Tax Laws (and associated Laws) are changing constantly, which makes it difficult for small business owners in particular to keep track of everything they need to know. Complying with the rules is hard enough, let alone being proactive to minimise your tax and maximise your wealth. We’ve created this article to cover some of these changes and provide you with some tips to get ahead of the pack.
You can view our full range of EOFY 2024 articles below
IMMEDIATE WRITE-OFF FOR ASSET PURCHASES
There have been a number of changes to the immediate write-off rules, so you can be forgiven for not knowing what the current rules are.
During COVID, many businesses were able to write off assets of any cost. As we came out of COVID (i.e. 1 July 2022), the write-off was only available for assets costing $20,000 or less, and then this was reduced to $1,000 or less from 1 July 2023. In the last federal budget, it was proposed to re-introduce the $20,000 threshold for the 2024 financial year, however, as of the time of writing, this has not been passed by Parliament.
The Senate is arguing that the threshold should be set at $30,000 and it should be available to businesses with turnover under $50m, and the Lower House is refusing to agree and wants to keep it at $20,000 for businesses with turnover under $10m. This disagreement has been holding up this Legislation and as such we can’t tell what the rules are going to be… We’re confident it will pass, but whether we end up with a $20,000 or $30,000 threshold is anyone’s guess.
Normally, this is where we say that if you are after a last-minute tax deduction, buying an asset may be the answer… but, thanks to the Government unable to pass this relatively simple Legislation, we have no idea if this is a viable strategy or not. We note that we never advocate buying things you don’t need (because even with the tax deduction you are still out of pocket buying the asset).
Keep in mind though the instant asset write-off isn’t a “bonus” or “free” deduction. You can claim the cost of the asset under normal rules, it’s just spread over the life of the asset (e.g. if spend $10,000 on a piece of equipment, under normal rules you can claim the $10,000 over 5 or 10 years instead of all this year under the instant asset write-off). The benefit to the immediate write-off is that you get all the tax benefits now.
Before you buy however, be sure that you will get the biggest benefit this year. It could be that you save more tax next year than you would this year. This is particularly relevant for sole traders, partnerships, and trusts.
BONUS DEDUCTION FOR ELECTRIFICATION
The government has also proposed a bonus tax deduction in the 2024 financial year for small and medium businesses (with aggregated turnover less than $50 million). This deduction amounts to 20% of the purchase price of eligible assets or improvements that facilitate electrification or enhance energy efficiency.
Unfortunately, similar to the immediate write-off, the Government has been unable to get the Legislation passed through Parliament, so we’re in the situation where we are trying to plan based on a best guess.
SMALL BUSINESS SKILL AND TRAINING BOOST ENDING
The small business skills and training boost ends on 30 June 2024. For businesses with an aggregated turnover of less than $50 million, this initiative enables them to deduct an additional 20% of expenditure incurred for eligible external training courses provided to employees by registered providers in Australia.
SUPERANNUATION RATE INCREASE
A reminder for businesses that the rate of super that needs to be paid to staff is increasing to 11.5% (up from 11%) on 1 July 2023. This new rate applies to wages paid to staff on or after 1 July.
Most payroll software will automatically update their programs and rates, however if you are not using the in-built superannuation categories you may need to manually update yours.
SUPERANNUATION CONTRIBUTIONS
Not a change but a reminder – to claim a deduction for superannuation contributions in the 2024 year, they must be received and processed by your super fund before 30 June. Given most super payments go via a clearing house which can take up to 10 days, you need to physically pay this super by 20 June in most cases to meet this criteria.
We also note that from 1 July 2024, the cap on the amount that you can contribute to super will be increasing to $30,000. This cap applies to employer contributions and voluntary amounts that you are claiming a tax deduction for.
RECONCILE YOUR PAYROLL
Once 1 July ticks over, you should be thinking about reconciling your payroll to ensure that the information you put on your staff’s group certificates is correct. This means checking that the payroll data matches your ledger data and the info you reported on your BAS’s.
We have a great checklist that goes through these (plus covers your payroll tax , workcover, and taxable payments report requirements).
Once done, small businesses have until 31 July to lodge their group certificates with the ATO (which is now called an STP finalisation).
MINIMUM WAGE INCREASE
The minimum wage is currently $23.23 per hour, but as of 1 July 2024 it will increase to $24,10. Keeping in mind that “wage theft” is now a crime (see our article on this here), please ensure you are diligent in paying your staff at least the minimum requirements.
RANDOM TAX TIPS
We have a heap of tax tips in our EOY Tax Tips brochure, but some important ones include:
- Bringing forward expenses that you will incur next year can move the tax deduction from next year to this year;
- Staff bonuses that are committed to before 30 June are deductible this year, even if paid next year;
- Ensure you do a stocktake and calculate your work in progress (the value of materials and labour used / paid for on jobs that you haven’t invoiced as yet) as these are used by your accountant in calculating taxable income, and if they don’t know the figures your options are limited; and
- Check what is owed to you by customers and write-off any amounts that you expect to never receive.
MANAGING YOUR BUSINESS CASHFLOW
Most business fail because they run out of cash. This can be caused by many things, but ultimately it is a lack of cashflow that is the final nail in the coffin. We have a video series designed to help businesses better understand and take control of their cashflow at www.youtube.com/playlist?list=PLgtTuizRYnvVKZKrV8WpK6vDY9F1C2vqf. The first video is below.
If you would like to talk to us about the topics in these videos in more detail, just give us a call.
