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2024 TAX PLANNING & PREPARATION
As another financial year rapidly draws to a close, we have brought together some account housekeeping and tax planning tasks and actions to help get you in order.
Tax Planning Actions to-do prior to End Of Financial Year
1. Superannuation Contributions
Consider maximising your personal superannuation contributions for the year - $27,500 (this includes any employer superannuation guarantee)
As a business owner or self-employed, you can claim this as a deduction against your business income
As an employee you can claim it as a deduction against your employment income
The contribution needs to be received by your super fund by 30/06/2024 to count as a tax deduction
The superannuation fund needs to be notified that you will be claiming the contribution as a tax deduction – you can either do this online by logging in your super account (or via myGov if linked), or we can complete a paper form for you when preparing your income tax return
Once you have maximised the current year’s super contributions you can also make a catch-up payment for any shortfall in contributions limits of past years (back to 2019) – consider additional super contributions to make up for these years
YE2019 will ‘drop-off’ after 30/06/2024, so at least consider making up this year’s shortfall
Contact your accountant to find out if you qualify to make these catch-up contributions and how much you can contribute
The contribution needs to be received by your super fund by 30/06/2024 to count as a tax deduction
The superannuation fund needs to be notified that you will be claiming the contribution as a tax deduction – you can either do this online by logging in your super account (or via myGov if linked), or we can complete a paper form for you when preparing your income tax return
Pay your employees super by 30/06/2024
SGC contributions are tax deductible when paid, so any unpaid @ 30/06/2024 won’t be a tax deduction for this year (it will be in YE2025 if paid on time)
SGC must be received by the fund/s by the 28th of the month after the end of the quarter (e.g. June Qtr must be paid by 28th of July) – we recommend that payment is made by the 21st of each month so that it is received by the super fund/s by the 28th (as BPay takes several days to process)
2. Income Recognition
Consider delaying the rest of June’s invoicing until 01/07 to move the income into next financial year (income is recognised for tax purposes when invoiced, not when payment received)
Review accounts receivable (Trade Debtors) owing @ 30/06/2024 and write-off any bad debts
Also print Accounts Receivable ageing report @ 30/06/2024 showing the balance owing
3. Expenses
Consider prepaying annual expenses in advance (e.g. rent, subscriptions)
Consider bringing forward expenses you know you will need to incur in July & August (get invoiced for them in June to recognise the expense in this financial year)
The immediate write-off threshold for assets is now $20,000 (anything worth more than that is depreciated over its effective life)
Do a stock take @ 30/06/2024 & print stock valuation reports (showing cost value) at that date
Write-off any obsolete stock
20% bonus tax deduction for:
external training courses delivered to employees by registered training providers ends 30/06/2024, so register & pay for any upcoming training needs before 30/06/2024
the costs of assets or improvements to existing assets that support electrification or more efficient energy use. The deduction is capped at a maximum of $20,000 and applies to assets acquired between 1 July 2023 and 30 June 2024
The Motor Vehicle cents per kilometre claim has increases to 85 cents. The maximum allowable is still 5,000kms and a diary or other form of substantiation should still be provided for this form of claim
4. Employee related deductions - these must be directly related to earning your income
Accommodation can only be claimed for short stays in commercial establishments like hotels & motels, other accommodation like caravan parks and hostels do not meet requirements for reasonable amounts to be claimed
Uniform and laundry claims are only applicable for occupation specific clothing, company required uniforms and protective clothing. General requirements like black clothing for hospitality workers or business attire are not allowable as these items are deemed to have private use in nature
It is important to differentiate work required items like steel capped boots and nurses shoes that offer protective qualities as opposed to sneakers that offer health beneficial qualities
Self-education expense are only allowable if there is a direct connection to your current position, a potential promotion or pay increase applicable or maintenance of a professional skill. Fees that will result in a completely different role to your current employment are not deductible as a work-related expense
Home office claims need proper substantiation like a 4-week representative diary for the number of hours worked from home, or calculation of the work use of running costs (e.g. phone, internet and electricity)
If using the fixed rate method, you cannot also claim a portion of the running costs (i.e. phone, electricity, etc)
Housekeeping to-do
Finalise employee payroll and STP by 14/07/2024
Make sure your employer is withholding the correct amount of tax
If you have more than one job, only one should be claiming the Tax-Free Threshold
Have you notified your employer if you have HECS or a Training loan?
