June 2024

The end of the financial year is fast approaching. But there is still time to put in place those last minute tax planning strategies. For individuals, this can include superannuation contributions, donations and making sure you have the right record keeping for motor vehicle and home office claims. For businesses, temporary full expensing is no longer available for the 2024 year and the current proposed law for the instant asset write off is $20,000 for small businesses (with aggregated turnover of less than $10 million). Other considerations include writing off bad debts, timing of superannuation payments, skill and training boost and division 7A loan repayments. Businesses operating through trusts should be aware of the ATO’s latest focus on trust distributions.

Individuals

 

Working from Home

Taxpayers wanting to claim the costs of working from home can either use the actual method or the fixed rate method for the 2024 financial year.

Due to the record keeping and calculation difficulties of the actual method, most taxpayers will opt to use the fixed rate method. For the 2024 financial year, the fixed rate continues at 67 cents per hour. The rate covers gas, electricity, internet, phone, stationery and computer consumables.

To substantiate the number of hours you must keep records of all hours worked from home throughout the whole year, not just a diary for a month that is then extrapolated for the remaining 11 months.

Additional deductions can be claimed for depreciation of work-related assets, such as office furniture and equipment. Assets costing less than $300 can be claimed outright where the work related use is 100%. The taxpayer must keep the invoice for the asset purchase and apportion expenses for the work-related use percentage.

Motor Vehicle

Individuals can claim deductions for work-related use of a motor vehicle using the cents per kilometre method or the logbook method. The cents per kilometre rate for the 2024 financial year is 85 cents per kilometre. The maximum number of kilometres that can be claimed under this method is 5,000 per car. You should keep records showing how you worked out your business kilometres, such as diary records.

If using the logbook method, the logbook can be electronic or paper and must be for a continuous period of at least 12 weeks, but must contain the minimum information as outlined by the Taxation Office and as can be found on the Taxation Office’s website. The 12-week period must be representative of your travel throughout the year. You must complete a new logbook every five years or earlier if your use changes.

If your logbook is more than five years old, you must commence the new logbook before 30 June. It is not necessary that the 12-week period be completed before year end.  If you need a new logbook for the 2024 financial year you should commence the log book prior to 30 June 2024.

You should keep receipts and invoices for all car expenses claims, such as repairs, registration, insurance and finance costs. Petrol costs can be claimed using actual receipts or be based on odometer records at the start and end of the financial year.

Superannuation

The concessional contributions cap for the year ended 30 June 2024 is $27,500 (this goes to $30,000 from 1 July 2024). This includes employer contributions as well as personal contributions.

Individuals can consider making additional contributions up to the cap. Contributions must be received by the superannuation fund by 30 June 2024.  You should check whether your superannuation fund has a cut-off date by which contributions must be paid to ensure the deduction is available in the 2024 year.  The usual recommendation is to make the contribution at least a week prior to 30 June to ensure the funds are credited to your superannuation account by 30 June.

You must also provide a “notice of intent to claim a deduction for personal superannuation contributions” to your superannuation fund and receive written acknowledgement prior to lodging your income tax return.  The acknowledgement by your superannuation fund needs to be provided by your fund while the contribution funds are still with that superannuation fund, so be careful not to rollover your super to another fund until after you have received your acknowledgement notice.

You could also consider making an after-tax contribution into superannuation to receive the Government’s co-contribution scheme payment.  Under the co-contribution scheme if you contribute up to $1,000 into your superannuation fund the Government will also contribute a maximum of $500 into your superannuation fund.

To be eligible for the co-contribution payment at least 10% of your income must be from salary or business.  Also, your income must be below $43,445 to receive the maximum co-contribution.  The upper income threshold is $58,445.

Another option is to make a superannuation contribution on behalf of your spouse.  If you make an after-tax contribution into your spouse’s superannuation fund you may be entitled to a tax offset in your income tax return.

If you contribute up to $3,000 into your spouse’s superannuation fund you would be able to claim a tax offset of $540 in your income tax return, improving your tax position.

The maximum tax offset is available if your spouse’s income is less than $37,000.   It phases out completely once your spouse’s income reaches $40,000.  The tax offset is claimed in your income tax return.  There is no requirement for your spouse to be working.

Donations

Donations to Deductible Gift Recipients (DGRs) can provide valuable assistance to charities while at the same reducing your income tax. Only some charities are DGRs and able to provide a tax deductible receipt. You can check whether an entity is a DGR on the Australian Business Register ABN Lookup (business.gov.au).  You need to ensure that the DGR entity issues the receipt with the intended name.  Receipts issued in joint names can only be claimed 50/50.

