Business tax planning guide 2024

Many businesses overlook a powerful tool at their disposal: strategic business tax planning. Imagine the possibility of reducing your tax bill significantly. This extra cash could fuel growth initiatives, reward your team, or provide a financial cushion for unexpected challenges.

This blog isn't just about following the rules; it's about leveraging tax regulations to your advantage. With that, Thriday provides clear, actionable steps specifically tailored for the 2024 financial year. We don’t want you to settle for simply "getting by" with your taxes.

Understand Your Business Structure

The first step is to identify your business structure. Qualifying as a "Small Business Entity" with the Australian Taxation Office (ATO) unlocks a range of tax concessions. To qualify, your business (and any connected businesses) must have a combined annual turnover of less than $10 million and be operating in the 2024 tax year.

Choosing the right structure is crucial. This will impact your taxes, liability, and day-to-day operations. Take this short quiz to determine what business model best suits your new venture: What Business Model Suits Your New Business.

Tax Rate Advantages for Small Businesses

The good news for small businesses is the lower company tax rate of 25% for the 2024 financial year. This applies to businesses with a turnover of less than $50 million (Base Rate Entities), provided 80% or less of their income is "passive income" (interest, dividends, rent, royalties, and capital gains). This tax benefit can significantly reduce your overall tax liability. Let's explore some additional strategies you can use to minimise your business tax further.

Bucket Company Strategy for Trust Structures

If you operate under a Trust structure, consider a "Bucket Company" strategy. This involves allocating profits to a company specifically designed to qualify for the 25% base rate entity tax benefit. Note that this strategy requires careful planning and professional advice to ensure eligibility.

Beware of the Asset Sale Tax Sting

Did you use the temporary full expensing or instant asset write-off schemes? While these offered a 100% deduction on asset purchases until June 30, 2023, there's a catch. When you eventually sell these assets, the sale amount will be considered income for the year. Remember, replacement assets above $20,000 are generally depreciated, reducing your taxable income. Careful tax planning can help minimise the impact of this potential tax liability.

Maximising Tax-Deductible Super Contributions

Superannuation contributions offer a great way to save for your retirement while reducing your taxable income. The concessional superannuation contribution cap for 2024 is $27,500 for individuals, increasing to $30,000 in 2025. Exceeding this cap can lead to additional taxes. Remember, employer super guarantee contributions also count towards this limit. Contributions made to qualify for the 2024 cap must be received by the super fund by June 30, 2024.

Tools of the Trade/FBT Exempt Items

Equipping your team with the right tools and technology is an investment in their productivity and offers a tax benefit for your business. "Tools of the Trade" and other FBT-exempt items include portable tools, computer software, laptops, mobile phones, and more. Structured correctly, you can claim a tax deduction for reimbursing employees for these purchases while minimising the impact on their salary package. Remember to finalise these purchases before June 30, 2024, to claim the deduction in the current financial year. We've just released an asset and liability register to make this a whole lot simpler.

Pre-June 30th Action Steps to Minimise Your Tax Bill

Several actions can be taken before June 30th to minimise your tax bill for the 2024 financial year:

• Repairs & Maintenance: Make payments for repairs and maintenance related to your business, rental properties, or employment to claim the deduction in the current year.
• Employee Superannuation: To claim the deduction, ensure employee superannuation contributions reach the super fund or Small Business Superannuation Clearing House (SBSCH) by June 30th.
• Defer Income: If possible, delay issuing invoices and receiving payments until after June 30th to push tax liability into the next financial year.
• Bring Forward Expenses: Stock up on consumable items like marketing materials, stationery, and office supplies before June 30th to claim this year's deduction.
• Defer Investment Income & Capital Gains: Arrange to receive investment income (interest) and finalise capital gains asset sales after June 30th to minimise your tax payable in the 2024 financial year.
• Repay Private Company (Div 7A) Loans: Business owners who borrowed funds from their company in previous years must ensure that the appropriate principal and interest repayments are made by June 30, 2024. Current year loans must be either paid back in full or a loan agreement must be entered before the due date of lodgement for the company return. Failing to do so could result in the loan being counted as an unfranked dividend to the individual.

Record Keeping and Depreciation

Here are some tips for record keeping and depreciation to maximise your deductions:

• Motor Vehicle Logbook: Maintain an accurate and complete logbook for a minimum 12-week period ending June 30th, 2024. Alternatively, claim up to 5,000 business kilometres using the cents per kilometre method.
• Investment Property Depreciation: For rental property owners, consider a Property Depreciation Report to maximise depreciation and building write-off deductions.

Additional Strategies to Maximise Tax Benefits

In addition to the pre-June 30th actions, consider these strategies to reduce your tax burden further:

• Conduct a Year-End Stocktake/Work in Progress: This process helps identify obsolete or worthless inventory you can write off, reducing your taxable income.
• Write Off Bad Debts: Review your accounts receivable and remove uncollectible amounts from your books as a tax-deductible loss. 
• Small Business Concessions - Prepayments: If eligible, prepay certain expenses (like loan interest) before June 30th to claim the entire prepaid amount as a deduction in the current financial year.
• Finalise Trustee Resolutions (Discretionary Trusts): Ensure all trustee resolutions are prepared and signed before June 30th to comply with ATO requirements, essential for distributions to adult beneficiaries.

Proactively Plan with Thriday, An All-in-One Financial Management Tool

While a qualified tax advisor can offer invaluable guidance for complex situations, powerful tools can streamline your record-keeping and proactive tax planning throughout the year. Consider incorporating a tax receipt automation tool into your workflow. These tools can:

• Scan and categorise your receipts automatically: Save time and eliminate manual data entry using a receipt scanner that captures information and sorts it into relevant expense categories.
• Reduce the risk of lost receipts: Having a digital record of your expenses eliminates the worry of misplaced paper receipts come tax time.
• Gain real-time insights into your spending: Track your expenses throughout the year to identify areas for potential tax deductions and optimise your cash flow.

By implementing these strategies and leveraging tax automation tools, you can significantly reduce the burden of tax season and ensure you're maximising your tax benefits throughout the year. Sign up for free account with Thriday today to make your tax time relax time!

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