Essential Tax Planning Insights

SUPERANNUATION

The Superannuation Guarantee Contribution (SGC) rate is set to rise by 0.5% on 1 July 2025, bringing it to 12%. This rate is expected to remain unchanged for the foreseeable future (unless legislation changes).

This means any super contributions related to wages paid on or after 1 July 2025 (even if they relate to FY25 work) will be subject to the increased 12% rate.

From the 2025–26 financial year, employers will still need to make SGC payments quarterly—by the 28th day following the end of each quarter (September, December, March, and June). However, this will change from 1 July 2026, with the implementation of the Payday Super system. Under this system, super contributions will be due at the same time as the payroll payment.

Tax Planning Tip

Even though the June 2025 quarter’s SGC doesn’t need to be paid until 28 July 2025, tax deductions for these super contributions can only be claimed in the 2024–25 tax year if the contributions are actually received by the employee’s super fund before 30 June 2025.

If you’re using a clearing house to process contributions, be aware that their cut-off dates will usually be earlier than 30 June to ensure funds are deposited in time. We recommend submitting payments at least one week before 30 June, where possible.

Making Additional Personal Contributions to Your SMSF or Super Fund

For the 2024–25 financial year, the cap for tax-deductible (concessional) super contributions is $30,000, regardless of your age.

If you’re over 75, your options are limited to mandated employer contributions and downsizer contributions.

Note: Your concessional contributions cap includes employer SGC contributions and salary sacrifice amounts.

If your total superannuation balance was under $500,000 as at 30 June 2024, you may be eligible to carry forward any unused portion of your concessional cap from the previous five financial years.

The amount you can carry forward depends on how much you’ve contributed in the past, starting from the 2018–19 financial year. Even if you weren’t a member of a super fund during some of those years, those caps can still be counted. Maximising your deductible contributions before 30 June 2025 can be advantageous because they’re taxed at a concessional rate of 15% to 30% (depending on your income), whereas personal income tax rates can range from 30% to 45% plus the 2% Medicare levy for individuals earning over $45,000. Remember: unused cap amounts expire after five years if not used.

Non-Concessional Contributions

Starting from 1 July 2024, the cap on non-concessional contributions will increase to $120,000.
For the 2024–25 financial year, members under the age of 75 may be eligible to utilize a bring-forward arrangement for their non-concessional contributions, as detailed in the table below.

SMALL & MEDIUM BUSINESS

For the 2025 financial year, businesses with a turnover of less than $50 million will be subject to a 25% company tax rate, provided that no more than 80% of the company’s assessable income is “passive income” (such as interest, dividends, rent, royalties, and net capital gains). Companies that do not meet this criteria may face a tax rate of 30%.

Instant Asset Write-Off for Eligible Businesses

The instant asset write-off incentive is currently available for businesses with an aggregated turnover of less than $10 million, allowing them to immediately deduct assets costing less than $20,000. To qualify for a 2025 tax deduction, assets must be purchased and either used or ready for use before 30 June 2025. Speak with us today to explore your options!

Loans from Private Companies – Division 7A

Private company directors are reminded to ensure compliance with Division 7A when providing loans or financial assistance to shareholders and associates, or when allowing them to use company property.

Loans from private companies to shareholders or associates are treated as deemed unfranked dividends under Division 7A unless repaid by the earlier of the lodgement date or the due date for lodging the company’s tax return, or the loan is converted into a formal loan with the following conditions:

• A Division 7A-compliant written agreement on commercial terms must be in place by the earlier of the company’s lodgement or due date.
• The loan must have a minimum benchmark interest rate.
• The loan term cannot exceed seven years, or 25 years for registered mortgages over real estate.

Other Important Division 7A Considerations:

• Ensure that minimum loan repayment amounts are made in future years; any shortfall will be considered a deemed dividend in that year.
• Division 7A deemed dividends are generally unfranked.
• Payments and debt forgiveness to shareholders or associates may also fall under Division 7A.
• The private use of company-owned assets for less than market value can be a deemed dividend under Division 7A.
• Division 7A rules apply to shareholders, associates, their relatives, trusts, companies, and partnerships.
• Loans for income-producing purposes may also be considered deemed dividends under Division 7A—there is no “otherwise deductible” rule.
• Ensure all Division 7A loans made in the 30 June 2024 tax year are either repaid or covered by a complying loan agreement by the earlier of the lodgement date or the due date for the company’s 2024 tax return.
• Unpaid present entitlements from a Trust could result in a deemed dividend to the Trust or its shareholder/associate in some circumstances.

Tax Planning Tip

To ensure that all future Division 7A loans comply with requirements, consider entering into a Division 7A-compliant facility loan agreement. If such an agreement is already in place, review it regularly to ensure it remains compliant. Alternatively, if cash flow permits, consider repaying any loans by 30 June 2025.

ONGOING YEAR-END CONSIDERATIONS

• Assess whether the amount constitutes income or capital, as income and capital gains are subject to different tax timing rules.
• Determine the most suitable income recognition method for each type: cash or accrual.
  • The cash method typically applies to personal services, rent, interest, dividends, and other non-business investment income.
  • The accrual method is typically used for trading income or business income that involves circulating capital or resources like staff and equipment.
• Review specific rules for when income is considered derived.
• Consider deferring income until after 30 June 2025, or, if in a tax loss position, assess whether accelerating income before 30 June could offset losses that may not be available in future years.

Income Received in Advance

• Income received in advance may not be considered derived (and taxed) until services are provided.
• Credit income received in advance to an unearned income account.
• This rule generally does not apply if payment is non-refundable, regardless of whether services are provided.
• Declare income for tax purposes when services are provided or when it’s clear that the services won’t be provided and no refund is sought by the customer.

