Why Is Tax Planning Important?
It provides business with the opportunity to assess their potential tax situation PRIOR to 30 June each year. This gives a business time to either plan for the expected result and/or implement strategies to reduce their tax. Finding out you have a larger-than expected tax bill after 30 June is too late – because there is nothing you can do to reduce it.
How Does The Tax Planning Process Work?
By early May, we should have your business results up until 31 March, which is the end of the third quarter. Based on these figures, we can usually project your annual profit or loss with a fair degree of accuracy. To do this we consider historical data from previous years, plus an estimate from the business owner/s of their projected last quarter results. And we do not just consider the figures in the business entities, but we include how it will potentially flow through to other entities or onto individual tax returns.
Uncovering Tax Opportunities
Sometimes there are opportunities within the business to reduce your taxable income. These can include pre-paying expenses; writing off bad debts, or obsolete stock and equipment, or contributing extra into superannuation for company directors. The increased immediate asset write-off is up to $150,000 and will be extremely useful to pick up new assets needed by the business and claim a full tax deduction prior to 30 June.
Reviewing Your Numbers
Smart business owners will take the time to stop and assess how their business is travelling as the end of the year gets closer. How do the figures compare with previous years? For example, has any particular source of income greatly increased or decreased? Have expenses like wages or cost of goods sold increased and reduced your profitability? What about the balance sheet? Is your cash position getting low? Are trade debtors or trade creditors increasing? Are your tax debts or long term liabilities increasing? Picking up on trends in your numbers, whether they be good or bad, can help you put plans in place and set a strategic direction to navigate your business in the right direction.
To discuss further, please contact our team at the office to make a time that suits best.