2025 Tax Planning Priorities

With the end of the financial year approaching quickly, now is the time to discuss the tax planning priorities and actions you can take before 30 June 2025 to reduce your taxes and grow your wealth.

Reduce Your 2025 Tax

Tax Planning Priorities

Maximising Super Contributions

• Access the 15% tax rate for super contributions rather than paying higher individual rates (up to 49%) or company rates (25-30%)

• Ensure contributions stay within the super contribution caps to avoid penalties

• Beneficial for compound earnings over time.

  
  

Capital Gains Tax (CGT) Planning

• Make provisions for CGT liabilities when selling assets, such as a property or business assets

• Be cautious with instant asset write-offs (e.g., motor vehicles). Items claimed at 100% have no written-down value, resulting in gains at the time of sale

• Consider options to minimise CGT liabilities, especially when redeploying funds into new investments.

Discretionary Trust Distributions

• Recent ATO rulings impact who can receive distributions based on the trust deed

• Ensure trust distribution resolutions are completed by the relevant date (often 15 May or 31 May)

• Carefully plan and review distribution strategies to optimise tax outcomes.

Bringing Forward Deductible Expenses

• Prepay deductible expenses such as:

  • Interest

  • Rent

• Useful when sitting on a profit to reduce taxable income.

Deferring Taxable Income

• Adjust invoicing or timing of completion for projects based on tax planning needs

• Evaluate costs and percentage of completion cautiously.

  
  

Instant Asset Write-Off

• $20,000 write-off available until 30 June (for businesses with turnover under $10m)

• Items under $20,000 can be purchased and claimed

• Ensure all eligibility conditions are met.

  
  

Family Trust Tax Advantages

• Use family trusts to distribute income strategically—reduce exposure to higher individual rates (up to 49 cents per dollar)

• Consider distributing to bucket companies (taxed at 25% or 30%) or super funds (taxed at 15%)

• Focus remains on retaining more funds for wealth creation while minimising tax liabilities.

Tax Deduction Opportunities with Super in 2025.

When you retire, your superannuation will likely become a significant income source. That's why it's a good idea to top it up while working. Did you know there are also some excellent tax benefits you can take advantage of right now by making voluntary superannuation contributions?

Generally, money invested in super is taxed at a lower rate than your personal income tax rate.

We want to inform you of opportunities to save tax through super contributions in the lead-up to 30 June 2025.

This is tax planning advice, not financial advice. If you are interested in this strategy, please contact our office.

How "Concessional" Super Contributions Are Taxed

Concessional (before tax) super contributions include employer super contributions made on your behalf, any salary sacrifice contributions you make, or any personal contributions you claim a tax deduction on in your tax return. These contributions are taxed at 15% when they are received by your super fund (up to a limit of $30,000 per year), provided your annual earnings combined with superannuation contributions are less than $250,000 annually.

Personal super contributions are beneficial for individuals with higher marginal tax rates or those whose employer refuses to establish a salary sacrifice arrangement.

The people who would benefit the most are those who earn above $45,000 per year, as this is where the marginal tax rate plus the Medicare Levy rises to 32%. Claiming a tax deduction on super contributions effectively makes your tax rate only 15%. That's a significant tax saving!

Catch Up Super Contributions

Suppose you haven't made maximum annual super contributions in any year from 2020 onward. In that case, you can make "carry-forward" concessional super contributions if you have a total superannuation balance of less than $500,000. You can access their unused concessional contributions caps on a rolling basis for five years. Amounts carried forward that have not been used after five years will expire.

How low-income earners are taxed

If you're a low-income earner (earning up to $37,000 per year), the low-income superannuation tax offset ensures that you don't pay a higher tax rate on your super contributions than your income tax rate. The offset will be paid directly to your super account and will equal 15% of your concessional contributions for the year, capped at a maximum of $500.

Individuals who earn between $45,400 and $60,400 during the 2025 financial year may also be eligible for 50 cents-for-each-dollar government super co-contributions, up to a maximum of $1,000 in non-concessional (after-tax) contributions.

How high-income earners are taxed

If you earn more than $250,000 a year (including super contributions), your concessional contributions are taxed at an additional 15%, bringing the total tax on these contributions to 30%. However, this is still less than your marginal income tax rate of 47%. This extra 15% is known as Division 293 tax. Only the concessional contributions that make your total income exceed $250,000 are subject to the additional tax.

Suppose your concessional contributions exceed the concessional contributions cap of $30,000 per year. In that case, the excess is included in your tax return and taxed at your marginal tax rate (less an allowance for the 15% already withheld by your super fund). You can withdraw some of the excess contributions to pay the additional tax.

Do you have a Discretionary Trust (a Family Trust)?

In the lead-up to 30 June 2025, you must complete your Trust Distribution Resolutions before 30 June. Why? To avoid paying an extra tax of up to 47% on Trust profits.

How can this happen?

Suppose a trust trustee fails to resolve the issue of distributing the trust's income before the end of the financial year. In that case, the Trustee may be assessed by the Australian Taxation Office (ATO) on the Trust income at the highest marginal tax rate of 47% rather than the intended beneficiaries being taxed at generally much lower tax rates.

Although preparing a Trust Distribution Resolution before the end of the financial year can be complex, we are here to help you comply with the trust taxation laws.

The steps we need to undertake on your behalf include:

• Review of your prior year's Trust Distribution Resolution

• Confirmation with you of the estimated Trust income of your Trust for the year ended 30 June 2025

• Review of your Trust Deed to ensure that the income definition and distribution clauses in your Trust Deed allow the proposed Trust Distribution Resolution for 30 June 2025

• Advice on the most tax-effective distribution of this estimated Trust income.

• Preparation of Trust Distribution Resolution and ensuring the Trustees sign it before 30 June 2025

As always, the ultimate goal is to limit tax, preserve wealth, and maximise long-term earnings.

Feel free to reach out to see how Mazzcorp Partners can help you.

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