As another financial year quickly comes to a close, we’ve summarised some key tax planning tips and relevant changes to consider in the lead up to 30 June.

Instant Asset Write Off for Small Businesses

As discussed in previous newsletters, the Instant Asset Write Off (“IAWO”) has been extended for another year. The IAWO provides small businesses with aggregated turnover below $10 million an instant deduction for the cost of assets up to $20,000 in the 2025 financial year.

To qualify for an immediate deduction, the asset needs to be installed and ready for use by 30 June 2025.

Although the government has indicated that they intend to extend the IAWO for the 2026 financial year, it may be worthwhile bringing forward any asset purchases of less than $20,000 prior to 30 June 2025 if you wish to claim the full deduction in FY25, especially if you may exceed the $10M aggregated turnover threshold in 2026.

Trust Distribution Resolutions

Trust Deeds of most discretionary trusts require the trustee to make a determination on or prior to 30 June each year to determine how the net income of the trust is to be distributed amongst its beneficiaries.

In conjunction with your advisor, you should carefully consider:

• The requirements of the Trust Deed and any subsequent variations to the deed;
• The income of the trust for the year;
• Whether there is a valid Family Trust Election (“FTE”) in place; and
• To which beneficiaries – and in what proportions – the income will be distributed (and if the trust has an FTE, ensuring distributions are only made within the ‘family group’).

Trustees now have additional matters to manage at year-end with the ATO’s guidance on “Section 100A”. Broadly, Section 100A is concerned with arrangements whereby distributions are made to lower taxed beneficiaries, non-resident beneficiaries or loss trusts, but where the distribution is never physically paid. As such, the benefit is enjoyed by another person or entity in the Group, rather than the beneficiary that was made entitled to the income. An example of this is where distributions are made to adult children but are never paid.

ATO Focus Areas for Individuals – 2025 Tax Returns

The ATO have flagged that the following areas will be a focus during tax-time in 2025:

• Work related deductions – The ATO continues to see errors with taxpayers attempting to claim work-related expenses and have therefore stated this will once again be a focus in 2025. Clients are reminded to ensure they have the records to back up their claims. This includes work-related expense claims that:

• • Don’t have a sufficient connection to the income earning activities.
  • Are above the average for the relevant industry/occupation.
  • Are related to working from home.
• Declaring income from all sources – The ATO has reminded taxpayers to include income from all sources in their 2025 tax returns. This includes income from ‘side-hustles’ that are conducted for a profit, such as ride sharing services or selling services via other marketplace apps.
• Rental properties – The ATO is targeting any unreported non-commercial rental income from holiday homes and investment properties (e.g. through platforms such as AirBnB). Also, the ATO are on the lookout for rental property deductions that may be overstated or relate to private purposes.
• Capital Gains Tax data matching – Have you sold cryptocurrency or transferred between cryptocurrencies within your crypto wallets? Have you sold units, or transferred shares to your spouse? These actions trigger CGT events and may have unanticipated tax implications. Through the ATO’s data matching capabilities, it is likely that these kinds of transactions will be picked up if they are left unreported.

Maximising Deductions

As they say, timing is everything. It can be worthwhile to ensure you’ve maximised your deductions before 30 June in order to reduce your tax payable for this financial year.

Some key areas where deductions can be maximised include:

• Superannuation contributions – Contributions are not deductible until paid and received by the complying superannuation fund. Look to pay super contributions prior to 30 June to enable a tax deduction in the current financial year. Some clearing houses can take more than a week to submit the payment to the super fund, so always check with your specific clearing house for year-end cut off dates. 
• Repairs – Prior to 30 June may be an opportune time to have any plant and equipment in need of service or repairs attended to in order to capture the tax deductions this side of 30 June.
• Bad debts – Review your trade debtors and consider whether all are recoverable. Consider writing off any non-recoverable amounts as a bad debt to claim the tax deduction this financial year.
• Trading Stock – Complete a stock take at 30 June. Write off any obsolete or damaged stock, and where the market selling value is less than the cost of the stock, look to write down the stock to the lower value.
• Staff Bonuses – For accrued staff bonuses to be deductible on this side of 30 June, the decision to pay the bonus and the determination of the bonus must be made and documented prior to 30 June.
• Donations – Determine whether you can make any tax-deductible donations before the end of the financial year. For a donation to be tax-deductible, the charity must be registered as a Deductible Gift Recipient (“DGR”). You can confirm DGR status by searching the entity on the Australian Business Register.
• Deductible General Interest Charge (“GIC”) – as discussed in our May 2025 newsletter, GIC (which is imposed on the late payment of tax liabilities) that accrues from 1 July 2025 will no longer be deductible. Therefore, consider lodging outstanding returns (i.e. where the lodgement date has passed) ASAP to trigger any GIC liabilities prior to 30 June 2025 so that the initial GIC levied will be tax deductible (to the extent the ATO issues the Notice of Assessment before 30 June 2025).

