Small business taxation involves intricate details that can befuddle even seasoned entrepreneurs. After twenty years as an SMSF accountant servicing the Melbourne area and working with hundreds of small businesses across industries, we’ve observed recurring questions and challenges. The 2024-25 tax year has a whole load of opportunities small Aussie businesses can take advantage of—alongside an equal number of potential pitfalls for the unprepared.
Here are seven practical tax insights to help your small business thrive while remaining compliant:
1. Understand the $20,000 Instant Asset Write-Off Extension
The instant asset write-off threshold remains at $20,000 for small businesses with aggregated turnover under $10 million through the 2024-25 financial year. This represents one of the most straightforward tax-saving opportunities available. Assets purchased and installed ready for use before June 30, 2025, qualify for immediate deduction rather than depreciating over several years.
Strategic timing matters tremendously. Purchasing eligible assets in June rather than July could accelerate your deduction by a full year. Remember the “ready for use” requirement—merely purchasing doesn’t qualify if the asset isn’t installed and operational. Many businesses miss this distinction and face unwelcome adjustments during ATO reviews.
2. Superannuation Contribution Timing Is Critical
The superannuation guarantee rate sits at 11.5% for 2024-25. Contributions must clear your super fund’s account by June 30th to qualify as deductions in the current financial year. This represents a change from previous requirements where “incurred” payments qualified.
Payment processing times vary significantly between super funds. Some process electronic transfers within 24 hours, while others require up to seven business days. Waiting until June 28th frequently results in contributions counting toward the following year’s obligations—creating cash flow pressure when you need to make additional contributions early in the new financial year. Mark June 22nd as your practical deadline.
3. Trust Distribution Resolutions Cannot Wait
Got a family trust? You must have your distribution resolutions finalised before June 30th each year. The ATO maintains strict enforcement of this deadline—informal arrangements or resolutions created after year-end face automatic rejection.
Document these resolutions formally through trustee minutes or resolutions. Consider different distribution strategies depending on beneficiaries’ tax positions. The maximum tax-free threshold for 2024–25 stands at $18,200 per individual beneficiary, creating planning opportunities for family groups. Adult children at university or partners with lower incomes represent particularly valuable distribution targets.
4. Vehicle Logbooks Require Refresh Every Five Years
Many business owners diligently maintained logbooks when first claiming vehicle expenses but haven’t updated them since. The ATO requires fresh logbooks every five years or when circumstances change significantly. Using outdated documentation during an audit typically results in claim rejections.
The logbook must cover a representative 12-week period. The digital options available now make this process substantially less burdensome than five years ago. Apps with GPS tracking create ATO-compliant records automatically—eliminating the traditional logbook frustration while maximising legitimate deductions.
5. Staff Functions & Gifts Trigger FBT Considerations
The staff Christmas party can be a social disaster for anyone who’s careless with their alcohol consumption. What fewer people realise is that it’s also a tax minefield for unwary business owners. Whether these expenses create tax benefits or hidden liabilities depends entirely on specific circumstances. Under current rules, on-premises events typically avoid Fringe Benefits Tax while off-site functions may trigger FBT unless they fall under the minor benefits exemption (under $300 per employee).
The same principles apply to employee gifts. Non-entertainment gifts under $300 generally get to skip FBT consequences, meaning they remain tax-deductible. Entertainment-based gifts (concert tickets, restaurant vouchers) follow different rules regardless of value. Document the business purpose and recipient details for all staff expenditures to maintain defensible positions during potential reviews.
6. The 80/20 Rule for Home Office Deductions
Home office deductions continue generating substantial audit activity despite the increasingly widespread nature of remote work. The core principle remains unchanged: you can only claim expenses related to income-producing activities, and you can only claim the portion of each expense that directly relates to your work. Determining this portion requires a properly dialled-in methodology.
The ATO accepts various calculation approaches. The most defensible involves determining the floor area percentage used exclusively for business purposes and applying that percentage to relevant household expenses.
The fixed rate method (still sitting at $0.67 per hour in the 2024-25 year) offers simplicity. But there’s also the chance that you’ll underestimate actual costs. Keeping a diary covering the hours you worked from home for at least four weeks will give you the substantiation you need. You can do this automatically with free apps like Toggl.
7. Single Touch Payroll Phase 2 Compliance
STP Phase 2 implementation became mandatory for all employers in 2023, but many small businesses remain non-compliant heading into the 2024-25 financial year. This enhanced reporting system requires more detailed salary and wage information, including specific allowances, deductions, and employment conditions.
The grace period for penalties has ended. Businesses not meeting STP Phase 2 requirements now face potential penalties starting at $222 per 28-day period for small businesses. Ensure your accounting software supports Phase 2 reporting and that your payroll practices capture the additional required information.
Maintaining tax compliance while maximising legitimate deductions requires proactive planning rather than reactive scrambling at financial year-end. The businesses achieving optimal tax outcomes typically maintain consistent communication with their advisors throughout the year, rather than limiting tax discussions to June and July.
Small business taxation involves complex tradeoffs between immediate needs and long-term planning. The strategies providing immediate tax benefits sometimes create future constraints or obligations. Working with advisors who understand both the technical requirements and your specific business context helps ensure your tax approach aligns with broader business objectives beyond mere compliance.