May and June is the time for tax planning as 30 June looms down on us. Accountants love 30 June and celebrate like New Years Eve. But the lead up to the end of June is very important for all businesses.
Many of our clients have now completed reviews of their figures and have now been informed of the likely tax obligations for their business.
The background to the process involves taking the year to date data from record keeping systems such as MYOB, Xero and Banklink and then including adjustments for stock, depreciation and finance interest to arrive at the taxation profit year to date. Then with client input as to the anticipated sales and purchases we work out the projected taxable income. After inclusion of non-business items we arrive at the individual taxpayers’ taxable income and likely tax on that income.
Now the fun begins when we look at the likely tax per dollar of additional income and expenditure. With this we can start using a number of strategies to in most case reduce the overall tax position. I say in most case as there are times when a business sustains a loss that we may want to bring more income into a financial year to lessen any future impact.
Here are a few tax planning strategies which we commonly utilise:
These are a few of the main strategies that are used in our tax planning meetings and this is assuming you are in the right structure to start with. The business structure is important to ensure flexibility of who receives the income of the business to ensure the family as a whole is paying the least amount of tax. It is also a common discussion we have at tax planning meetings as the best date to change in 1st July, so timing is perfect in May and June.
If you require assistance with your tax planning, time is fast running out but not altogether too late. Get in touch with your accountant and have a chat.
If in the past you have not considered reviewing your position before end of June, next year it may be the time to get in early and start.