They say that knowledge is power and at this time of year, the knowledge you need most as a business owner concerns your tax position. If you want to significantly improve the tax outcomes for your business for the current financial year, I recommend tax planning.
Tax planning isn’t complicated but it does require a little time and the sooner you start, the more opportunities there will be to identify and implement actions which may legally minimise your tax this year.
In my experience, if you fail to plan ahead you are much more likely to receive a large bill that you are not prepared for. By identifying all applicable claims and deductions and giving you time to implement tax reduction strategies, tax planning also ensures that you won’t pay more tax than necessary.
An unexpected and unnecessarily big tax bill can cause tax flow issues for your business and in some cases it could also put your family home at risk. Further, if your business cash flow is tied up in meeting tax obligations, you may end up struggling to maintain business operations instead of funding the growth you were hoping for.
The beauty of tax planning is that it gives you the time to make a difference. Here’s how it works…
As your accountant, I’ll help you work out your expected profit, taxable income and likely tax commitment for the current financial year. Having estimated your tax position, we’ll aim to improve this position in two significant ways:
#1 Tax reduction strategies
Tax planning involves identifying what can be done to legally minimise, defer or eliminate tax you may otherwise be liable to pay. Tax reduction strategies typically reduce the business profit which, in turn, reduces your tax liability.
For example, you may decide to make capital purchases, particularly if these are tax deductible in the current financial year. Writing off bad debts is another strategy that may be appropriate. You could choose to make any additional super contributions for employees at this time, pay staff bonuses or make personal super contributions to boost your retirement savings. You may also be able to reduce your tax commitment by prepaying certain expenses.
#2 Budgeting for your tax liability
Tax planning enables you to manage your business cash flow so that your tax payments can be made in a comfortable and timely manner that doesn’t disrupt business operations. We can help you create a payment schedule for your tax liability that takes into account the other known demands on the business cash flow in the year ahead. This means you will be able to satisfy the ATO as well as meet other essential cash flow commitments including for suppliers, wages, salaries and insurance.
This type of cash flow management can also extend to your own personal financial needs for the year and allow you to make concrete arrangements for such things as family holiday or house renovations.
While tax planning is an option for all taxpayers, it is especially important for business owners. The benefits mean you can tackle the new financial year from a position of knowledge, strength and confidence.
To find out more about how tax planning can benefit your business, please contact me today on 07 5479 5499 or firstname.lastname@example.orgBookkeeping for Tradies Request Fee Range NOW
At VBA we specialise in strategic tax advice, offering tax and financial reporting for individual income earners, family businesses, tradies and construction companies.
Victor Bimrose Accountancy Pty Ltd (ASIC No. 1259423) ABN 53 010 957 294 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361.
General Advice Warning: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.