Expense Timing

• Expenses are typically deductible if incurred by 30 June 2025, provided a liability exists at that time.
• Provisions are generally not deductible.
• Some accruals are not deductible.
• Specific rules determine when certain expenses are deductible (e.g., prepayment rules).
• Interest paid after a business ends may still be deductible.

Repairs

• Ensure repairs are incurred by 30 June 2025 to claim a deduction in the 2025 income year. However, repairs must not involve:
  • Initial repairs,
  • Substantial asset replacements, or
  • Improvements to an asset.

Gifts

• Make donations to deductible charities before 30 June 2025.
• Ensure payments are made to an endorsed deductible gift recipient (DGR).
• Donations are not deductible if the donor receives a benefit, unless it’s a contribution at an eligible DGR fundraising event over $150, in which case the deduction is reduced by the value of any benefits received.
• The GST-inclusive value of benefits received cannot exceed 20% of the contribution or $150.

Bad Debts

• Review bad debts before 30 June 2025.
• Write off bad debts before year-end for a deduction in the current year (provisions for doubtful debts are not deductible).
• Bad debts may not be deductible if ownership or control of a company or trust has changed, unless the company meets the same business test.

Trading Stock

• Choose an appropriate valuation method: cost, market selling value, or replacement price.
• Identify obsolete stock for special valuation treatment.
• Scrap unwanted stock by 30 June 2025.
• Small business entities don’t need to value stock if the difference between opening and estimated closing stock value is $5,000 or less.

Non-Commercial Losses

• Losses from businesses run by individuals (or partnerships with individual partners) are quarantined and deductible only against income from the same or a related business, unless one of the following conditions is met for individuals with taxable income under $250,000:
  • Business income of $20,000 or more,
  • Profit in three out of the last five years (including the current year),
  • Real property worth $500,000 or more, or other assets worth $100,000 or more used in the business,
  • The Commissioner’s discretion.
• Individuals with taxable income over $250,000 must rely on the Commissioner’s discretion to have losses deducted.

Home Office Expenses

• Home office expenses may be deductible if business or employment activities are conducted at home.
• Certain expenses (e.g., interest, rent, insurance) are not deductible unless a specific area of the home is used exclusively for business.
• A converted spare room is not automatically a home office.
• Power, heating, and depreciation may be claimed at a flat rate set by the ATO, even if the room is not exclusively a home office.
• Working from home as a convenience without a dedicated office space may not qualify for home office deductions.

Car Expenses for Individuals

• If claiming actual expenses, ensure the logbook is up-to-date, as a new logbook is required every 5 years.
• Take year-end odometer readings and keep all relevant receipts.

Personal Deductions

• The ATO is increasing audits of personal employment-related deductions. Ensure:
  • You’re entitled to the deduction,
  • You have appropriate documentation (e.g., receipts, tax invoices),
  • You’ve excluded private portions of expenses and can substantiate business/employment use,
  • You haven’t been reimbursed by your employer for the expense.

Prepayments

• If expenses aren’t subject to prepayment rules, prepay deductible expenses by 30 June 2025.
• Prepayment rules spread deductions over multiple years if the expense benefits extend beyond the current income year.
• Excluded expenditures (e.g., salary, legal/court-ordered payments, and expenses under $1,000) are not subject to prepayment rules.
• Small businesses and non-business individuals can prepay expenses if the benefit is within 12 months.

Taxable Payments Reporting System

• Businesses in building, construction, courier, cleaning, IT, transport, and security industries must report contractor payments to the ATO.
• The annual report for 30 June 2025 is due by 28 August 2025.

Superannuation

• Employee superannuation guarantee contributions must be made by 28 July 2025.
• Ensure minimum pension payments are made for those in pension phase by 30 June 2025.
• Be mindful of contribution caps and ensure contributions do not exceed concessional or non-concessional limits.
• Contributions made close to year-end must be received by the super fund by 30 June for deductibility.
• Review salary sacrifice arrangements, especially if you have multiple employers, to avoid exceeding concessional caps.

Super Guarantee and Contractors

• Employers must make super contributions for eligible employees and certain independent contractors.
• Review contracts to determine if contractors should be treated as employees for Superannuation Guarantee purposes.

Director and Employee Entitlements

• Hold shareholders’ meetings before 30 June 2025 to approve directors’ fees and bonuses for a deduction in the 2024-25 year.
• Ensure employee bonus arrangements for 2024 results are in place before 30 June 2025.
• Confirm employee salary packages, including fringe benefits and super contributions, are finalized before the salary is earned.

Payment Summaries – Salary Sacrifice

• Employers must report salary sacrifice super contributions on PAYG payment summaries, including any contributions exceeding the SGC requirements.
• Post-tax salary contributions are not included.

Losses

• Ensure companies and trusts claiming a deduction for current or prior year losses comply with company loss and trust loss rules by 30 June.

Debt Forgiveness

• When forgiving a debt before 30 June, assess any potential consequences under commercial debt forgiveness rules, which may impact tax losses, future deductions, and CGT cost bases.
• In some cases, deferring forgiveness to the next tax year may be advantageous.

Sale of Investments – CGT Issues

• Consider delaying the sale of CGT assets until after 30 June unless losses would otherwise be forfeited.
• Be cautious when realizing capital losses before 30 June, as losses may be denied if assets are not genuinely disposed of or are replaced with identical assets.
• The timing of the sale contract generally determines the CGT event date.
• Delay sales to pass the 12-month holding period for CGT discounts when applicable.

CGT Small Business Concessions

• The available concessions include:
  • 15-year exemption,
  • Active asset reduction,
  • Retirement exemption,
  • Small business rollover.
• To qualify, taxpayers must meet specific asset and business tests.
• There are additional rules for businesses selling shares or interests in a trust conducting a business.
• Review rules on asset transfers between related entities.