What is tax planning and how can it help your business?

Tax planning is a crucial aspect of financial management that allows individuals and businesses to effectively manage their tax obligations while staying within legal boundaries. You cannot escape paying taxes, but you can minimise the amount of tax payable. We can do so by maximising our deductions, reducing our income at the same time, without incurring any extra costs.  

By strategically navigating tax laws, regulations, and incentives, taxpayers can minimise their overall tax liability.  

 

Understanding Tax Planning

Tax planning involves utilising available deductions, exemptions, and tax credits to reduce the amount of tax payable or increase tax receivable.  

The amount of tax you owe is determined by your taxable income. Taxable income is your assessable income reduced by allowable tax deductions. The amount of tax you pay is calculated using the current tax rates multiplied by your net taxable income. Any instalments of tax you have paid for the year will reduce the end result of tax payable or refundable when your return is lodged. 

 

To minimise your tax, consider the following steps: 

Reduce your income

If possible, delay invoicing until July instead of June. By doing so, you can shift the income to the following year, reducing the amount subject to taxation. 

Increase your tax deductions 

Purchase any necessary tax-deductible items before the end of June. This ensures that the deduction applies to the current year, rather than the next. 

Be mindful not to make unnecessary purchases solely for the purpose of claiming a tax deduction. Remember that deductions only reduce the amount of tax payable or provide a refund at the applicable tax rate.

It’s important to note that you won’t receive a full refund equivalent to the amount spent. For example, when you spend $1,000 you are only saving the tax rate. For example, if tax on earnings is 25% and you spent $1,000, you only save $250 of tax but you have spent an extra $750.  

Review

It is important to look at your business and see what is working well and what needs improvement. Understanding your tax position is critical to the health of your business. You don’t need to pay more tax than you are legally required to – but tax should not be the focal point of what you do, especially at the end of the financial year. Instead focus on value creation.

Do not let deductions encourage you to spend more on items you don’t need and don’t lower your pricing and profits just to reduce your tax payable.  

 

Advantages of Tax Planning

Here’s how we can assist you in saving on taxes: 

Comprehensive deduction analysis 

By thoroughly examining your business operations and financials, we can identify all eligible deductions specific to your industry and activities. We ensure that no potential deductions are overlooked, maximising your tax savings. 

Optimal timing of income and expenses

We strategically time the recognition of income and expenses to minimise your tax liability. By deferring income to future years or accelerating deductible expenses into the current year, we help you optimise your tax situation and potentially reduce your overall tax burden. 

Capital gains and losses management

Through careful analysis, we assist in managing capital gains and losses effectively. By strategically offsetting gains with losses, we aim to reduce your taxable capital gains, potentially resulting in significant tax savings. 

Utilising available tax offsets and exemptions

Our team stays up-to-date with the latest tax regulations, including tax offsets and exemptions, available for businesses. We identify opportunities for you to take advantage of these offsets. 

 

By partnering with us for tax planning, you can focus on growing your business while having peace of mind knowing that your tax obligations are being efficiently managed, ultimately leading to increased savings and improved financial stability. Contact us to get started.

To learn more about tax planning, check out our blog:

Focused on end-of-year taxes? Find out why year-round tax planning is the best strategy!