Essential Year-End Tax Planning with Cordner Advisory
As we approach the end of the financial year, it's crucial to ensure that your year-end tax planning is thorough and strategic. At Cordner Advisory, we specialise in providing expert business advisory, tax, accounting, and SMSF services. Our goal is to help you minimise tax liabilities, maximise deductions, and ensure compliance with the latest tax regulations. This comprehensive guide will help you navigate the complexities of year-end tax planning effectively.
Ready to optimise your year-end tax planning? Contact Cordner Advisory today to schedule a consultation with our expert tax advisors. With our tailored tax planning strategies.
ATO's Areas of Focus for 2024 Tax Time
The Australian Taxation Office (ATO) has identified three key focus areas for the 2024 tax season. Understanding these areas will help you avoid common pitfalls and ensure compliance.
Work-Related Expenses
Work-related expenses are a significant focus for the Australian Taxation Office this year. Over 8 million individual taxpayers claimed a work-from-home deduction in 2023, with around half of those claims relating to working from home. The ATO has introduced the 67 cents per hour fixed rate method for the 2023-24 tax year, which requires comprehensive record-keeping to substantiate claims.
When are Work Related expenses tax deductible? Work-related expenses are tax deductible if they are directly related to earning your income. This includes costs such as home office expenses, travel expenses, uniforms, and self-education. To claim these
deductions, you must keep detailed records of the expenses incurred and ensure they meet the ATO's requirements.
Key Points:
Record Keeping: Maintain detailed records of hours worked from home and additional running expenses incurred.
Avoid Copy-Paste Claims: Do not replicate previous year's claims without proper substantiation, as this may trigger ATO queries.
Ensure your year-end tax planning is flawless with Cordner Advisory. Contact our tax advisors for a consultation and explore advanced tax planning strategies.
Ready to optimise your year-end tax planning? Contact Cordner Advisory today!
Rental Property Deductions
Rental property owners are under scrutiny for making errors in their tax returns. The ATO has noted that 9 out of 10 rental property owners make mistakes in reporting for taxation purposes. Common issues include incorrect treatment of expenses as immediate deductions and inflated claims to offset rental income increases.
What deductions can I claim on a rental property? You can claim deductions on various expenses related to your rental property, including mortgage interest, property management fees, repairs, and maintenance. It's essential to differentiate between deductible repairs and capital improvements, as capital improvements are depreciated over time.
Key Points:
Accurate Reporting: Ensure all rental income is reported accurately.
Expense Classification: Differentiate between deductible repairs and capital
improvements.
Comprehensive Records: Keep detailed records of rental income and expenses to support your claims.
Failing to Include All Income
The ATO is also focusing on taxpayers who fail to include all income in their tax returns. This includes interest income, dividend income, payments from government agencies, and private health insurance.
Does all income have to be reported? Yes, all income must be reported in your tax return. This includes wages, investment income, government payments, and other sources. Failing to report all income can lead to penalties and interest charges.
Key Points:
Wait to Lodge: Avoid rushing to lodge your tax return in early July. Wait until all income information is pre-filled and available.
Comprehensive Reporting: Ensure all sources of income are reported to avoid ATO scrutiny.
Make your year-end tax planning seamless with Cordner Advisory. Schedule a consultation with our expert tax advisors to explore effective tax planning strategies
Year-End Reminders
Effective year-end tax planning involves a range of tax planning strategies to optimise your financial outcomes. Here are some key reminders and strategies to consider:
Depreciation for Non-SBE Taxpayers
Non-SBE (Small Business Entity) taxpayers should conduct a thorough review of their depreciation schedules. By identifying and scrapping assets that are no longer in use, you can claim a balancing adjustment deduction, reducing your taxable income. This strategy ensures that your depreciation claims are up-to-date and accurately reflect your current asset usage.
Declaring Dividends Earlier in the Year
Division 7A of the Income Tax Assessment Act 1936 deals with loans made by private companies to their shareholders or associates, ensuring they are treated as dividends unless repaid. By declaring and paying dividends earlier in the year, you can reduce the interest accrued on these loans, lowering your overall tax liabilities. This proactive approach helps in managing your cash flow more effectively and reduces the risk of incurring additional tax penalties.
Trading Stock Valuation
The valuation of trading stock can significantly impact your taxable income. You have the option to value your stock at cost, market selling value, or replacement value. Choosing the most tax-effective method can optimise your financial outcomes. Additionally, identifying and writing off obsolete or damaged stock before year-end can provide valuable deductions, further reducing your taxable income.
Bad Debts
Writing off bad debts involves recognising that certain receivables are uncollectible. By doing this before the financial year-end, you can claim a tax deduction for the amount of the bad debt. This process requires compliance with specific requirements, such as continuity of ownership and the same business test for companies and trusts, ensuring that the debt was genuinely uncollectible.
