Navigating Tax Planning: Your Guide to Success in 2024

Tax planning is a critical element of financial management that should be considered well before tax season to steer your business towards stability and progression.

Developing a comprehensive tax strategy early in your SME journey and ensuring its continuity, your business can effectively navigate tax complexities, minimise risks, and seize growth opportunities. When executed diligently, tax planning not only protects your business from unexpected financial challenges but also contributes to long-term profitability and resilience in the dynamic business landscape.

The key considerations in effective tax planning:

Exit, succession planning

Holding investment assets, private assets or Division 7A loans in a business you plan to sell could impact your eligibility for the small business CGT concessions.

Flexibility in your trust distribution patterns year-to-year may allow you to save tax on business profits but could also impact how your small business CGT concessions are applied. Strategic planning of distributions over time may enable you to access significant tax concessions.

Instant asset write-off

The temporary full expensing measure ended on 30 June 2023. As part of the 2023–24 Budget, the Australian Government announced the instant asset write-off threshold to $20,000 from 1 July 2023 until 30 June 2024. Small businesses with an aggregated turnover of less than $10 million can immediately deduct the total cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.

The $20,000 threshold will apply on a per-asset basis; assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.

Note that this measure is not yet law but is currently before parliament. 

Reviewing trust distributions

Most SME owners are familiar with the potential benefits of a discretionary trust—asset protection, tax advantages, and a succession planning framework. Another advantage is making distributions to beneficiaries at lower marginal tax rates.

The ATO has recently become stricter about situations where a trust makes distributions to an adult child and that child doesn’t receive the full benefit. Under the Section 100A provision of tax law, the ATO will focus more on these types of distributions for the 2024 financial year and beyond. This could mean a different approach to trust distributions within your family and business. Read our article on Family Trust Changes for further details.

Superannuation contributions

Typically, the ability to contribute a significant amount to your superannuation fund and claim a tax deduction has been restricted by the concessional contributions cap (currently $27,500 annually for the 2024 financial year).

However, individuals with a super balance below $500,000 and who have not exhausted their caps during the 2019-2023 years may be eligible in the 2024 financial year to make additional contributions for which they can claim a tax deduction.

If you have made very few or no superannuation contributions since 2019, you may be able to contribute an amount in excess of $130,000 in the 2024 year and claim a deduction for the whole amount, resulting in significant tax savings (especially for those with a higher marginal tax rate).

Small Business Skills and Training Boost

Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction for external training courses delivered to employees by registered training providers.

Small business energy incentive

The government announced it would provide businesses with an annual turnover of less than $50 million, with an additional 20% deduction on spending that supports electrification and more efficient energy use. Eligible assets or upgrades will need to be first used or installed between 1 July 2023 and 30 June 2024.

Note that this measure is not yet law but is currently before parliament.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Tax deductible debt

Maximising tax-deductible debt has always been a key tax planning strategy, and it’s increasingly important given the recent rise in interest rates and the expected increase. When interest rates rise and, therefore, the total interest paid increases, potential tax savings from a deduction for interest also increase.

Tax rates and franking dividends

For most SME businesses, the company tax rate is now 25%. However, when a business pays a dividend, it will not necessarily be franking the dividend at the same rate as the company tax rate. Seeking professional advice in order to understand the potential ‘top up’ tax as a dividend flows through your structure to the shareholders is crucial.

Additionally, the marginal tax rate system plays a big part in tax effectiveness of gains and income across your business. If you or family members are on a high marginal tax rate then it may be overdue to discuss both trusts and a sensible structuring approach.

Other aspects of effective tax planning this financial year may include the managed timing of investment income and capital events, writing of bad debts, as well as home office and COVID-19 test expenses.

Here’s our team’s tips when it comes to tax planning.

Reinvest – Consider that investing the funds saved from tax planning may be a clever way to boost your business’ bottom line and encourage responsible wealth management. Discuss this option with your business accountant.
Research – Stay current on any and all changes made by the ATO that may impact your business. You can do this by regularly communicating with your business accountant and researching the legalities around tax planning.
Start now – The earlier you begin planning your tax, the better for your business over the long term.
Stay aware – Be careful of tax avoidance schemes, including those promising tax benefits that aren’t legally available. The ATO has resources to help.
Strategise – Contact your trusted financial team to get up-to-date and relevant information for you and your business.

Our expert team possesses the necessary skills and experience to provide tailored solutions that meet your business needs. Don’t waste your time and energy navigating the complexities of tax planning alone. Choose Beyond Advisors today and experience the confidence and reassurance of working with a trusted partner. Get in touch with us now to take charge of your tax planning needs 1300 784 213

Sign up to Beyond Advisors

Enter your details to receive our insights, news and more.

  • This field is for validation purposes and should be left unchanged.