Tax Planning Before EOFY in Australia: A Proactive Guide

When it comes to tax planning in Australia, the key is to ensure it’s not something you think about at the end of the financial year (EOFY). The best tax planning strategies are those that are proactive and take into account the different financial obligations that occur throughout the tax year. 

Being proactive can substantially change your tax position and ensure minimal surprises. In this guide, we explore the considerations for effective tax planning, how financial advice can help and the importance of taking action early. 

Why tax planning before 30 June matters

In Australia, the financial year starts on 1 July and ends on 30 June. This means, any expenses or income made during the period will be consolidated and used to determine your taxable income and in turn, your final tax payable. 

It’s imperative to carefully consider your choices during the taxable period, the earlier the better. 

Some reporting requirements, like single touch payroll (STP), have added immediacy to tax planning requirements for businesses throughout the year. STP greatly reduces your flexibility post-year end due to its structured real time reporting and direct connection to the ATO.

Remember, tax lodgement is different to tax planning. Lodgement refers to the time of actual reporting of your tax while planning is more about making financial decisions throughout the year to positively impact your tax position. To ensure you’re on the forefront, getting financial advice early and having a strategy in place can make a huge difference to the end outcome.

At The Practice, our financial tax advisors have a breadth of experience across Melbourne and are experts in proactive tax planning. We tailor advice based on your business size and needs.     

What is tax payable and how can you influence it?

Tax payable refers to your tax liability for the year. It takes into account your income for the year and any eligible deductions and offsets.

Your payable tax is calculated by subtracting the deductions and offsets from your total income. Deductions and offsets can include anything from employee salaries, office equipment or special discounts like the small business income tax offset. The type of deductions vary depending on your business so best to get advice from a qualified tax advisor. 

Key factors that impact your tax payable

There are a few key factors that can greatly influence your tax payable. These are: 

• Timing of income
• Timing of expenses
• Super contributions
• Business structure decisions

Tax planning strategies before EOFY

If you haven’t yet considered your tax planning strategies, it’s not too late. There are strategies you can implement to help your overall tax position. With the right financial advice, you can optimise your position well before the end of the financial year. Below, we explore a few of the key strategies. 

Bring forward or defer income and expenses

With tax planning, timing is everything. By bringing forward or deferring income and expenses, you can influence your tax liability in a given financial year.

For example, consider a situation where you have experienced a strong year, which has been driven by multiple projects, and has increased your income well beyond the usual level.

If you have a project wrapping up close to the end of the financial year, it’s worth considering whether the income from that work is genuinely derived before or after 30 June. When the work is completed and invoiced in the new financial year, the income naturally falls into that year. This can help proportion your income across financial years and reduce the impact of a one-off spike on your tax liability. The key is to ensure that any deferral reflects the actual timing of when the work was performed and the income was earned.

The same principle applies to expenses. If you have a surplus of funds and have been planning to purchase essential equipment, bringing that purchase forward into the current financial year allows you to claim the deduction sooner. This can be particularly effective when paired with available concessions such as the instant asset write-off.

As always, the right approach depends on your individual circumstances, so it’s best to seek professional advice from one of our qualified tax advisors at The Practice before making these decisions. 

Forward plan your superannuation contributions

Many business owners get caught out by leaving superannuation contributions to the last minute and not having the cashflow to contribute to their own super fund. By planning for this liability, you’ll be able to not only take advantage of claiming superannuation contributions as a deduction but also  maximise your wealth for retirement. 

But you do need to be mindful of deadlines and compliance considerations. There is a maximum amount you can claim in any financial year. To make the most of the deduction, ensure you don’t contribute over the threshold. It’s also a good idea to make the contributions before 30 June to avoid going into the next tax year.

Review trust distributions and beneficiaries

If you have trust distributions and beneficiaries, you’ll need to also include that in your tax planning. Having a strategy in place prior to the end of the tax year means you can optimise tax outcomes across your family group. 

Manage your Division 7A loan obligations

Companies with Division 7A loans during the tax year can also have a bearing on your obligations. There are major risks for non-compliance so if you’re concerned about any issues, it’s best to identify them earlier in the year. 

Plan for one-off or unusual transactions

Every year is different and depending on your activity for that year, you may have some out of the ordinary transactions. These transactions can be one-off or unusual but may impact your payable tax for that year. Some examples include:

• Property sales
• Large business income events
• A loan becomes immediately payable

In these instances, there may be certain implications that could adversely affect your tax obligations. A property sale may bring with it capital gains tax but efficient tax planning may help reduce or negate the gain with something else. 

Why tax planning for professionals and business owners is critical

In today’s regulatory environment, there are many nuances when it comes to tax planning for professionals.

As a business owner, you may encounter complex income structures and multiple revenue streams. Tax planning will ensure you’re minimising tax inefficiencies and optimising your overall financial position.

With obligations like STP, it’s critical to be on top of real time reporting and ensure your final position at the end of the year aligns. The key is to seek advice from a qualified tax professional early, not on 30 June. 

The Practice has been helping businesses across Australia since 1997 and encompasses a multidisciplinary approach. With us, you’ll have easy access to tax planning advice for business, lending and wealth management. Let’s talk about your tax strategies and align them with your broader financial goals.

Take control of your tax position before EOFY

Tax planning ahead of the end of the financial year can give you the clarity and confidence you need to avoid any surprises. Get the benefits of a proactive tax strategy and make gains for not only one tax year, but for many years to come. 

Our Business Advisory team at The Practice are well versed in providing tailored tax strategies for business owners, professionals and investors. Book a tax planning consultation today and see how we can help with proactive tax planning for your business.

Frequently asked questions

When should I start tax planning in Australia?

The ideal time to start tax planning is before the financial year even starts, at a time when you’re looking at your annual budgets for the year ahead. 

Our Business Advisory team recommend around April to May of the year before, then checking in from February to May of the next year to ensure you’re implementing the strategies ongoing.

The rule of thumb here is the earlier you plan, the more options you’ll be able to access.

How do I find a financial tax advisor that aligns with my goals?

The true value of a financial tax advisor is in challenging and uncertain times. You want someone who will always bring their A-game and work with you to make your goals a reality, with strategies that align with your financial undertakings. 

To find your financial advisor, take a look at their credentials and specialities. Then have a chat and see if there is a real understanding of your needs. Our financial tax advisors at The Practice have extensive experience in tax planning advice and are here to help. Chat to our Business Advisory team today.      

This article provides general information only and does not constitute personal financial advice. It does not consider your individual objectives, financial situation, or needs. You should seek professional advice before making any financial decisions