation fund prior to 30 June 2024.   

Superannuation contributions are generally taxed in the fund at 15%.  

Consider the financial circumstances and wealth planning goals of all entities in your group, including the business operating entities as well as you and your family individually, to determine whether additional superannuation contributions make financial sense. 

Employee Super Packaging.

 The superannuation guarantee percentage is increasing to 11.5% from 1 July 2024.  

Employers should make sure they review employee contracts to determine whether the employee is remunerated on a superannuation inclusive or exclusive basis and whether the additional cost will be passed on to the employee.  

Early Stage Innovation Company (ESIC) Notifications.

Where you operate a start-up innovation company and you have completed a capital raise during the 30 June 2024 financial year you may be able to have your investors access certain tax concessions. You need to make sure you have made the appropriate disclosures electronically with the ATO by 31 July 2024.   

You may also be entitled to Research and Development (R&D) tax concessions, employee equity concessions and other government funding.  

We recommend you discuss these with your Gild advisor to make sure you are maximising your entitlements for you, your investors and your employees.   

New Beneficiary TFN Notifications.

Where you have added new beneficiaries of trusts for the 30 June 2024 you will need to notify the ATO with a TFN declaration by 31 July 2024.  

Tax Instalment Modifications.

Where you have completed your tax estimates and you have overpaid tax instalments you should look to vary your final instalment in line with your tax estimates. This should be done by the lodgement date of the June 2024 BAS.  

Contractor Reporting (TPAR).

The ATO requires reporting of payments made to contractors in the following industries:   

  • building and construction   
  • cleaning services   
  • courier services and road freight services   
  • information technology services   
  • security, investigation or surveillance services   

The report is due by 28 August 2024.  

Other Planning Points.

Asset Disposals  

Tax Concessions: When disposing of assets, consider the 12-month holding period requirement for certain tax concessions, such as the capital gains tax (CGT) discount.  

Holding assets for at least 12 months can significantly reduce the tax payable on capital gains.  

Share Disposal  

Pre-Disposal Restructures: Evaluate opportunities for pre-disposal restructures to maximize the after-tax return on share disposals.  

This is particularly important for transactions involving minority shareholders.  

Effective structuring can optimize tax outcomes and enhance overall returns.  

Constructing Large Assets  

Capital vs. Revenue Costs: Determine whether costs associated with constructing large assets are capital or revenue in nature.  

Correct classification is crucial for tax purposes, as capital costs may be depreciated over time, whereas revenue costs may be immediately deductible. 

R&D Eligibility  

R&D Claims: Ensure that your business meets the general requirements for Research and Development (R&D) claims.  

Verify eligibility for refundable R&D tax offsets, which can provide significant financial benefits.  Proper documentation and adherence to regulatory criteria are essential.  

Refer to our R&D Key EOFY Considerations and Deadlines here.

Employee Share Schemes (ESS)  

Share/Option Plans: Consider implementing Employee Share Schemes (ESS) or option plans to attract and retain employees.  

ESS can offer tax advantages and align employee interests with business goals.  

Ensure the plans comply with relevant tax regulations.  

Early Stage Innovation Company (ESIC)  

Capital Raises: If planning capital raises, assess whether your business qualifies as an Early Stage Innovation Company (ESIC).  

ESIC status can provide investors with tax incentives, making your company more attractive for investment.  

Employee Salary Packaging  

Tax Savings: Explore salary packaging options for employees, which can lead to potential tax savings for both the business and employees.  

Effective salary packaging can improve employee satisfaction and retention while optimizing tax outcomes.  

Quantity Surveyor Reports  

Where you acquire new or own existing property you may be able to access increased deductions for prior year capital spend in relation to the property. In particular:   

  • building costs incurred by the previous owner may continue to be deductible over a statutory period; and   
  • part of your acquisition cost may be attributed to ‘depreciable’ fitout such as air-conditioners.

You may be entitled to access the temporary asset write-offs in relation to these amounts (subject to meeting conditions).   

Likewise, where a tenant moves out of your property and leaves a fit-out in place you may potentially be able to continue to depreciate some of their fit-out you acquire under the capital works provisions. A Quantity Surveyor can estimate the costs associated with the construction.   

Employer Vs Contractor 

The ATO continues to consider the treatment of employees v contractors and this has been the subject of a number of recent court decisions.  

In particular, this distinction impacts whether superannuation guarantee amounts and on-costs are payable on contractor payments. The State Revenue Offices are now receiving this information and using it to determine other tax compliance such as payroll tax is being maintained.   

You should ensure your systems and processes for determining the classification is appropriate.   

Company Tax Rate/Change 

The Base Rate Entity company tax rate is 25% compared to the ordinary company tax rate of 30% for the FY2024 financial year. There are several ongoing planning points in relation to the lower company tax rate:   

  • determining the character of income within company groups as ‘active’ or ‘passive’ and which tax rate applies. For example, income of an internal asset leasing entity is likely passive;   
  • managing trust distributions to companies to ensure the 80% passive income test is not breached; and   
  • quarantining frankable profits at the 30% tax rate.   

We can assist you with strategies to help access the lower company tax rate and, where possible, preserve entitlement to pay dividends to shareholders at the higher franking rate.   

Financial Planning 

You should discuss the scope of the financial accounts preparation with your Gild adviser and the degree to which normal accounting principles and standards need to be adopted for this financial year-end for the users of your financial statements.

The preparation of your financial statements may impact tax issues such as:   

  • whether the company is able to declare a dividend out of available profits; or   
  • whether the company has a ‘distributable surplus’ under the private company loan rules.   

Revenue Vs Capital Treatment of Receipts 

You may achieve significant tax advantages from classifying a receipt as ‘capital’ rather than ‘revenue’.  

Where you have received amounts outside the ordinary course of your business (e.g. from asset sales) you should discuss with us the appropriate treatment and whether there is a benefit from forming a view the amount is capital.  


Need Some Help?

Tax planning is important, but it’s not always easy. Partner with The Gild Group to assess the live data and project forward.

We can help you evaluate costs accurately and make informed decisions, thereby maximising your tax benefits effectively.

Prepare for the end of the financial year with confidence and look forward to the new year with expert help from The Gild Tax Team!