Practice Update May 2025 -2

28 May 2025

Strategies for individuals before June 30, 2025

As June 30 approaches, we focus on how individuals can reduce taxable income. Thoughtful planning can make a difference. In this article, we will explore practical strategies for maximising your deductions before the end of the 2025 financial year, backed by examples and simple explanations.

Understand what you can claim

Before diving into strategies, you must know what deductions you are entitled to claim. The ATO allows you to claim deductions for expenses directly related to earning your income. This includes:

A key principle is that the expense must not be private in nature, and you must have a record to prove it.

Case study
A freelance graphic designer, Emma bought a new laptop for her business for $2,500. She uses it 90% for work and 10% for personal use. She can claim 90% of the purchase price, or $2,250, as a deduction.

Bring forward expenses where possible

If you expect your income to be the same or lower next year, bringing deductible expenses into this financial year often makes sense.

You might:

  • Prepay up to 12 months of expenses, such as rent for your business premises, subscriptions, or insurance.
  • Purchase essential business equipment now rather than after July 1.
  • Pay for professional development courses or seminars early.

Example
Jason owns a plumbing business. He knows he needs to renew his $1,200 public liability insurance in July, but he can claim it in this year’s tax return by paying it in June instead.

Boost your super and enjoy tax benefits

Making extra superannuation contributions is a powerful way to reduce your taxable income. In 2025, the concessional (before-tax) contributions cap is $30,000. This includes your employer’s Super Guarantee payments and your salary sacrifice contributions.

You can also make catch-up contributions if you haven’t used your full concessional cap in the past five years and your super balance is under $500,000. The table below summarises the types of contributions and related benefits.

Case study
Lily earns $110,000 a year. She has contributed only $15,000 to her super this year (via her employer). She decides to make an extra $10,000 personal contribution before the end of June. She submits a Notice of Intent to her super fund and claims a deduction, reducing her taxable income to $100,000.

Note
You must ensure your super fund receives the contributions before June 30. Bank processing delays can cause missed opportunities.

Maximise motor vehicle deductions

If you use your car for work purposes, claim the correct deductions. There are two primary methods:

  • Cents per kilometre method (up to 5,000 business kms per year)
  • Logbook method (track business vs personal use for at least 12 weeks)

Choosing the correct method can significantly impact your deduction.

Example
Ben, a sales representative, keeps a detailed logbook and shows that 70% of his car’s use is for business. His running costs for the year are $10,000, covering fuel, registration, insurance, repairs, and other expenses. He can claim $7,000 (70% of $10,000) as a deduction.

Make donations to registered charities

If you’re feeling generous, donating to a Deductible Gift Recipient (DGR) charity before June 30 can reduce your tax bill. Donations of $2 or more are tax-deductible, but be sure to keep your receipts.

Tip
Donations must be monetary or specific, eligible items. Raffles, fundraising event tickets, and crowdfunding support often do not qualify for deductions.

Example
Joan donates $500 to the Red Cross and receives a receipt. She can claim the full $500 as a tax deduction.

Keep good records

No matter how good your deductions are, the ATO can deny them without evidence.
Make sure you:

  • Keep receipts, invoices, and bank statements.
  • Use apps or accounting software to track expenses.
  • Keep vehicle logbooks and work-from-home records.

The ATO generally requires records to be kept for a minimum of five years.

Tip
Keep the record if you’re unsure whether an expense is deductible. A good accountant can help clarify things at tax time.

The countdown to June 30 is on. With some planning, you can significantly reduce your tax bill, boost your savings, and set yourself up for a stronger financial year. Everyone’s situation is different, so getting personalised advice from a qualified accountant or tax agent is smart. Small moves today can lead to significant savings tomorrow.

Strategies for small businesses

Small businesses have unique opportunities to manage their tax position before the end of the financial year. By taking action now, you can legally minimise your tax, improve cash flow, and set yourself up for success in 2026. Here are several practical strategies to consider.

Take advantage of the instant asset write-off

If your business turnover is under $10 million, you may be eligible to claim an immediate deduction for assets costing less than $20,000 each.

