With the end of the financial year fast approaching, we outline some opportunities to maximise your business deductions.
Plus, we give you the lowdown on areas at risk of increased ATO scrutiny.
Opportunities
Write off bad debts
Your customer is definitely not going to pay you? If all attempts have failed, the debt can be written off by 30 June to claim a deduction this year. Ensure you document that you have written off the bad debt on your debtor’s ledger or with a minute.
Obsolete plant & equipment
If your business has obsolete plant and equipment sitting on your depreciation schedule, instead of depreciating a small amount each year, scrap it and write it off before 30 June if you don’t use it anymore.
For companies
If it makes sense to do so, bring forward tax deductions by committing to pay directors’ fees and employee bonuses (by resolution), and paying June quarter super contributions in June.
Risks
Tax debt and not meeting reporting obligations
Failing to lodge returns is a huge ‘red flag’ for the ATO that something is wrong in the business. Not lodging a tax return will not stop the debt escalating because the ATO can simply assess what they think your business owes. If your business is having trouble meeting its tax or reporting obligations, we can assist by working with the ATO on your behalf.
Professional firm profits
For professional services firms – architects, lawyers, accountants, etc., – the ATO is actively reviewing how profits flow through to the professionals involved, looking to see whether structures are in place to divert income to reduce the tax they would be expected to pay. Where professionals are not appropriately rewarded for the services they provide to the business, or they receive a reward which is substantially less than the value of those services, the ATO is likely to take action.
Need support or have questions? Talk to us today about maximising your outcomes and reducing your risk.
Instant asset write-off threshold finally confirmed
It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30 June 2025 to $20,000. This was announced back in the 2024-25 Federal Budget, but the Government faced several hurdles in terms of passing the legislation.
This basically means that individuals and entities who carry on a business with a turnover of less than $10m can often claim an immediate deduction for the cost of depreciating assets (eg, plant and equipment) that are acquired during the 2025 financial year, as long as the cost of the asset, ignoring GST credits that can be claimed, is less than $20,000.
If you are thinking about purchasing an asset before 30 June 2025 with the hope of claiming an immediate deduction, then please reach out to us to confirm the position. The rules contain several tricks and traps that we can help you navigate.
The threshold is due to drop back to $1,000 from 1 July 2025 unless further legislation is passed to provide another temporary increase to the threshold or a permanent modification.