Businesses

 

Writing off depreciable assets

The Government announced that for the 2024 and 2025 income years, small businesses (aggregated turnover less than $10 million) will be able to write off assets if their cost is less than $20,000 (“instant asset write-off”).  It is important to note that only small businesses that opt-in to apply the simplified depreciation rules that will have access to the instant asset write-off rules.  This threshold will also apply to determine whether the full pool balance can be written off. These measures are not yet law.

Larger businesses can only write off assets with a cost less than $100 including GST.  All other assets will need to be depreciated over time.

Please note that the deduction for cars is limited to the car depreciation limit of $68,108 (2024).

Superannuation Contributions

Businesses are required to pay superannuation guarantee for its employees by the 28th day after the end of each quarter.  Accordingly, superannuation for the June 2024 quarter must be paid by 28 July 2024 to meet its superannuation guarantee obligations. However, the contributions are only deductible in the 2024 financial year if received by the fund by 30 June 2024. If you are making super contributions via the clearing house, please allow 10 days for the payments to reach the super fund.

The current superannuation guarantee rate is 11% but will rise to 11.5% from 1 July 2024.

Bad Debts

A review of trade debtors should be conducted to identify any amounts that are considered bad debts and whether these should be written off prior to 30 June 2024.  To claim a deduction for bad debts in the 2024 financial year, a business must write off any bad debts prior to 30 June 2024. There must be a decision to write off the debt and that decision should be recorded in writing prior to 30 June.

Employee Bonuses

Bonuses which have not been paid by year end are still deductible in that year provided they are incurred. To be incurred, there must be a definite liability to pay the bonus and a legal liability must arise before the end of the financial year.

Skill and Training Boost

The 2024 financial year will be the last year that the Skills and Training Boost is available.  Small medium businesses (with an aggregated annual turnover of less than $50 million) will receive an additional deduction of 20% on eligible expenditure incurred on external training courses provided to employees by registered training providers.

Small business energy incentive

In the 2023 Federal Budget, the Government announced a new incentive which may allow small medium businesses (with an aggregated annual turnover of less than $50 million) to claim an additional 50% of expenditure incurred that supports “electrification and more efficient use of energy”.  This measure is not yet law.

Up to $100,000 of total eligible expenditures incurred between 1 July 2023 to 30 June 2024 will be eligible for the incentive, with the maximum bonus tax deduction being $20,000. Certain expenditures such as hybrid and electric vehicles, energy generation assets (such as solar panels) and fuel powered assets are all excluded under the draft legislation.

Deny deductions for interest charges

On 13 December 2023, as part of the 2023-24 Mid Year Economic and Fiscal Outlook (MYEFO), the Government has proposed an amendment to deny deductions for ATO interest charges (GIC) and shortfall interest charges (SIC) effective from 1 July 2025.  This measure is not yet law.  However, you should consider current amounts owed to the Taxation Office that may (or may not) be under a payment plan.  You may need to consider whether to clear the debt with the Taxation Office by 1 July 2025 and fund this from other sources, as interest from other sources for businesses will remain deductible.

Company Loan Repayments

Loans made by a company to shareholders or their associates in the 2024 financial year should be repaid or placed under a Division 7A complying loan agreement before the due date for lodgement of the company’s 2024 tax return. If this does not occur, the loan will be treated as a deemed unfranked dividend. Similar rules can apply where there are loans from trusts and unpaid trust distributions to companies.

A complying loan requires repayment of principal and interest over either 7 years for an unsecured loan or 25 years for a secured loan. For existing loans, the shareholder or associate should ensure the minimum repayment is made by 30 June 2024.

If the repayment is to be made by way of a dividend, the dividend needs to have been declared and paid (which can included the crediting of a loan account rather than in cash) by 30 June 2024.

The interest rate for the Division 7A loans has increased to 8.27% for the 2024 financial year.

Trust Resolutions

The ATO continues to make distributions of trust income a major focus. In particular, it is looking at distributions to adult children, companies and non-residents.

If a valid trust distribution is not made by 30 June 2024, trust income might be assessed to the trustee and taxed at the highest marginal tax rate.

Particular care should be taken to ensure  the distribution does not involve a reimbursement agreement. One situation highlighted by the ATO as being of concern is where the trustee resolves to distribute income to adult children, but the cash is paid to the parents rather than to the child. If the anti-avoidance provisions are applied, the income will be assessed to the trustee at the top marginal rate rather than to the adult child.

A recent court decision also held that trustees should give real and genuine consideration to beneficiaries, particularly to beneficiaries specified in the trust deed, when resolving how to distribute the income each year. The court found the trustee had breached its fiduciary duty by lack of active consideration given to two family members specified in the deed.

Year-end finalisation report

Procedures should be in place to ensure that employers are able to lodge the Single Touch Payroll (STP) year-end finalisation report by 14 July 2024.  If employers provide certain fringe benefits with a total taxable of more than $2,000 during the FBT year, the grossed-up taxable value will need to be disclosed in the STP finalisation report.