Common examples

The asset must be installed and ready for use by June 30 to qualify.

Tip
Second-hand assets can also qualify.

Example
Tom runs a landscaping business. In May 2025, he purchased a ride-on mower for $18,500. He starts using it immediately and can claim the full cost in his 2025 tax return.

Prepay business expenses

Small businesses can generally claim a deduction for prepaid expenses covering up to 12 months. Typical prepaid expenses include:

  • Rent
  • Insurance premiums
  • Software subscriptions
  • Advertising costs

Example
A café owner prepays $4,800 for 12 months of business insurance in June 2025. They can deduct the full $4,800 this year rather than spreading it over future years.

Write off obsolete stock and assets

If your business holds stock that has become obsolete, damaged, or unsellable, writing it off before June 30 can reduce your taxable income. Similarly, scrapping old or unused equipment can generate a tax deduction.

Steps:

  1. Conduct a stocktake and identify unsellable items.
  2. Update your inventory records.
  3. Remove obsolete assets from your asset register.

Example
A clothing retailer identifies $7,000 of damaged winter stock during a June stocktake. Writing it off lowers the retailer’s taxable profit for the year.

Review your debtor list and write off bad debts

If you have customers who haven’t paid and are unlikely to do so, you may be able to claim a deduction by writing off those bad debts.

Requirements:

  • Have made genuine attempts to recover the debt.
  • Decide that the debt is unrecoverable.
  • Write it off before June 30.

Example
A digital agency owes $12,000 to a former client that has been liquidated. After confirming the liquidation, the agency writes off the debt and claims it as a deduction.

Maximise superannuation contributions for employees

Paying employee super contributions on time meets your legal obligations and ensures you can claim the deduction this year. Importantly, contributions must be received by the super fund by June 30, not just sent.

You might consider paying the June quarter super contributions early if you have extra cash flow.

Example
A builder typically pays quarterly super in July. This year, they pay the June quarter super for employees by June 25. This payment becomes deductible in the 2025 tax year.

Set up a home office deduction properly

If you run your small business from home, you may be entitled to claim a portion of household expenses.
Options include:

  • Fixed rate method: a set amount per hour worked from home
  • Actual cost method: a share of specific expenses such as electricity, internet, rent, and cleaning

Example
Mel runs an online store from a dedicated home office. She claims 67 cents per hour under the fixed rate method for simplicity.

Small business owners have more control over their tax outcomes than most. With innovative, timely moves before June 30, you can minimise your tax bill, strengthen your cash position, and confidently head into the new financial year. Always remember that good record-keeping is as essential as making the right decisions. Talk to your accountant early to ensure all actions are properly documented and compliant with ATO rules.

