As the end of financial year (EOFY) approaches, it’s essential for business owners to take stock of their financial position and make strategic decisions that will help minimise tax liabilities and strengthen their operations for the year ahead.

Whether you’re looking to maximise your deductions, or reviewing your business structure, EOFY is the perfect time to be proactive. But what should you focus on?

To help you prepare, we’ve compiled a comprehensive business tax planning checklist based on insights from our recent LDB webinar. Whether you’re a sole trader, company or trust, these tax planning tips can help you prepare and optimise your tax outcomes at the end of financial year. Just remember, that while this is a general guide for how to approach EOFY, working closely with your tax accountant is key to ensuring your EOFY tax strategy is tailored to your specific circumstances.

1. Take advantage of the instant asset write-off

If you’re classified as a small business (with an aggregated turnover of less than $10 million), you may be eligible to claim an immediate tax deduction for assets costing less than $20,000.

Key conditions:

• The asset must be first used or installed ready for use by 30 June.
• Consider your cash flow and whether it’s beneficial to bring forward the deduction or defer it.

Note: The government has proposed an extension to this scheme, but it has not yet passed through Parliament.

2. Defer income and prepay expenses to control taxable income

By deferring income to the next financial year or bringing forward expenses, businesses can reduce their taxable income. But it’s important that you carefully consider if this is right for your business, in terms of cash flow and the following year’s projected profits, as well as staying compliant to avoid penalties.

Strategies to consider:

• Delay issuing invoices until July, if your cash flow allows.
• In some cases, you may be able to prepay up to 12 months of expenses (like rent or subscriptions) to claim a deduction in this tax year. (See lower in this article for more detail on this.)
• This strategy can be especially useful if your projected profit this year is higher than what you expect next year.

3. Review your business structure for EOFY

EOFY is a good time to consider whether your current structure is still right for your business.

Businesses evolve, and the structure you started with may no longer suit your goals, or be the most tax efficient for you. While you’re thinking about it, speak with your accountant about whether a restructure could benefit your operations moving forward, and potentially improve your tax position for the end of financial year.

4. Reduce tax by writing off bad debts

No one likes a bad debt, but they are a reality for most businesses. If you have aged receivables that are unlikely to be recovered, they may be eligible to be written off, which will improve your tax outcome for the end of financial year. However, they can only be written off if you’ve taken reasonable steps to recover the debt and have documentation to support your efforts.

5. Review your asset register

EOFY is a good time to scrap any obsolete, damaged, or unused plant and equipment from your fixed asset schedule. This helps ensure your depreciation claims are accurate and reflects the current state of your assets. You never know what you might find that improves your tax position come June 30.

6. Pay superannuation before 30 June for an optimal tax outcome

Superannuation is only deductible when it is actually paid. To claim a deduction this financial year, you must ensure:

• Super payments (including June quarter) are received by the super fund before 30 June.
• For business owners topping up their own super, contributions need to be within concessional caps and received by EOFY.

Of course, we recommend that you speak to your super fund accountant and your wealth adviser to ensure this strategy is good for making the most of your super contributions and wealth management, as well as being good for the health of your business.

7. Plan for capital gains tax events (CGT)

If your business has sold assets this year, there may be implications for capital gains tax. CGT can be complicated, so it’s essential that you consult your accountant, but here are some top line considerations:

• Assets held for more than 12 months may qualify for a 50% CGT discount (if held by an individual or trust).
• Timing matters. Holding an asset for just one more day could make a big difference.
• Consider offsetting capital gains with capital losses by reviewing your portfolio. This is best done in collaboration with your tax accountant and business advisors.

8. Commit to staff bonuses (They don’t have to be paid in this tax year.)

It’s great to reward staff for their hard work and successes, and it can work out well for tax purposes as well. To claim a tax deduction for staff bonuses this year, they must be committed to in writing before 30 June, even if the actual payment is made later.

Ensure this is documented and communicated clearly to your employees.

9. Prepay expenses for immediate deduction (turnover under $50 million)

Businesses with an aggregated turnover under $50 million can claim end of financial year tax deductions for prepayments covering periods of up to 12 months. Common types of these expenses include:

• Rent
• Insurance
• Subscriptions

By carefully considering these payments, and what’s best for your business over the next 12 months, you could generate some tax efficiencies in this financial year.

10. Review closing stock and consumables

If your business holds consumables or spare parts:

• Items with a shelf life of under 3 months may be deductible in the year acquired.
• Segregate short-life items from other stock to maximise deductions.

11. Claim immediate deduction for startup costs

Have you started a new business this year? Formation costs such as legal and accounting fees may be deductible in the first year, as long as the business has commenced trading. Speak with your tax accountant or business advisor about whether your business will qualify for these tax deductions in this financial year.

Need help with EOFY tax planning?

EOFY is more than a compliance deadline. It’s an opportunity to take control of your finances, optimise your tax position, and plan ahead with confidence.

At LDB, our team of tax accountants, wealth managers and business advisers work as one to support our clients across tax, compliance, superannuation, and financial planning. Whether you’re looking for help with EOFY compliance, deductions, cash flow planning or your long-term business, wealth and tax strategies, our friendly team is here to guide you.

Call LDB today on 03 9875 2900 or get in touch online and ask how we can support you in growing your business.