As we approach the end of the financial year, it’s an opportunity to reflect on the year that was and consider actions that need to be undertaken prior to 30 June to maximise year-end tax planning opportunities.
Big picture year-end tax considerations
Year-end tax planning is a crucial time for evaluating whether the current structure is fit for purpose both now and into the future. This includes looking at the interaction of trusts, companies, SMSFs, Private Ancillary Funds, and other entities.
It’s also important to consider any changes in your personal life during the year. Perhaps life is largely status quo or perhaps there has been a realisation of a significant family asset that requires additional tax planning. This additional planning might involve Small Business Capital Gains Tax concessions, donations, superannuation contributions and other actions that need to be completed before June 30.
Stepping away from tax considerations, it’s also beneficial to review personal insurances and estate plans. Ensuring that personal insurances are up to date and adequately cover current needs is crucial for financial security. Similarly, reviewing and updating estate plans can provide peace of mind that assets will be distributed according to the client’s wishes and in the most tax-efficient manner.
Businesses, what should you be taking into consideration?
Key year-end revenue related tax planning considerations for businesses include reviewing contracts to determine if income invoiced may be considered revenue in advance for income tax purposes.
From a deduction perspective:
- Review the accounts receivable ledger to follow up any outstanding debts and to formally write off any debts that are not collectable.
- Make sure all capital assets have been included on the asset depreciation schedule, consideration has been given to the instant asset write off and all depreciated assets are still held by the business.
- Review your inventory listing to ensure obsolete and damaged stock has been properly accounted for.
- Any superannuation payable by the business is paid prior to 30 June, as superannuation payments are deductible based on cash payment and not accruals.
Although not 30 June time sensitive, have the various government grants including Research & Development concessions been considered.
From a business owner perspective has consideration been given to the remuneration strategy of salaries verse dividends as well as the impact of any funds withdrawn from the business that maybe subject to Division 7A provisions.
Trusts and investment companies, you haven’t been forgotten
For clients with trusts and investment companies, it is recommended to estimate the trust income for the year, give thought to the beneficiaries that will receive the income, and prepare a year-end distribution resolution that meets the trust deed requirements.
In relation to beneficiaries, it is important to consider the following:
- Be cautious with 100A otherwise known as reimbursement agreements and ensure trust beneficiaries are receiving the benefit of trust distributions.
- Consider the tax residency of beneficiaries as there could be withholding tax considerations.
- If there is professional services income received by the trust give consideration to the ATO guidance in PCG 2021/4.
- Be mindful of the impact of Division 7A on unpaid present entitlements from the trust to any corporate beneficiaries within the structure.
Is best to document any dividends as they are paid particularly if the strategy is to utilise dividends to meet the minimum repayment requirements of any Division 7A loans.
Tips for individuals
It’s important to consider private health insurance if you are over 31 and/or earning over $97,000 (as at 30 June 2025). This can help you avoid the Medicare Levy Surcharge.
Additionally, making donations before June 30 can be beneficial, especially if they are made in the name of the spouse with the higher marginal tax rate, as this can maximise the tax deduction.
It’s also wise to evaluate the opportunity to defer income or bring forward expenses. This strategy is usually most beneficial if you are in a higher tax bracket in a particular year, as it can help manage your taxable income more effectively. For instance, you might consider prepaying expenses like interest on investment loans or if a sole trader purchasing necessary business equipment before the end of the financial year.
Lastly, keeping detailed records of deductions for work-related expenses and car expenses is crucial. This includes maintaining receipts and logs for items such as uniforms, tools, travel expenses, and vehicle usage for work purposes. Proper documentation ensures you can claim all eligible deductions and potentially reduce your taxable income.
What is the ATO keeping an eye on?
The ATO has a multitude of data from various sources, both domestically and internationally. They are becoming stricter around on-time lodgement and payments, with general interest charges no longer deductible from July 1, 2025. They are also keeping an eye on:
- Holiday homes – The ATO also has access to rental agent and AIRBNB data and is scrutinising deductions on holiday homes and the apportionment of loan interest where it is not solely for investment purposes.
- Group restructures – the ATO is keeping a watchful eye on succession driven group restructures with a specific focus on Division 7A and private use of assets held by entities within the group.
- International transactions – Correct reporting of international transactions and adherence to various integrity provisions (CFC, transfer pricing, foreign hybrid mismatch) is essential.
Year-end is a great opportunity to revisit your personal situation, business structuring and tax strategy. So, it is important that you do not let this opportunity go to waste.
Prefer to listen?
Sydney Private Wealth Partner Jordan Kennedy and Family Advisory Partner Ankit Sharma discuss key tax planning strategies in the Pitcher Perspective podcast.