Practice Update May 2025

7 May 2025
Strategies for individuals before June 30, 2025

Practice Update April 2025

31 March 2025
A foreign entrepreneur’s guide to starting a business in Australia Starting a business as a foreign entrepreneur can be an exhilarating way to access new markets, diversify investment portfolios, and create fresh opportunities. Many countries around the globe provide pathways for non-residents and foreign nationals to register businesses. However, understanding different countries’ legal requirements, procedures, and opportunities is crucial for success. In this issue, we will navigate the process of establishing a business in Australia to help foreign entrepreneurs looking to register a company in Australia. Key takeaways Foreign entrepreneurs can fully own Australian businesses with no restrictions on ownership. Registered office and resident director requirements are key legal considerations. ABN and ACN are essential for business registration. The application process can be done online, simplifying the process for foreign entrepreneurs. Why register a business as a foreign entrepreneur? There are various reasons why a foreigner may want to register a company in another country. These reasons include expanding into a foreign market, taking advantage of favourable tax laws, leveraging local resources, or benefiting from business-friendly regulatory environments. Before registering, conducting thorough market research to assess whether establishing a business abroad aligns with your objectives is essential. Understanding the country’s political and economic climate, legal framework, and tax system will help ensure the success of your venture. The general process for registering a business as a foreign entrepreneur While the exact requirements may differ from country to country, some common steps apply to most jurisdictions when registering a company as a foreign entrepreneur: Choosing the business structure The first step is deciding on the appropriate business structure. The structure determines liability, taxation, and governance. Common types of business structure include: Sole proprietorship: A single-owner business where the entrepreneur has complete control and entire liability. Limited Liability Company (LLC): Offers liability protection to the owners, meaning their assets are not at risk. Corporation (Inc.): A more complex structure that can issue shares and offers limited liability to its shareholders. Different countries have varying rules regarding foreign ownership, so understanding the options available is essential before registering a company. Registering with local authorities Regardless of the jurisdiction, most countries require you to register your company with the relevant local authorities. This process typically includes submitting documents such as: Company name and business activities: You need to choose a unique company name that adheres to local naming regulations. Articles of incorporation: This document outlines the company’s structure, activities, and bylaws. Proof of identity : As a foreign entrepreneur, you will likely need to provide a passport and other identification documents. Proof of address: Many countries require a physical address for the business, which may be the address of a registered agent or office. Tax Identification Number (TIN) and bank accounts After registering the company, you will typically need to apply for a tax identification number (TIN), employer identification number (EIN), or equivalent, depending on the jurisdiction. This number is used for tax filing and reporting purposes. Opening a business bank account is another critical step. Some countries require a local bank account for business transactions, and you may need to visit the bank in person or appoint a local representative to help with the process. Complying with local regulations Depending on the type of business, specific licenses and permits may be required to operate legally. For example, food service, healthcare, or transportation companies may need specific licenses. Compliance with local labour laws and intellectual property protections may also be necessary. Appoint directors and shareholders To register a company, you’ll need to appoint at least one director who resides in Australia. The director will be responsible for ensuring the company meets its legal obligations. You will also need to appoint shareholders, who can be either individuals or corporations. For foreign entrepreneurs, the requirement for a resident director is one of the key challenges. If you don’t have a trusted individual in Australia to act as the director, you can engage a professional service to fulfil this role. This ensures your business remains compliant with local regulations. Choose a company name Next, you need to choose a company name. The name should reflect your business but must be unique and available for registration. You can check the availability of a name through the Australian Securities & Investments Commission (ASIC) website. Remember that the name must meet legal requirements and cannot be similar to an existing registered company. If you’re unsure, seeking professional advice is always a good move. Apply for an Australian Business Number (ABN) and Australian Company Number (ACN) Once you’ve selected your business structure and appointed your directors, it’s time to apply for an Australian Business Number (ABN) and an Australian Company Number (ACN). These are essential for running your business in Australia. ABN: This unique 11-digit number allows your business to interact with the Australian Taxation Office (ATO) and other government agencies. ACN: This 9-digit number is allocated to your company upon registration with ASIC and serves as your business’s unique identifier. You can easily apply for both numbers online through the Australian Business Register (ABR) and the ASIC websites. Register for Goods and Services Tax (GST) If your business expects to earn more than $75,000 in revenue annually, you must register for GST. This means your business will charge customers an additional 10% on goods and services. The GST registration threshold for non-profit organisations is higher at $150,000 annually. If your company is below these thresholds, registering for GST is optional, but registration becomes mandatory once it exceeds the limit. Set up a registered office Every Australian company must have a registered office in Australia. This is where all official government documents, including legal notices, are sent. You can use your premises or hire a foreign company registration service to provide a virtual office address. Common challenges for foreign entrepreneurs While the process is relatively simple, there are a few hurdles that foreign entrepreneurs may encounter when registering a company in Australia: Resident director requirement: You’ll need a director residing in Australia. If you don’t have one, you’ll need to engage a service provider to fulfil this role. Understanding local tax laws: Australia has a corporate tax rate of 25% for small businesses with annual turnovers of less than $50 million. However, larger companies with turnovers exceeding $50 million are subject to a standard corporate tax rate of 30%. Foreign entrepreneurs must also understand the implications of the Goods and Services Tax (GST) and payroll tax. Compliance with Australian regulations: Navigating Australia’s various regulations and compliance requirements can be time-consuming. An accountant or adviser can help you in this regard. FAQs Can I register a company in Australia as a foreigner? Yes, foreign entrepreneurs can register a company in Australia. The only requirement is to have a resident director. Do I need to be in Australia to register a company? No, you can complete the registration process online. However, you must appoint a resident director. Do I need an Australian bank account to start a business in Australia? You will need an Australian bank account to handle your business’s finances and transactions. Can I operate my Australian company from abroad? Yes, you can operate your company remotely, but you must comply with all local tax laws and regulations.

