Your ATO To-Do List: Get on Top of Tax Planning Early

The $20,000 instant asset write-off is due to expire at the end of this financial year, reverting back to $1,000. And while there are strong calls for it to be extended further – which the March budget did not do – businesses that haven’t yet taken advantage of the write-off may want to review their assets for potential upgrades.

The deduction only applies to businesses with a turnover of less than $10 million and can be applied to multiple items provided each is valued at less than $20,000 and was installed by 30 June this year. The scheme applies to both new and second-hand assets.

Obviously, it's not worth buying things your business doesn't need just to reduce taxable income, but if the business will benefit, or it's something you would need to buy in the coming year, it may be worth making a purchase before June 30 to secure a deduction sooner rather than later. As always, seek advice from a qualified professional.

Some regular expenses involved in running a business may be claimed as tax deductions, so look for expenses that could be prepaid to bring the deduction forward to the 24/25 financial year and possibly reduce your immediate tax burden.

For example, an annual lease that runs for a calendar year could be prepaid before the end of the financial year and the cost could be claimed in that year's return. It will, of course, mean the pre-paid amount can't be used as a deduction the following year, but working out how best to spread expenses could really help with cash flow.

To qualify as a pre-paid expense, the amount cannot be less than $1,000 or include wages. For more information about how the ATO views prepaid expenses, see their guidelines.

Business owners may be eligible to claim deductions for 'bad debts', that is income earned that can't be recovered from customers or debtors.

Examine outstanding debts well before June 30 to consider what could be written off each financial year.

A debt can be incurred and written off in the same financial year, provided a business can prove it is genuine, in terms of what efforts have been made to recover monies owed prior to writing it off.

According to ATO guidance a 'bad debt' must be, "an amount you have determined is unlikely to be recovered through any reasonable and commercial attempts… this does not always mean you need to have commenced formal proceedings to recover the debt."

It does, however, need to be recorded as a `bad debt' in business records, and the debt removed from the customer's account before it can be written off for tax purposes.

The ATO regularly lets accountants and business owners know particular areas of focus for them in relation to business tax claims.

Recently they have had a sharp focus on:

• Incorrect returns from 23/24: The ATO has warned business owners it is reviewing claims under the 23/24 allowances for Skills and Investment Boost and the 22/23 Technology Investment Boost where businesses were allowed to claim a bonus 20 percent deduction. Errors include sole traders claiming for training, and businesses who exceed the turnover cap. In a statement to business, the ATO encouraged businesses to check and amend any incorrect claims, saying: "If you incorrectly claim, we may get in contact with you or your tax professional. If no action is taken, we may conduct a review and audit of your business."
• Using business money and assets for personal use or benefit: The ATO has warned problems arise when people use company assets for personal use and/or don't have separate accounts for their business and personal use. "The company's money and assets are not the owners", the ATO warns. Money paid by the company to an owner or shareholder must be declared as income or a loan.
• Incorrect non-commercial business losses: The ATO has reported growing numbers of traders incorrectly offsetting losses from non-commercial business activities (such as those classed as hobbies). They have reminded operators non-commercial business losses cannot be claimed in the year it is incurred but must be deferred.

You can keep track of the ATO’s focus areas by checking their quarterly updates.

A few important legal changes are on the horizon that you’ll want to be aware of, including:

• Parental leave: Starting 1 July 2025, the Government Paid Parental Leave scheme increases to 24 weeks.
• Superannuation changes: Superannuation will need to be paid to employees on top of Paid Parental Leave paid by the Government, and the Superannuation guarantee will increase to 12%.