Small business tax planning and strategies for 30 June 2024
Tax planning is important for small businesses, here is what you need to know now to prepare your strategy.
As 30 June 2024 is fast approaching, we have prepared this document to provide your business with some tax planning options.
Taking advantage of some of these options may put you in a better taxation position this year.
Bonus deductions
Businesses with annual aggregated turnover of less than $50 million will receive an additional 20% deduction for eligible expenditure on training employees, and investments that support energy-efficient practices and implementing energy-saving technologies.
The following incentives are available until 30 June 2024:
• Skills and training boost
• Efficient energy
Scrutiny of s 100A family trust arrangements
Trust income distributed to adult children
The ATO has advised that compliance resources will be dedicated to scrutinise arrangements where parents benefit from the trust entitlements of their adult children.
The ATO acknowledges circumstances where adult children by way of these arrangements repay expenses incurred in relation to their upbringing and other family costs that would ordinarily be met by the parents.
Nonetheless, these arrangements will be closely monitored to ascertain if there is contemporaneous evidence of the claimed obligation.
Retention of funds by the trustee
A scenario where beneficiaries of a trust retain their distribution as working capital in a business that is run by the trustee, falls under ordinary dealings as long as there is “use of funds condition”. The beneficiary, in such a scenario, may be a private company that enters into a loan agreement with the trustee that complies with Div 7A.
These arrangements have been approved by the ATO will not be scrutinized.
Other considerations
• Payments for annual leave and long service leave entitlements are not deductible until the amounts are actually paid to staff.
• From 1 July 2024, the Superannuation Guarantee (SG) rate for compulsory superannuation contributions by employers will increase from the current 11% to 11.5%. • Current year deductions for directors’ fees are only available where your company has definitively committed itself to the payment. An example of this is the company passing a properly authorised resolution to this effect.
• If your discretionary trust will be in a loss position for the 2023–24 income year, consider making a family trust election. A family trust election may give you the ability to carry forward losses to distribute in a future income year.
• Subject to allowances in the trust deed, consider the application of streaming income to various beneficiaries. This may produce an overall effective tax position.
• Trustee resolutions are not accepted as giving rise to present entitlements for an income year unless they are made by 30 June 2024. Sometimes, this date may be earlier if required by the trust deed.
If you need to know more about the items discussed here, please contact our office for more information.
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