Practice Update March 2025

5 March 2025
Do bucket companies help build wealth at retirement? Bucket companies are familiar with wealth-building strategies, particularly as individuals approach retirement. By distributing profits to a bucket company, individuals can benefit from reduced tax liabilities and enhanced investment growth opportunities. This essay explores how bucket companies influence wealth building at retirement, their impact on age pension eligibility and tax positions, and strategies to maximise economic outcomes. Understanding bucket companies A bucket company is used to receive distributions from a family trust. Instead of distributing profits directly to individuals, which may attract high marginal tax rates, the trust distributes income to the bucket company, which is taxed at the corporate tax rate (currently 30% or 25% for base rate entities). The company can then retain the after-tax profits for reinvestment or distribution. Impact on wealth building at retirement Tax efficiency and compounding growth Using a bucket company can result in significant tax savings compared to personal marginal tax rates, reaching up to 47% (including the Medicare levy). Retained earnings within the bucket company are taxed lower, allowing more capital to compound over time. Example of Tax Efficiency: Income DistributedPersonal Marginal Tax (47%)Bucket Company Tax (25%)Savings $100,000$47,000$25,000$22,000 Over 20 years, if the tax savings of $22,000 per year are reinvested at an annual return of 7%, they would accumulate to approximately $1,012,000. Age pension and means testing The age pension is subject to both an income test and an assets test. Holding wealth in a bucket company can impact these tests: Income Test: Distributions to individuals count as assessable income. Retained profits within the company do not. Assets Test: The value of the bucket company shares is counted as an asset, which may affect pension eligibility. Strategic use of the company can help individuals control their assessable income, potentially increasing their age pension entitlement. Strategies to maximise economic outcomes Timing of Distributions By deferring distributions from the bucket company until retirement, individuals can benefit from lower marginal tax rates or effectively use franking credits. Dividend Streaming Using franking credits from company-paid tax can reduce personal tax liabilities when distributed dividends. Investment within the Company Reinvesting retained earnings within the bucket company in diversified assets can enhance compounding returns. Family Trust Distribution Planning Strategically distributing income to lower-income family members before reaching the bucket company can reduce overall tax. Winding Up or Selling the Company Carefully planning an exit strategy to wind up the b ucket company or sell its assets can minimise capital gains tax liabilities. Example of a retirement strategy with a bucket company Assume that John and Mary, aged 65, have distributed $100,000 annually from their family trust to their bucket company over 20 years. Corporate tax paid: 25% Annual return on reinvestment: 7% After-tax reinvested earnings annually: $75,000 YearAnnual ReinvestmentTotal Accumulated Amount (7% p.a.)5$75,000$435,30010$75,000$1,068,91420$75,000$3,867,854 At retirement, they can distribute dividends with franking credits to minimise personal tax and supplement their income while potentially qualifying for some age pension benefits due to strategic income timing. FAQ What is a bucket company? A bucket company is a corporate entity that receives trust distributions, taxed at the corporate rate rather than personal marginal rates. How does a bucket company impact my age pension eligibility? While retained earnings do not affect the income test, the value of the company shares is considered an asset under the assets test. Can bucket companies help reduce tax during retirement? Yes, by using franking credits and strategic distribution timing, bucket companies can minimise tax liabilities. Are there risks associated with using bucket companies for retirement planning? Yes, risks include changes in tax laws, corporate compliance costs, and potential capital gains tax upon winding up the company. Should I consult a professional before using a bucket company? Absolutely. Professional advice is essential to ensure compliance with tax laws and optimise wealth-building strategies.