Check your Award pay increase from 01/07/2024 and update employee’s pay rates accordingly – let your accountant know if you need assistance with this
Lodge on time
Wait until all prefill data (e.g. Income Statement, bank interest, Government Payments, etc) is finalised and available before lodging (usually by the end of July)
MJA Business Solutions will be scheduling your tax and accounting work in for 2024 – we will be in contact regarding your allocated month
Things to note for the New Financial Year
Stage 3 tax cuts come into effect from 01/07/2024 (so they do NOT have any impact on your YE2024 tax return) – you will see the change in your take home pay from your first pay after 01/07/2024 (your payroll software should automatically update to the new rates)
The personal super contributions cap increases to $30,000 for the YE2025
Employee superannuation guarantee rate increases to 11.5% from 01/07/2024 (your payroll software should automatically update to the new rate)
From 01/07/2026 superannuation will need to be paid with each payrun (at the same time you pay your employees)
Land tax surcharge increases to 5%
Medicare Levy Surcharge and Private Health Insurance Rebate are income tested – they do not form part of the tax withholding from your wages, they are balanced in your tax return (either reducing your refund or creating a tax payable)
Generally, if you’re paying Medicare Levy Surcharge (MLS) you should consider getting Private Health Insurance (PHI) as the premiums are usually comparable to the MLS payable (and then you get the benefits of the PHI)
Audit Risks – what’s on the ATO Radar
The ATO has warned that it will be leveraging its data matching capabilities (which are extensive) to ensure tax payers declare all income and capital gains
1. Substantiation
Expenses need to be actually incurred (not reimbursed)
Receipts need to be kept – the ATO can assess individual expenses claimed against industry, regional and company benchmarks for anomalies
Single Touch Payroll has allowed the ATO to have access in real time to allowances included in an individuals payroll, which creates a new area for anomalies to be reviewed. For example, the expectation of seeing travel allowances provided for motor vehicle and travel expense claims
In the case of an audit, employees should be able to provide substantiation in the form of an employer letter or contract requirement of personal expenses incurred for work-related purposes in the absence of specific allowances for work-related deductions
Proper substantiation should be kept for apportioned expenses like logbooks for motor vehicle expenses and travel itineraries for combined work-related and private travel for proper audit preparations
Reasonable amounts for travel can only be claimed if an allowance is declared as income and substantiation can still be provided in some form for travel expenses incurred for work, like bank statements and travel diary
2. Inclusion of all income sources
Review the status of your hobby/side hustle – is it actually a business?
Do you have crypto investments? Any trades are treated as income
Dividends from share investments are income – even if on a dividend reinvestment plan
3. Rental Properties
Ensure income is grossed-up for the fees charged by the Agent, and then these fees claimed as rental expenses
Annual repairs & maintenance expenses higher than $8k have historically been viewed as unusually high as tested through MyGov tax reporting
Detailed descriptions of repairs should be provided each year for review of capital nature to ensure deductibility
4. Payment of superannuation guarantee on time
SGC must be received by the fund/s by the 28th of the month after the end of the quarter (e.g. June Qtr must be paid by 28th of July)
With Single Touch Payroll (STP) the ATO knows what you’re paying your employees and when. They get reported to by the superannuation funds about when payments are received
MJA Business Solutions has partnered with AuditCover Australia to provide Tax Audit insurance, AuditCover Insurance covers our fees related to responding to an audit, reducing stress for you. The premium is tax deductible, so get piece of mind by taking out a policy before end of financial year.
As always, if you have any questions, please get in touch so we can help, or make an appointment.
Mel
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