Year end tax planning tips for your small business

With the end of the tax year approaching, it’s time to take action to minimise the tax liability for your small business. 

Here are my top tips for end of year tax planning:

Take advantage of the instant asset write off

One of the best tax breaks for small business is the instant asset write off – which means that you can score an immediate tax deduction for the costs of capital assets costing up to $20,000 if your business turnover is less than $10 million. With many businesses offering End of Financial Year promotions, now is the ideal time of year for your business to take advantage by acquiring some much-needed assets to build your business and, at the same time, reduce your taxable profits.

The tax break works by offering an immediate deduction for all capital assets costing less than $20,000 against your profits for the year. The scheme is scheduled to run through until 30 June 2026 however, it pays to take advantage of the scheme this tax year because your business can accelerate the tax deduction.

Amongst the items you could look at claiming are the following:

• Cash registers and other POS devices
• Delivery vans (costing less than $20,000, therefore probably second-hand)
• Store or office fittings and fixtures
• Computers, laptops and tablets
• Security systems
• Accounting software
• Plant and equipment, including tools

Defer income

To reduce this year’s tax bill, It could be worth considering deferring business income until the next tax year. Amongst the possible strategies are holding off invoicing for goods and service until July 2025 and, if you are expecting to sell an asset which is subject to capital gains tax (CGT), deferring the disposal until 1 July 2025 or later, eg, by deferring the signing of the contract for sale of a rental property, shares or units until after the start of the tax year (the CGT event arises on the contract date NOT the settlement date).

Prepay expenses

You can get an immediate tax deduction for certain pre-paid business expenses.  So, by paying now for something that you will use in the next tax year, you can get a deduction in the current tax year. The basic rule is that a deduction is available for expenses that cover a period of no more than 12 months. That covers expenses such as insurance premiums, telephone and internet services, subscriptions to trade or professional bodies, rent or leasing charges on your premises and bookings for seminars, conferences or business trips.

Pay superannuation

Employers have to pay superannuation contributions within 28 days of the end of the quarter, ie by 28 July 2025. However, you can accelerate the tax deduction by ensuring that all June quarter superannuation contributions are paid by 30 June. Note that contributions must actually be paid, cleared in the business bank account and received by the employee’s super fund before 30 June for a tax deduction to be available. Any other outstanding amounts should also be paid before year end.

Write off bad debts

No business wants to be in a position where they can’t recover outstanding debts but we have to be realistic and acknowledge that it does happen sometimes, especially during an economic downturn like the current one. The good news is that if your business has to write off a debt, a tax deduction is available for the amount of the debt written-off.

A debt that is unpaid and deemed to be a bad debt is an allowable deduction provided it was included as assessable income in the current or a previous income year.

At this time of the year, it makes sense to go through your debtors list and if there are any debtors on it who you believe can’t or won’t pay, write off those debts by 30 June to claim the deduction this year. The business must keep a written record to document that the debt has been written off.

Get the right trading stock valuation

Damaged and obsolete stock can be written down or written off entirely and a tax deduction claimed – now is the time to crystalise that tax deduction.

The Golden Rule – Keep records

Good record keeping is your best friend for efficient business management and will also make life easier if the ATO ask you questions. It’s essential that records are kept to substantiate what’s in your tax return; any unsubstantiated deductions, for instance, are generally not allowable.

Tax law requires that records be kept for five years, and they should include:

• sales receipts
• expense invoices
• credit card statements
• bank statements
• employee records (wages, super, tax declarations, contracts)
• vehicle records
• lists of debtors and creditors
• asset purchases.

Records can be kept on paper or electronically, but should be easily retrieved. In our experience, businesses often stumble when asked by the ATO to verify transactions by providing supporting records, with the consequence that even “innocent” businesses can find themselves stung by the tax man where they are unable to provide the requested evidence.

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