Preparing for your 2025 tax return: What business owners need to know

As the end of financial year approaches, business owners should take stock of key developments that may significantly impact their 2025 tax return. This year, the focus shifts from legislative changes to judicial decisions, with several recent court rulings reshaping how the ATO interprets long-standing tax provisions.

From the treatment of trust distributions and Division 7A to FBT exposure for directors and the fine line between capital gains and ordinary income, it’s essential to understand where risks may lie, and where planning opportunities can be leveraged. Timely action ahead of 30 June can optimise outcomes, ensure compliance, and protect against unexpected liabilities.

Strategic planning opportunities

The lead up to 30 June presents a valuable window for both compliance and strategic decision making. “Tax time is an opportunity to reflect on the year just passed and forecast ahead,” David explains.

Cash flow and timing

Understanding the timing of tax liabilities is critical. Businesses should:

• Reconcile actual profits with tax instalments already paid.
• Forecast final tax liabilities to avoid cash flow shocks in December or February.
• Plan for potential doubling-up of instalments following a strong year of growth.

Tax planning measures before 30 June

To optimise tax outcomes, ensure the following actions are taken before 30 June:

• Superannuation contributions: Must be received by the fund before year-end to be deductible.
• Bad debts: Must be written off and documented, ideally through a board resolution, before 30 June to be deductible.
• Capital purchases: Assets under $20,000 are eligible for immediate deduction. Consider advancing purchases where cash flow permits.
• Employee bonuses: Ensure any unpaid bonuses are legally incurred and contractually binding by 30 June to qualify as deductions.
• Trust distribution resolutions: Trustees must document income distribution decisions by 30 June to avoid top marginal tax rates on undistributed income. Digital signing tools that capture a timestamp can assist in evidencing compliance.

Understanding your likely 2025 tax position, reconciling it with instalments already paid, and forecasting future liabilities are all essential to maintaining healthy cash flow and avoiding unexpected tax burdens.

“Don’t assume that doing things the way you’ve always done them is the right approach anymore,” David cautions. With greater scrutiny, evolving judicial interpretations, and tighter enforcement from the ATO, proactive planning and timely action are more important than ever.

If you're unsure about how these changes impact your business, or if you want to ensure your tax strategy is aligned with both compliance and long-term growth, our advisors are here to guide you through the complexities of the 2025 tax return and beyond, with confidence.

Note:The UPE tax case is now set to be heard by the High Court