Tax planning takes advantage of lawful and strategic ways to minimise tax liabilities this financial year and in future years. While it may minimise taxes in any given financial year, tax planning works best when used as part of a long-term financial strategy. This post will outline some tax planning considerations for businesses and individuals for 2024-25 and beyond:

What is Tax Planning and Why is it Important?

Tax planning minimises your business tax liability by taking advantage of any allowances, deductions, exemptions, and exclusions available. Essentially, efficient tax planning reduces your tax obligations to the legal minimum. 

Importantly, tax planning isn’t a task to simply check off the list once a year. When done effectively, it’s a long-term strategy that involves reviewing past performance, predicting future financial performance, and planning accordingly.   

Why is tax planning important?

Tax planning comes with several advantages for businesses and business owners, including:

• Get your business where you want it to be. Implementing tax planning strategies helps businesses and business owners achieve mid to long-term goals and can help to improve financial performance and cash flow, and minimise tax liabilities. 
• Better business decisions. Purchase equipment, hire new team members and take out loans when it makes financial and tax sense for your business. 
• Generate profits. Tax savings can be channelled into income-generating activities.
• Lower taxable income. Any reduction in tax payments is a form of business savings – savings that can be ploughed back into the business, used to pay off debt, invested, increase employee benefits, and used for just about anything else to sustain and grow the business.

The Tax Planning Process

The first step in the tax planning process involves compiling a comprehensive picture of the financial circumstances of the business or individual. This should outline recent profits and expenses, as well as planned future purchases, likely liabilities, and a financial forecast.

Next, the financial forecast should be analysed alongside the mid and long-term goals of the business or business owner. Again, tax planning is more than minimising tax payable; it’s an effective strategy that helps businesses and business owners move from where they are now to where they want to be. 

With these goals in mind, tax professionals can suggest strategies and build a roadmap towards them that includes tax planning and tax minimisation. 

Tax Minimisation Strategies

Common strategies for businesses to legally minimise the amount of taxes payable include: 

• Temporary full expensing; 
• Restructuring business entities; 
• Purchasing a business premises, and
• Technology and equipment planning and purchases. 

Tax planning also benefits business owners. It’s a crucial component in long-term plans for retirement, succession planning, and wealth building. Common strategies, like timing superannuation contributions, ensure business owners personally minimise their tax liabilities today and into the future, including at retirement.

Additionally, tax planning is a critical element of estate planning. Any individuals looking to preserve their wealth and ensure their beneficiaries aren’t liable for taxes that are only payable due to poor tax planning. Common strategies for estate tax planning include establishing trusts and structuring investments. 

What’s the difference between tax planning and tax evasion?

It’s also important to note the difference between tax planning (and the tax minimisation that results from it) and tax evasion. Tax planning involves implementing legal strategies, whereas tax evasion ignores existing laws. Tax evasion occurs when businesses or business owners intentionally do not report income or profits, inflate expenses, or implement other similar (illegal) methods to reduce their tax liability.  

Watch our video on the difference between tax planning and tax evasion (which is illegal).

Tax Planning Strategies: How can they help?

Here are three tax measures savvy business owners and individuals will take advantage of for the 2024-25 tax year: 

Superannuation and carry forward concessional contributions

There are limits to the contributions you can make to your superannuation fund before incurring additional tax.

As of 1 July 2024, the concessional contributions cap increased to $30,000 per financial year (up from $27,500). Concessional contributions include employer super guarantee payments, salary sacrifice contributions, and personal contributions you claim as a tax deduction.

Here are some tax considerations:

1. If you want to maximise contributions to your super fund, you should remain under the cap to avoid additional tax.
2. If exceeding the cap is unavoidable, you should speak with a tax advisor to understand and/or minimise the tax impact.
3. You should pay your superannuation contributions by mid-June 2025 at the latest. Your superannuation fund must receive the funds before the 30 June deadline to be deemed a 2024-25 contribution. 

Instant Asset Write-Off & Depreciation

The rules around the instant asset write-off have changed frequently over recent years, and 2024/2025 is no exception.

For the 2024–25 financial year, eligible small businesses (with an aggregated turnover of less than $10 million) can claim an instant asset write-off for assets costing less than $20,000. This applies to eligible new or second-hand assets that are first used or installed ready for use between 1 July 2024 and 30 June 2025.

The threshold applies on a per-asset basis, meaning you can write off multiple assets instantly if each one costs less than $20,000. Assets valued at $20,000 or more cannot be immediately deducted but must be depreciated over time through the small business simplified depreciation pool.

As with previous years, the deduction can only be claimed in the year the asset is first used or installed ready for use. That means timing matters—if your business is expecting higher profits (and a higher tax bill) in 2024–25, bringing forward your asset purchases before 30 June 2025 could help reduce your tax liability.

Loss carry back tax offset

A tax loss occurs when your total deductions for a taxable year exceed your taxable income. Australia’s loss carry back tax offset allows businesses to offset a tax loss against earlier years with income tax liabilities.

You can choose whether to apply your business tax loss to a previous year and get a tax refund or carry it forward and apply it to a future taxable year. Companies often choose the loss carry back option because it results in a cash refund or tax liability reduction, which boosts business cash flow sooner.

If you’d like to discuss your tax planning strategies for 2025-25 and beyond, reach out for a free consultation.