What is Tax Planning, really?

What is Tax Planning, really?
Well, it is not just about saving tax, that’s for sure! There are many elements to effective tax planning and astute taxpayers are encouraged to engage in this process every year.

Why? Because your life and your business change each year, nothing stays the same. Especially at the moment while we are enduring a cost-of-living crisis.

If you are paying tax then it means you are making money. It’s that simple. However, with effective tax planning you could:

• Legally defer your tax payments without incurring penalties and/or additional interest.
• Plan your cashflow for tax you owe in the future (Pay As You Go Instalments).
• Understand that negative gearing means you are actually making a loss.
• Learn what is the best for you and your business, do you really understand what that ‘asset purchase’ does to your business? Don’t rush out and buy equipment just to save tax – that’s not how it works.
• Realise that a tax refund is not ‘free money’. It is your money that the ATO has been holding on your behalf.
• Get the timing right. The impact of selling an asset now versus later – you could be denying yourself valuable cashflow if not timed properly.
• Top up your super (Retail or SMSF) and utilise the concessional caps available to you.
• Understand correct terminology and misgivings that are bandied about. Did you know that if you made a $50 donation to a charity, you don’t get that whole $50 back in your tax return?
• Save yourself a high tax bill by learning that any money you take out of your company is now MORE income to you, therefore more tax you have to pay personally. The ATO is cracking down on this so unless you have a proper Division 7A arrangement in place, be aware.
• Grasp the importance of ATO compliance and the penalties and consequences imposed on those with delinquent tax debts. It may affect your ability to get a bank loan if you have a messy ATO account.

Have you had a mate from the pub say ‘I do blah blah blah and don’t pay any tax…’? Oh, that’s right! He is an expert in taxation and doesn’t mind telling you dodgy and misleading stories.

Your life and your business are unique to you and your family. Therefore, it is important to have the correct advice and support about your tax situation. Unless your mate from the pub is going to pay all your tax for you, then don’t take his advice!

There are many strategies and advantages to spending an hour or so with your trusted accountant and undertake our tax planning process. It could potentially save you thousands of dollars while keeping in touch & in tune with your taxation affairs.

If you have any questions or if you’d like to book in a Tax Planning meeting, feel free to contact us on 03 8805 8000.