Is your building and trades business ready for June 30?

Is your building and trades business ready for June 30?

The end of the financial year is almost here. If you own a building and trades business, that means it’s time to review your finances and get everything in order before June 30. Proper planning will help you avoid nasty surprises while setting yourself up for success in the year ahead.

Here are the key areas to consider as the deadline approaches:

1. Tax planning & extracting wealth from your business

Depending on your business structure, tax planning can help you extract wealth more efficiently. If you operate through a company, consider paying dividends to shareholders before year-end. This is especially effective when paired with deductible super contributions at an individual level, allowing you to manage your taxable income while saving towards your financial future.

2. Asset purchases – what you need to know

The end of the financial year often brings attractive sales from retailers, particularly for commercial vehicles and equipment. From a tax perspective, there are important points to remember:

• Instant asset write-off: if your business turnover is less than $10m, you can instantly deduct the cost of purchase if the cost of the asset is less than $20,000 (net of GST).
• Small business pools: assets purchased that cost more than 20,000 are instead added to the small business pool, with a 15% of the cost available as a deduction in the first year and 30% of the remaining pool balance in subsequent years.

IMPORTANT: The critical requirement is that the asset must be first used and available for use before June 30, 2025, to claim the deduction. Plant and equipment on backorder or yet to be delivered are not eligible to be deducted.  

3. Reviewing stock on hand

If your business holds trading stock, you’re likely familiar with stocktakes before year-end. The ATO allows you to value your closing stock using one of three methods:

• Replacement value
• Cost
• Market selling value

Choosing the right method can significantly impact your tax liability, especially if certain stock items are obsolete or slow-moving. Appropriate valuations may even allow for a tax deduction for write-downs where necessary.

4. Reviewing debtors

Before June 30, it’s wise to review your debtors. Unpaid debtors form part of your taxable income, but you can claim a deduction for any bad debts that are deemed unrecoverable and written off. This not only cleans up your accounts but also reduces your tax burden, ensuring you’re not paying tax on money you’ll never receive.

5. Reviewing employer obligations and commitments

Superannuation

Super payments for the June quarter are technically due by July 28, but if you pay them before June 30, they will be deductible in the period in which they are paid. 

Staff bonuses

If you’re planning to reward your team with bonuses but are tight on cash, you can still claim the deduction this year, provided you’re committed to paying it and have documented approval.

6. Review your June PAYG instalments

The ATO may require you to make Pay-As-You-Go (PAYG) income tax instalments throughout the year, based on your previously lodged tax return. Now is the time to assess whether you’ve paid too much or too little:

• Overpaid? Speak to your adviser about varying the June instalment to reduce or recoup prior quarters' payments.
• Underpaid? Prepare for a potential tax bill, allowing adequate time for you to manage your cash flow before the due date.

7. Finalise your TPAR (taxable payments annual report)

If you’re in the building and construction sector, you’re likely required to lodge a TPAR by August 28. This report details payments made to contractors, including subcontractors, consultants, and sole traders. Most accounting software can capture the required details, just ensure they are complete and accurate before submission.

8. Review payroll tax obligations

Depending on the states where you employ staff or engage contractors, you may need to register for payroll tax. This is a self-assessed obligation, so make sure your records are up to date. If your payroll has increased from prior years, it’s a good time to check payroll tax thresholds with your adviser to avoid surprises or potential fines from late payment.

9. Assess your business structure

The end of the financial year is the perfect time to evaluate your business structure with your adviser. If you’ve experienced growth or acquired significant assets, there might be a more suitable structure that will provide asset protection and tax savings, which can be implemented before the start of the next financial year. 

Taking the time to review these areas now will not only ensure compliance but also maximise your position in the new financial year.

For more information

For more information, please contact your local RSM office.