Prepayments
The '12-month prepayment rule' allows non-business individuals and small businesses to claim an immediate deduction for prepaid expenses that cover a period of 12 months or less. For non-SBE taxpayers, only specific types of expenses, termed 'excluded expenditure,' qualify for immediate deductions. This strategy can be beneficial in managing cash flow and reducing taxable income in the current financial year.
Deferring Income
Deferring income involves postponing the recognition of income until the next financial year. If you receive payments in advance for goods or services that will be delivered in the following year, deferring this income can help manage your current year's tax liabilities. This strategy requires careful planning and compliance with accounting standards and tax regulations.
Capital Gains and Realising Capital Losses
Capital gains tax (CGT) can be minimised by strategically realising capital losses to offset gains. By reviewing your asset portfolio, you can identify assets that have decreased in value and realise these losses to offset any capital gains. However, be cautious of ‘wash sales’—the practice of selling and repurchasing the same or substantially identical asset—which the ATO scrutinises. Ensure compliance with CGT concession rules to maximise benefits.
Directors’ Fees and Employee Bonuses
Accruing and committing to the payment of directors’ fees and employee bonuses before the end of the financial year allows you to claim these expenses as deductions. It's essential to comply with PAYG withholding (PAYGW) obligations to avoid losing the deduction. Proper documentation and timely accruals are key to ensuring these deductions are valid.
Superannuation Contributions
To claim a tax deduction for superannuation contributions, ensure that all employee contributions are paid by 30 June. Additionally, prepare for the increase in the superannuation guarantee rate to 11.5% effective from 1 July 2024 by adjusting your payroll systems. This proactive approach helps in managing cash flow and ensures compliance with superannuation obligations.
Bringing Forward Other Expenses
Bringing forward expenses involves incurring costs before the end of the financial year to claim deductions in the current year. This can include consumables, trade gifts, donations, and repairs. Ensure that these expenses make commercial sense and are manageable within your cash flow. This strategy can help reduce taxable income and optimise financial outcomes.
Ensure your year-end tax planning is flawless with Cordner Advisory
Seeking reliable financial advice? Cordner Advisory specialises in corporate accounting. Reach out today for customised support from our dedicated experts.
Pending Legislation and Key Changes
Immediate Deduction Threshold Increase: Monitor the progress of the proposed increase to the immediate deduction threshold for SBE taxpayers, which may rise to $30,000. This change could significantly impact your tax planning strategies.
Small Business Energy Incentive: A proposed 20% bonus deduction for eligible energy-efficient assets and improvements may benefit small and medium businesses. Stay updated on the progress of this legislation.
Unused Concessional Cap: Maximise your superannuation contributions by utilising unused concessional caps from the preceding five tax years. Contributions made after 1 July 2024 will not be able to utilise unused caps from the 2018-19 tax year.
Effective year-end tax planning requires a proactive approach and a deep understanding of current tax regulations. At Cordner Advisory, we're committed to helping you navigate these complexities and achieve the best possible financial outcomes. By utilising these tax planning strategies and staying informed about the latest tax developments, you can ensure that your business remains compliant and financially healthy. Trust Cordner Advisory to be your partner in navigating the complexities of tax planning and achieving your financial goals.
Trust Cordner Advisory to be your partner in navigating the complexities of tax planning and achieving your financial goals!
Frequently Asked Questions
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Year-end tax planning is crucial for Cordner Advisory clients to ensure they minimise tax liabilities and maximise deductions. Our expert business advisory, tax, accounting, and SMSF services will help you navigate the complexities of the Australian tax system, ensuring compliance with the latest tax regulations.
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For the 2024 tax season, the Australian Taxation Office (ATO) is focusing on work-related expenses, rental property deductions, and ensuring all income is reported. Cordner Advisory can help you stay compliant and avoid common pitfalls in these areas with our thorough tax planning and advisory services.
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We suggest rental property owners to accurately report rental income and differentiate between deductible repairs and capital improvements. At Cordner Advisory our comprehensive records and expert advice can help you claim all eligible deductions, reducing your taxable income effectively.
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Cordner Advisory recommends strategies such as depreciation reviews, declaring dividends earlier, optimising trading stock valuation, writing off bad debts, and bringing forward expenses. These strategies help manage your cash flow and reduce taxable income, ensuring financial stability and compliance.
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It is essential to have a comprehensive report of all income, including wages, investment income, and government payments. By waiting for all income information to be pre-filled and available, at Cordner Advisory we can help you avoid penalties and interest charges, ensuring a smooth tax filing process.
