Financial Year End 2024

Financial Year End 2024 - Man Using Macbook
Photo By Karolina Kaboompics

There are less than three weeks before the end of the 2023-2024 financial year. It is time to get prepared!

What’s new in 2024-2025

Wage increases: The National Minimum Wage increases by 3.75% to $24.10 per hour. Award minimum rates also increase by 3.75%. The new pay rates apply to the first full pay period commencing on or after 1 July 2024.

Personal tax cuts: The tax brackets for individuals change from 1 July 2024, so ensure that your payroll software is updated. The effective tax free threshold increases from $21,884 pa ($420 per week) to $22,575 pa ($434 per week). The threshold for the top tax bracket increases from $180,000 pa to $190,000. A taxpayer in this bracket will save $4,529 pa in tax ($87 per week).

Superannuation guarantee: Required employer super contributions will be 11.5% of ordinary time earnings paid after 30 June 2024.


Year-end tax planning ideas

Delay receipts

If you account for your income on the cash basis, you can defer income simply by deferring receipt of your income. One way to do this is to delay invoicing your customers. However, you cannot defer income by not banking cash or cheques you have received.

Defer unearned income

If you account for income on the accrual basis and receive payment for work before you have carried it out, you can defer that income until you have earned it. Your business records would need to be able to identify this unearned income.

Prepay expenses

Your business is a Small Business Entity (“SBE”) if it has a group turnover of less than $10 million per year. This entitles you to claim a deduction for expenses paid up to twelve months in advance. For example, you can claim for lease, rent and insurance payments made for up to twelve months ahead.

If your business is not an SBE, you may generally only claim deductions for prepayments under $1,000.

Bring forward expenditure

If you know that you will need to incur expenses in the new financial year, such as repairs and maintenance, consider bringing them forward to the current year. You cannot accrue employee super contributions, so pay super guarantee contributions before 30 June.

You can also stock up on consumable supplies before the end of June. Examples of these include stationery, spare parts, lubricants, fertiliser, and bulk fuel. If you do not keep more than about three months’ worth of supplies, you can claim the expense in the year of purchase.

Bad debts

You can claim a tax deduction for irrecoverable debts in the year that you write the debt off as bad. Review your outstanding debtors now before 30 June and write off those that you think will never pay you.

Purchase any needed vehicles or equipment

Small business entities can claim an immediate tax deduction for assets that cost less than $20,000. This immediate tax deduction is budgeted to continue for assets purchased in 2024-25.

Larger businesses must claim depreciation in the normal way.

Accrued expenses

You may claim a deduction for an expense in the year in which the liability to pay the expense arose. An employer’s liability to pay salaries and wages accrues daily as the employees perform each day’s work. This means that you can claim a deduction for salaries, wages and commissions that have accrued but which you have not paid by the end of the year. Note that wages and salaries are only taxable to the employees when they receive the payments.

You can also accrue directors’ fees and staff bonuses if you are committed to the payment. This would require you (the shareholders, partners, or trustee) to record a resolution to this effect before 30 June. However, if the payments are not made within a reasonable time after the end of the financial year, the Tax Office will regard this as a sham.

Scrap useless assets

Review your asset schedule and get rid of business assets that you no longer use. The remaining book value may be claimed as a tax deduction. This does not apply to assets that are pooled or written off in full, so this strategy will not help businesses that use the simplified depreciation rules. Of course, any business may benefit from having more space after getting rid of clutter!

Trading stock

All trading businesses must value their trading stock at the end of the tax year. You need to keep the records of the stock count to comply with your tax record keeping obligations. You may value each item of trading stock at cost price, replacement cost or market value. The cost of manufacturing goods must include not only materials and labour but also a proportion of factory overheads.

You may value obsolete and obsolescent stock at less than cost price. If you are going to dump unsaleable stock, you can value it at scrap value or at zero value. You may value stock that is becoming obsolete at a fair and reasonable value considering the likelihood of selling it. The Tax Office will not accept an arbitrary percentage write-down.

If your business is an SBE you are not required to count stock if your estimated value of that stock is within $5,000 of the previous year’s stock value. However, if you do choose to value trading stock, you must do this in terms of the normal rules. You cannot use your estimate for tax purposes.

Logbooks and odometer readings

Partnerships and sole proprietors must comply with the car substantiation rules. If you have business cars, you may be able to maximise your tax deductions by keeping a valid logbook. A valid logbook is one kept for 12 weeks showing details of all business trips. You can use a valid logbook to estimate business use for the next four years if you record odometer readings every 30 June.

If there is no valid logbook the only option for claiming car expenses is to claim 85 cents per kilometre. This is limited to a maximum of 5000 km (a maximum deduction of $4,250).

Distribute profits

If you have a company or trust with distributable income, consider how you will distribute income to shareholders, unitholders, or discretionary beneficiaries. We can help you with this aspect of your financial year end tax planning.

Super contributions

Consider whether to make additional superannuation contributions. This could be a deductible expense to your company or trust. If you are a sole trader or partner, you may be able to claim a personal deduction. If your income is less than $43,445, you may qualify for the $500 government co-contribution, or partial co-contribution if your income is less than $58,445.

It is best to take advice before making contributions. Take care that your contributions from all sources do not exceed the contribution limits. The ATO will impose penalty tax on the excess. This financial year the maximum deductible contribution is $27,500 for all taxpayers. However, you may be able to benefit from your unused contribution caps from earlier years starting from 2018-2019. Your total super balance must be less than $500,000 to benefit from this concession.

Contributions for taxpayers earning over $250,000 will be taxed at 30% not 15% within their super funds. If you have a trust, it is better to keep the total of your taxable income plus deductible superannuation contributions below $250,000, and let your trustee pay tax on the additional income.

With these end of financial year planning tips in mind, you can act now and enjoy a great start to the year ahead. Best of all, once you end checking all those important “must-do’s” off your list, you’ll be ready to relax and face the new financial year with confidence.