Ok so I’ll be the first to admit (speaking from experience) that talking tax at the dinner table probably isn’t going to win you any new friends, and there’s a good chance it may not secure you that elusive second date. Stick with me though while I try, at least, to give you something to discuss that won’t have your date skipping dessert or slyly texting their friend to get them to call with a ‘family emergency’ – tax planning!
The obvious question will follow – what in the world is there to get excited about with tax planning?
Take Time For Your Bottom Line
For business owners I believe it’s a great opportunity to down tools for 5 minutes and take stock of where they are at. It’s as good a time as any to take a moment to be proud of what you have achieved, critical of what you haven’t, and envision where you want your business to be in 3 months time, in a year’s time, in 5 years time…
Make tax planning that one time of the year where you actually do set aside a day to step back from your undoubtedly otherwise hectic schedule to assess the health of your business (and yourself for that matter). There’s a good chance your customers, employees, family and friends, and business bottom line will thank you for it!
Tax Planning – The Explanation
So what is tax planning and what is there really to be excited about?
Tax planning (in its simplest form) is assessing your business, asset, and liability position prior to the end of the financial year and identifying opportunities and areas of concern so that you can make informed financial decisions in the short to medium-term. In particular though, it gives business owners the option to implement strategies before 30 June that may minimise any expectant tax liabilities.
As an accountant I personally find it far more interesting working with the ‘live’ numbers around tax planning as opposed to the ‘historical’ data and events we deal with when preparing financial accounts and tax returns post 30 June each year. Tax planning is an opportunity for us, as accountants and business advisers, to help business owners be proactive with their business and is a time to provide valuable input.
As a business owner it should be exciting – as it’s a real opportunity to stop, reflect and take charge of your business by planning ahead and focusing on the numbers of the future rather than of the past.
Questions To Ask Yourself
So what are some questions that you, as a business owner, could be asking of your business? Here are just a few:
- Are your sales in line with your expectations? If not are there opportunities to reach out to new customer bases? Are less profitable customers impeding your ability to service your better ones?
- Do you have issues with collection of debtors? If not do you need to address your payment terms? Are you chasing your debtors promptly and regularly?
- Are you incurring unnecessary expenses? Are you paying for insurance you don’t need? Are you getting an adequate return on any advertising spend?
- Are there expansion opportunities within your current business? If so what do you need to put in place to explore these?
Questions to Ask Your Accountant
And what about us? What can we, as accountants and business advisers, offer in the way of advice at tax planning time? After some analysis of your financial position we can provide such things as:
- Feedback on your year-to-date performance in comparison to previous financial years
- Commentary on any trends or areas of concern in your year-to-date figures
- Business profit and income tax projections which in turn assist in all important cash-flow planning
On the back of this financial analysis we can then suggest some strategies that may help manage your tax liabilities and hopefully strengthen your balance sheet. Some of these strategies may include:
- Looking to take advantage of any government incentives like the $20,000 instant asset write-off
- Reviewing the remuneration packages of related employees as to their tax effectiveness
- Looking to maximise superannuation contributions in line with recent reforms
- Assessing the viability of any salary-sacrifice options
- Looking at your current business structure to determine if more tax-effective options are available
- Reviewing your debt structure
- Looking at other wealth creation activities
Little Effort, Big Gain
No matter how big or small your business is tax planning is worth considering.
At the end of a tax planning process with your accountant, you should expect to walk away with more insight into your own business, a greater level of surety to make short to medium-term financial decisions, and thus be in a better position to take advantage of any opportunities available to you.
Although the process may involve an extra trip to the accountant, I believe it is an area of our work where we provide further value for money.
No offence taken though if you want to hold off on the tax planning discussion until date #3…
Make sure you take advantage of tax planning strategies that are tailored specifically for your business and situation. Our team can assist you. Prepare for the end of financial year and get in touch with BLG Business Advisers online or by calling (02) 4229 2211 today.