Being in business is hard. The last thing you want to do is pay more tax than you need to!
Most people think tax time happens after the end of the financial year. But the most important time when thinking about tax is now, ie BEFORE the end of the financial year.
Why?
Now is your opportunity to reduce the amount of tax you need to pay as you need to action things before the 30th June rolls around.
But tax planning is not just about reducing the amount of tax you have to pay. It's about timing of income, timing of expenses, thinking strategically about what the next year holds and looking at where you are building your wealth. And tax planning doesn't just happen at the end of the year. It should be considered at the beginning of the year when you are setting your wages and super etc. Now is just the time when you action the final strategies for the year.
What is tax planning?
It's not tax avoidance that's for sure!
Tax planning is about taking advantage of concessions from the government, claiming all tax deductions available to you, structuring your business and investments correctly and timing. Let's take a look at some examples.
- If you have equipment, vehicles etc that you need to purchase for your business you can take advantage of the $20,000 instant asset write off. But it's not always as simple as jumping on board with any concessions announced. You wouldn't want to do this if cashflow was an issue, if you had previous losses or if your profits could be distributed effectively and the purchase would be more beneficial in next year.
- Structuring your employment arrangements to ensure they take into consideration meal allowances for employees (including yourselves) who do overtime.
- Increasing your Superannuation contributions to maximise your tax deductions and increase your SMSF balance so you can purchase the property you operate from.
- Looking at your assets and ensuring obsolete assets are written off.
- Looking at the timing of when you pay some expenses - ie if this has been a bumper year bringing forward some of your purchases, prepay rent.
- Looking at the timing of when you are invoicing. BUT this requires you looking at cashflow issues as well.
- Looking at how your business is structured. Do you need a trust, if you are a sole trader should you look to transfer to a Company etc.
What should I do?
For our growthwise clients you don't need to do anything. Thanks to Xero we keep a close eye on your numbers and continue to plan your strategies during the year. We are working on your action list of what needs to be completed before the 30th June now.
We believe that tax planning is so important we include it as part of our standard service offering. So far we have saved our clients $1,232,275 in tax by implementing strategies particular to each of you! What a rewarding job!!!! The exciting news is we still have a lot more to go before we get to 30th June!
It's not just about the tax saved though, it's more about ensuring you are utilising your business profits in the most effective way. That's why we get so excited about helping our clients make even more profit :)
If you are in business and aren't looking at what you can do to make more profit, pay less tax and have more fun you should get in touch with the growthwise ninjas today.
