Tax Planning – What you need to know
One of the most productive conversations our Business Advisors have with their clients is during the final quarter of the financial year.
We are currently working with our clients on:
1. Tax planning pre-30 June;
2. Cash flow forecasting for the 2027 Financial Year;
3. Strategic planning for the next financial year;
4. Any structure changes of benefit to commence pre or post 30 June;
5. Any business or family changes that require consideration.
Clients who actively participate in these conversations, really can add value to their business and personal financial positions.
With annual tax planning time upon us, here are a few things to think about and discuss with your business advisor well before 30 June. Importantly, effective tax planning isn’t a once-a-year activity when you submit your tax return; it should be a continuous cycle.
Strategies should be maintained, monitored, and continuously assessed for changing circumstances, new tax legislation and compliance responsibilities.
If not fully understood and actively managed, tax obligations can result in additional costs or lost opportunities for businesses. Business owners need to understand the impact that tax legislation has on their business, its cash flow, its directors’ liabilities, and, on returns.
Key areas small to medium businesses should consider:
- Trust distributions, in particular who to effectively distribute to;
- Family remuneration through dividends or other income streams;
- Repayment of Private loans;
- Capital gains tax, including potential CGT roll-overs and small business CGT concessions;
- Tax loss recoupment rules;
- Other small business concessions (e.g. full expensing of the cost of depreciating assets).
Having a clear picture of the current ‘state of play’ for your business and oversight of where you’re headed will help determine future-facing strategies that could minimise your tax liability into the future, such as:
- Deferring Assessable Income
- Superannuation
- Superannuation for Employers
- $20,000 Instant Asset Write-Off
- Trust Distributions and Reporting
- Farm Management Deposits
- Home Office Deductions
Here’s a little more detail on these areas for considering now, well before 30 June.
Deferring Assessable Income
Deferring derivation of income is a tax planning strategy that involves delaying the recognition of income for tax purposes until a later period. This can reduce the taxable income and tax liability of a taxpayer in the current year and defer it to a future year.
The main benefit of deferring derivation of income is that it can lower the tax payable in the current year and defer it to a future year. This can be advantageous if the taxpayer expects to have a lower marginal tax rate in the future year, or if they have tax losses or deductions that can offset the income in the future year.
Review whether amounts taken up as income are in fact assessable income for the current year. It is also worth considering whether any bad debts can be written off before 30 June 2026; these must have been previously included in assessable income.
Superannuation
The concessional contribution cap for 2026 is $30,000. Unused concessional contributions can be carried forward and claimed as a personal tax deduction if an individual meets the relevant eligibility requirements. Deductibility of personal superannuation contributions must meet certain conditions: Those between the ages of 67-74 must satisfy the work test, where an individual must be gainfully employed for at least 40 hours over 30 consecutive days in the financial year.
Those who experience high taxable income in 2026 but expect low taxable income next year can, in certain cases, employ the ‘double deduction strategy’.
Contributions up to the concessional contributions cap are made at any time during the year, while an additional contribution is made in June 2026 but not allocated to the member until July 2026.
You can claim a personal tax deduction for two years' worth of contributions in a single year, as both contributions were made in the same year. However, the additional contributions count towards the 2027 cap thereby avoiding excess concessional contribution issues.
For employers to secure a tax deduction in the 2026 income year, ensure the June 2026 quarter employee contributions are paid by 30 June, subject to cash flow. While the due date is 28 July 2026, it is recommended to make the payment earlier to ensure it is received by the fund in time.
$20,000 Instant Asset Write-Off
The Government announced that small businesses, with aggregated turnover of less than $10 million, will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2025 and 30 June 2026. Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
Trust distributions and reporting
It is essential that you ensure a valid trust distribution resolution is in place by 30 June 2026, and takes into consideration the anti-avoidance provision, Section 100A.
This provision seeks to prevent a tax benefit arising where a beneficiary of a trust is made entitled to the share of trust income, but someone other than the beneficiary receives the benefit. It is also important to ensure that if your Trust has a capital gain or franked distributions and it is beneficial to be streamed to beneficiaries, that the Trust Deed is reviewed to ensure this is allowed.
Farm Management Deposits
Investing in Farm Management Deposits (FMDs) can help primary producers reduce fluctuations in taxable earnings caused by economic and seasonal changes to primary production income.
Interest is paid on such FMDs, and they must be held for at least 12 months; otherwise, the tax benefit of investing in an FMD will not be retained.
If you meet the eligibility criteria, Farm Management Deposits are tax deductible in the financial year they are made and are taxable income when that FMD is withdrawn. FMDs are limited to $800,000 per person. FMDs are a tax-effective strategy, and taxpayers can consider whether FMDs would be useful to reduce this year’s taxable income or whether they have any FMDs to withdraw if income is lower than average.
Home Office Deductions
There are two methods in place for calculating your home office deductions and they remain unchanged. The ‘Fixed Rate Method’ is calculated using a per hour rate of 70 cents. This rate covers energy expenses including electricity and gas, phone usage (both mobile and home), internet usage, computer consumables and stationery. The ‘Actual Cost Method’ is exactly that. A fair apportionment of the additional expenses incurred for working from home.
It’s important to consider which method will best suit you; regardless of which you choose, remember that to claim a deduction for working from home you must:
- Have incurred additional expenses because of working from home.
- Have kept a record for the full year to prove the hours worked from home (such as a timesheet, roster, or diary).
- Have kept a record for each expense claimed.
Motor vehicle logbook
Ensure that you have kept an accurate and complete Motor Vehicle Logbook for at least a 12-week period. The start date for the 12-week period must be on or before 30 June 2026. You should make a record of your odometer reading as of 30 June 2026 and keep all receipts/invoices for your motor vehicle expenses incurred during the year. Once prepared, a logbook can generally be used for a five-year period if your circumstances don’t change substantially.
An alternative (with no logbook needed) is to simply claim up to 5,000 business kilometres (based on a reasonable estimate) using the cents per km method.
Donations
If you have made donations in the past 12 months, make sure you find your receipts and provide them to your accountant. Donations of $2 or more to Deductible Gift Recipients may be tax deductible.
If you have any questions or need assistance coming into tax time, be sure to get in touch with your Hood Sweeney Business Advisor on 1300 764 200 or send us a message by clicking here.