Tax Planning – Recurring Opportunities

Tax planning is about planning your affairs to legitimately make sure you don’t lose wealth to taxation. It should not be confused with tax evasion which is illegal. No strategy should be driven by tax outcomes alone– they are only a  factor to consider. Following is a range of discussion and suggestion points that are general in nature and should not be considered advice specific for your situation. To help tailor a tax planning strategy to suit your needs please contact our team on 1300 656 141.

Tax Planning for Individuals

Deferral of Income

Prima facie, deferring your income until a later tax year makes sense because you can hang onto your money for longer. Maybe put it against your mortgage and accrue less interest. However, it isn’t as straight-forward as that!

You need to take into account your expected future income level. For example, if you have lower income this year than you expect to have in later years, you may not benefit from deferring your income. Conversely, if you expect to have lower income in future (e.g. you intend to leave the workforce) deferring income becomes a good idea.

How to Defer income?

So, HOW do you defer income? In simple terms it can be everything from choosing to defer the sale of assets that will lead to the realisation of a taxable capital gain, to setting term deposits to mature in the next financial year.

N.B. You will also need to take into account any changes to tax rates and levies. Deferring income this year will result in that income being taxable at next year’s (or a later year) rates. Where the tax rates are decreasing, that can be a very good thing, indeed.

Bring Forward Expenses
A similar outcome is achieved by bringing forward expenses. If you are planning to spend money in the short term, consider spending that money before 30 June especially if your income is higher this year than what you think it will be in future. This makes even more sense in a year where the current tax rates are higher than they will be next year.

For example, you can make donations to deductible gift recipients or carry out repairs & maintenance on investment property. You may also qualify for deductions for interest that is prepaid (subject to the terms of the finance agreement). If you are considering this strategy, please contact the BridgePoint Group team for tailored advice.

Capital Gains and Losses
Another way you can influence your taxable income between now and 30 June is to manage your capital gains and losses. Consider reviewing your other investments and realising capital losses that can offset any gains if you’ve realised a capital gain in the current financial year.

Alternatively, if you incurred a capital loss or have carried forward capital losses available, you may consider crystallising a capital gain, particularly if you expect your income to increase over time although note you can carry forward losses to later years, so there is generally no real urgency about realising a gain just to use losses.

Making superannuation contributions
Subject to a number of rules, individual taxpayers may qualify for a deduction in respect of personal superannuation contributions up to the concessional contribution limits. The limits are currently $27,500 increasing to $30,000 in 2025. Personal contributions are only deductible if the following conditions are satisfied:

• The contribution is paid into a complying superannuation fund; and
• Your fund has sent you an acknowledgment; and
• You meet the age restrictions; and
• You have given your fund a notice of intent to claim in the approved format.

For more information about superannuation deductions, please contact our team on 1300 656 141.

---

Tax Planning for Businesses

Write off bad debts
We all hate bad debts but at least make sure you get a tax deduction for them! To secure the deduction, the debt must:

• Be in existence (e.g. there has been no deed of release); and
• Be bad (and not just doubtful); and
• Be written off before 30 June; and
• Have been brought to account as income during this year or an earlier year.

Write off obsolete stock
You can claim a deduction for stock that is written off because it is old, damaged or obsolete. To secure the deduction, the stock must be written off before 30 June.

Write off scrapped assets
If you are carrying assets in the balance sheet that have been scrapped or disposed of, you should write them off. To the extent the asset has not been fully depreciated already, you will qualify for a deduction for the balance of the value of that asset.

Review stock valuations
There are three primary methods available to you for the valuation of stock – the lower of cost, replacement or net market value. That means that if you are holding stock that is no longer worth what you paid for it, you can effectively claim a deduction for the difference by choosing to value stock at replacement value or net market value. We also note that the decision on how to value stock is made each year and you can change methods from year to year.

Pay super before 30 June
Superannuation expenses are deductible only at the time the Fund has received and banked the contribution. Therefore, if you want to claim super deductions in the current year, they must be paid before 30 June. Allow enough time for Fund to process your contributions because they get very busy at this time of year! And as always, make sure your cashflow situation is strong enough to cope with paying super 28 days early.

Segregate unearned income
Businesses will sometimes receive income in advance of providing goods or services. Subject to the terms and conditions on which that income is received, it may be considered unearned income. Unearned income is a liability in your balance sheet. Importantly, neither is it taxed until earned.

Bring Forward Expenses
You may wish to bring forward planned expenses in order to be able to deduct them this year. As always, you should consider your cashflow and the commercial sense of incurring the expense in the first place.

Small Business Entity Concessions
There are several concessions available to small business entities (those with aggregated turnover of less than $10 million). Businesses that are not small businesses (turnover > $10m) but have (turnover < $50m) can also access an immediate deduction for certain start-up expenses and for prepaid expenditure. These concessions include:

• Being able to deduct prepaid expenses (limited to prepayments for up to 12 months of service). Common examples are rent, IT monthly maintenance charges and of course, prepaid accounting fees!
• You can claim an immediate deduction for certain assets costing less than $20,000 provided you first used them or they were installed ready for use prior to 30 June.

Warning regarding accrued bonuses and Directors’ Fees
To ensure that accrued bonuses and Directors’ fees are deductible this year, you should:

• Ensure that the decision to pay is documented before 30 June so you are legally committed to pay (e.g. minutes of Directors’ meeting, Directors’ resolution); and
• Ensure that the intended recipient is notified before 30 June of their entitlement to receive the amount of the bonus/fee.

For tax planning assistance contact our team on 1300 656 141