Navigating Year-End Tax Planning: Opportunities and Risks for the 2024-25 Financial Year

 Year-End Tax Planning

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As the 2024–25 financial year concludes, individuals and businesses should review their tax planning strategies to maximize available deductions, manage compliance risks, and respond to increasing ATO scrutiny. Below is a summary of key opportunities, risks, and regulatory updates. 

Opportunities for Individuals

1. Superannuation Contributions 

   • Concessional Contributions: Individuals with a total superannuation balance of less than $500,000 as of June 30, 2024, may access unused concessional contribution caps from the previous five fiscal years. For example, if an individual has accumulated $8,000 of unused cap space each year over five years, they may be eligible to make a deductible contribution of up to $40,000 in the 2024–25 financial year. 

   • Spouse Contributions: Where a spouse’s assessable income is less than $37,000, making a contribution to their superannuation fund may entitle the contributing individual to claim a tax offset of up to $540. 

   • Tax Offset for Capital Gains: Larger superannuation contributions can reduce an individual’s taxable income, thereby helping to offset capital gains tax liabilities. 

   • Eligibility: Individuals under the age of 75 can claim a tax deduction for personal superannuation contributions by submitting a "Notice of Intent to Claim or Vary a Deduction" to their superannuation fund. Those aged between 67 and 74 must also satisfy the 40-hour work test (unless exempt). 

     
     

2. Charitable Donations 

   • Tax Deduction Rules: Donations of money (or, in some cases, property) made to a registered Deductible Gift Recipient (DGR) are generally tax-deductible for amounts of $2 or more. The more tax you pay, the greater the tax benefit of the deduction. For example, a $10,000 donation could result in a $3,250 tax saving for an individual earning up to $120,000, or a $4,500 tax saving for someone earning $180,000 or more (excluding the Medicare levy). 

   • Notes: To qualify for a deduction, the donation must constitute a true gift — that is, it must be given voluntarily without receiving a material benefit or advantage in return. Special rules apply to donations made through charity auctions and fundraising events conducted by DGRs. 

   • Donation Channels: Philanthropic giving can also be structured through vehicles such as public ancillary funds or private ancillary funds. Donations to these funds are generally eligible for an immediate tax deduction, while the fund itself manages and invests the donated assets over time. These funds are typically required to distribute a minimum portion of their net assets to registered DGRs annually. 

     
     

3. Investment Property Deductions 

   • Depreciation Schedules: Investors may claim deductions for the decline in value (wear and tear) of eligible assets associated with rental properties. To qualify, the property must be genuinely available for rent, and appropriate records must be maintained to substantiate the claim. 

Risk for Individuals

1. Work-from-Home (WFH) Expenses 

   • As a priority for ATO scrutiny, records of work from home expenses must be accurately maintained and the following reporting options are available: 

     • Fixed rate method: Taxpayers can file a return at a rate of A$0.70 per hour, including electricity, internet, telephone and stationery, and are required to keep a record of the actual hours worked. 

     • Actual Expense Method: Taxpayers are required to keep receipts and keep a diary of typical home office usage for a four-week period to support the return. 

   • Note that expenses of a personal nature (e.g. coffee, toilet paper, etc.) are not deductible and will be scrutinized by ATO. 

     
     

2. Rental Property Compliance 

   • Loan Interest Apportionment: Taxpayers may only deduct the portion of loan interest attributable to rental property use. If any part of the loan is refinanced for private purposes (such as funding holidays), the deductible amount must be reduced accordingly. 

   • Repairs vs. Capital Improvements: Immediate deductions are available only for repairs that restore the property's original condition (e.g., repairing a damaged fence). Structural improvements (e.g., installation of a new hot water system) must be capitalized and depreciated over their effective life. 

   • Co-Ownership: Income and expenses must be reported in accordance with the individuals' legal ownership interests, such as 50% each for joint tenants. 

     
     

3. Gig Economy Income 

   • All income earned through gig economy activities (such as Airbnb, Uber, or YouTube) must be declared in the financial year it is earned, regardless of when the funds are withdrawn. ATO uses data-matching programs to identify unreported income, and penalties may apply for non-compliance. 

Opportunities for Business

1. Write-Offs & Deductions 

   • Bad Debts: Businesses should write off irrecoverable debts by 30 June and ensure that the decision is properly documented to claim a tax deduction. 

   • Obsolete Assets: Unused or obsolete equipment can be scrapped to qualify for immediate tax deductions. 

   • Instant Asset Write-Off: Businesses with an aggregated turnover of less than $10 million may be eligible to immediately deduct the cost of assets valued under $20,000 (GST-exclusive). Given the complexity of the rules, eligibility should be carefully verified. 

     
     

2. Prepayments 

   • Businesses can accelerate deductions by committing to employee bonuses or directors’ fees (supported by a formal resolution) and by making superannuation contributions for the June quarter prior to year-end. 

Risks for Business

1. Tax Debt & Compliance with Reporting 

   • Late lodgments or unpaid debts may result in penalties imposed by ATO. Businesses experiencing financial difficulties are strongly encouraged to proactively engage with ATO to manage their tax obligations and mitigate escalating compliance risks. 

     
     

2. Focus on Professional Firms 

   • ATO continues to closely monitor the income diversion arrangements of professional services firms, such as law and accounting practices. Profit allocations must accurately reflect the value of services personally provided by professionals to ensure compliance with tax requirements. 

Key Regulatory Updates

1. Instant Asset Write-Off Threshold 

   • The instant asset write-off threshold has been confirmed at $20,000 (GST-exclusive) for the 2024–25 financial year. This threshold is scheduled to reduce to $1,000 from 1 July 2025 unless legislative extensions are introduced. Businesses should verify their eligibility prior to acquiring assets. 

     
     

2. Property Subdivision Tax Implications 

   • Revenue vs. Capital Treatment Profits derived from short-term subdivision or development activities are generally taxed as ordinary income and are not eligible for capital gains tax (CGT) discounts. GST may also apply unless specific exemptions, such as non-substantial renovations, are met. 

   • ATO Examples Highlight: 

     • Business Activity: Repeated property flipping is treated as a business activity and attracts both income tax and GST. 

     • Capital Account: Subdivision prompted by financial distress may still qualify for CGT concessions if the property has been held for more than 12 months (note: the main residence exemption does not apply). 

       
       

3. ATO Small Business Benchmarks 

   • ATO has updated its small business benchmarks based on 2022–23 data. These benchmarks enable businesses to compare their turnover and expenses against industry peers. Significant deviations from industry norms may trigger ATO reviews. Businesses are encouraged to use ATO’s viability assessment tool to monitor their financial health. 

If you require assistance with tax planning or compliance management, we offer comprehensive services tailored to your needs. Whether you are looking to seize new policy opportunities or navigate complex tax challenges, we will develop customized solutions based on your specific circumstances. Please feel free to contact us — we are here to help you safeguard and achieve your financial goals. 

Source: Knowledge Shop, viewed on 1st May 2025.