The end of the financial year is fast approaching. We outline the areas at risk of increased ATO scrutiny and the opportunities to maximise your deductions.
OPPORTUNITIES
Bonus Deductions
Small businesses can take advantage of several bonus deductions in 2023-24, including the instant asset write-off, energy incentive, and the skills and training boost. Lets review tax tips tips to reduce your tax liability and increase your refunds.
Instant Asset Write-Off: The 2023-24 Federal Budget increased the instant asset write-off threshold, allowing small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets costing less than $20,000. This measure has been extended to 30 June 2025 in the 2024-25 Federal Budget. Without this, the threshold would revert to $1,000. However, legislation for the 2023-24 measure is pending due to a parliamentary disagreement regarding the threshold amount and its applicability to medium businesses (up to $50 million).
Energy Incentive: The $20,000 energy incentive offers an additional 20% deduction on eligible depreciating assets or improvements supporting electrification and energy efficiency in 2023-24. This measure is also awaiting legislative approval. If passed by 30 June 2024, assets must be used or installed, or improvement costs incurred, between 1 July 2023 and 30 June 2024 to qualify.
Skills and Training Boost: The 20% bonus deduction for external training costs provided to employees is available to businesses with an aggregated annual turnover of less than $50 million. To claim this boost, training must be provided by a registered training provider, registered, and paid for between 29 March 2022 and 30 June 2024. This typically includes vocational training for trades or qualification courses rather than professional development.
Write-Off Bad Debts If it’s clear a customer won’t pay, you can write off the debt by 30 June. Document the bad debt on your debtor’s ledger or with a formal minute.
Obsolete Plant & Equipment Scrap and write off any obsolete plant and equipment from your depreciation schedule before 30 June to avoid small annual depreciation amounts.
For Companies: Consider bringing forward tax deductions by committing to directors’ fees and employee bonuses via resolution and paying June quarter super contributions in June if it’s beneficial.
RISKS
Tax Debt and Reporting Obligations Failing to lodge returns signals to the ATO that something may be wrong. Non-lodgement doesn’t stop debt escalation, as the ATO can issue an assessment of what they think your business owes. If your business struggles with tax or reporting obligations, we can assist by working with the ATO on your behalf.
Professional Firm Profits The ATO is scrutinizing how profits are distributed in professional services firms (architects, lawyers, accountants, etc.) to ensure professionals are appropriately compensated. If professionals aren’t fairly rewarded or receive significantly less than the value of their services, the ATO is likely to take action.
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