Review and Vary PAYG Instalments

Many businesses and individuals progressively pay PAYG instalments throughout the year towards their estimated tax liability for the current year.

Where businesses experience a decrease in profit relative to the prior year, this can result in additional PAYG instalments being paid throughout the year. Whilst any overpayment of income tax will be reconciled upon lodgement of the tax return, the payment of additional tax can put pressure on the working capital requirements of the business.

June is an opportune time for businesses and individuals to review if your circumstances have changed and are likely to derive a lower taxable income in FY25, and if so to consider varying the June PAYG instalment to reduce the instalment payable or claim back any excess instalments paid during the year.

Entitlement to Franking Credits Coming Under ATO Scrutiny for Newly Established Corporate Beneficiaries

To be eligible to utilise franking credits attached to franked dividends, the shareholder must generally satisfy the ‘45-day holding period rule’ if their total franking credits for the year exceed $5,000. Broadly, this should be satisfied where the shareholder has held the shares for 45 days before the ‘ex-dividend’ date (being the date from which the relevant shares are traded without entitlement to the latest dividend).

In the case of shareholder discretionary trusts which receive franked dividends, the 45-day holding rule was generally assumed to be satisfied for the trust’s beneficiaries to the extent that the trust had made a Family Trust Election (“FTE”).

However, it appears that the ATO has begun targeting arrangements where franked dividends are distributed out of discretionary trusts (even with a FTE) to a corporate beneficiary (i.e. a ‘bucket company’) which was incorporated after the date on which the dividend was declared to the discretionary trust. For instance:

• Frank Trust acquires shares in XYZ Pty Ltd on 1 July 2024;
• XYZ Pty Ltd declares a fully franked dividend, with the ex-dividend date being 20 April 2025;
• On 15 June 2025 Bucket Co Pty Ltd is incorporated;
• On 30 June 2025, Frank Trust resolves to distribute the fully franked dividend it received from XYZ Pty Ltd. to Bucket Co Pty Ltd

In the example above, although Frank Trust satisfies the 45-day holding period rule, the recent ATO position is that Bucket Co Pty Ltd itself cannot satisfy the holding period rule as it was incorporated after the date on which the dividend was declared. The impact of this is that Bucket Co is not entitled to the franking credits, meaning it would be taxable on an unfranked dividend without access to the franking credit offset.

This is an evolving issue with limited ATO guidance at this stage. Should this be relevant to your Group, feel free to reach out to your SiP advisor to discuss.

Division 7A: Bendel’s Case Set to Continue & Year-End Planning

Bendel’s Case to be Determined in the High Court

As discussed in our previous newsletters, the taxpayer, Bendel, was successful in both the Appeals Tribunal and the Full Federal Court against the Commissioner in the case regarding Division 7A and unpaid present entitlements (“UPEs”) to corporate beneficiaries.

The Commissioner subsequently applied for special leave to appeal the decision in the High Court, contending that a UPE from a discretionary trust to a corporate beneficiary should be considered a loan for Division 7A purposes, in line with the ATO’s longstanding view and interpretation as outlined in TD 2022/11.

Last week, the High Court granted the Commissioner’s special leave application, meaning that the High Court will hear the Commissioner’s appeal and make a final determination on the outcome of the case. Therefore, while we await the High Court’s decision, taxpayers with similar arrangements have no greater certainty when it comes to 2025 tax planning. The ATO has issued an interim decision impact statement advising Taxpayers to continue to apply the law as per the existing ATO view until the case is finalised.

Division 7A Year-End Planning

A reminder that for existing Division 7A loan arrangements, the annual minimum repayment is due by 30 June. Failure to make the annual minimum repayment may result in a deemed unfranked dividend to the borrower having regard to the shortfall in the required repayment amount.

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The above tax summary is intended to be general in nature and does not constitute advice. Should you believe that any of the above matters may be relevant to you or your Group’s particular circumstances, please discuss the specific details with your Slomoi Immerman Partners advisor.