Year-end tax planning opportunities

‍The end of the financial year is fast approaching, and it is time to consider your potential tax position before 30th June.

The team at Murray Nankivell can provide tax planning strategies which incorporate a review of your performance for the current year to date and will estimate your position as at 30th June. Being informed of your tax position will enable you to implement tax effective strategies prior to the end of the financial year.

Aside from profitable farming or business operations, unexpected tax bills can also arise from:

• Capital gains from sale or family transfer of investments or property
• Reduced depreciation deductions
• Timing of income or deduction in prior years
• Farm management deposit involvement
• Movement in stock levels

With the end of the financial year fast approaching we outline some opportunities to maximise your deductions.

For your personal return

Opportunities

Bolstering superannuation

If growing your superannuation is a strategy you are pursuing, and your total superannuation balance allows it, you could make a one-off deductible contribution to your superannuation if you have not used your $30,000 cap. This cap includes superannuation guarantee paid by your employer, amounts you have salary sacrificed into super and any amounts you have contributed personally that will be claimed as a tax deduction.

If your total superannuation balance on 30th June 2024 was below $500,000 you might be able to access any unused concessional cap amounts from the last five years in 2024-25 as a personal contribution. For example, if you were $8,000 under the cap in each of the last 5 years, you could contribute an additional $40,000 and take the tax deduction in this financial year at your personal tax rate.

To make a deductible contribution to your superannuation, you need to be aged under 75, lodge a notice of intent to claim a deduction in the approved form (check with your superannuation fund), and receive an acknowledgement from your fund before you lodge your tax return. For those aged between 67 and 74, you can only claim a deduction on a personal contribution to super if you meet the work test (i.e., work at least 40 hours during a consecutive 30-day period in the income year, although some special exemptions might apply).

Charitable donations

When you donate money (or sometimes property) to a registered deductible gift recipient (DGR), you can claim amounts of $2 and above as a tax deduction. The more tax you pay, the more valuable the tax-deductible donation is to you. For example, a $10,000 donation to a DGR can create a $3,250 deduction for someone earning up to $120,000 but $4,500 to someone earning $180,000 or more (excluding Medicare levy).

To be deductible, the donation must be a gift and not in exchange for something. Special rules apply for amounts relating to charity auctions and fundraising events run by a DGR.

Investment property owners

If you do not have one already, a depreciation schedule is a report that helps you calculate deductions for the natural wear and tear over time on your investment property. Depending on your property, it might help to maximise your deductions.

For your business

Opportunities

Write-off bad debts

Your customer definitely not going to pay you? If all attempts have failed, the debt can be written off by 30th June to claim a deduction this year. Ensure you document the fact that you have written off the bad debt on your debtor’s ledger or with a minute.

For employers

If it makes sense to do so, bring forward tax deductions by committing to pay directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.

Instant asset write-off threshold finally confirmed

It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30th June 2025 to $20,000. This was announced back in the 2024-25 Federal Budget, but the Government faced several hurdles in terms of passing the legislation.

This basically meals that individuals and entities who carry on a business with turnover of less than $10m can often claim an immediate deduction for the cost of depreciating assets (e.g., plant and equipment) that are acquired during the 2025 financial year if the cost of the asset, ignoring GST credits that can be claimed, is less than $20,000.

If you are thinking about purchasing an asset before 30th June 2025 with the hope of claiming an immediate deduction, then please reach out to us to confirm the position. The rules contain a number of tricks and traps which we can help you to navigate.

In conclusion

These are just some of the many opportunities our team can discuss with you to maximise your deductions.

Keep in mind that any action taken which results in a reduction in tax must be taken for investment or commercial reasons (i.e. making super a contribution can lead to a tax reduction, however the contribution is made with the intent to support you through retirement). It is important that your action is not for the sole and dominant reason of avoiding tax.

Cash-flow is king - in implementing tax planning strategies we consider your cash-flow position to ensure the strategy is in line with your available working capital needs.

If we have not already carried out a review of your tax position for you and you feel that there may be circumstances that you believe will impact your tax position, please arrange an appointment with our office as soon as possible to discuss your year-end planning, so there is sufficient time to implement these strategies. Our team is ready to develop the best strategy for you.