Tax Planning – Strategies & Opportunities for Business Owners
by Tim O’Brien
4 min 30 sec read
- Taking Time for Your Bottom Line – Why Tax Planning is Important
- What does Tax Planning involve?
- How to get Started – Questions to Ask Yourself
- Questions to Ask Your Accountant or Business Adviser
- When Should You See Your Accountant or Business Adviser?
- Little Effort, Big Gain – Next Steps
As a business owner you probably have some goals you want to reach for your business. Do you know what strategies to put in place to get there or have a trusted adviser guiding you?
One strategy that all businesses should have set up is tax planning. As a business owner tax planning can be an exciting process – 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.
Achieving your business goals is much simpler with tax planning, but it’s equally important even if you don’t have goals and just want to make sure the business is running smoothly. It’s not until someone delves into the business that you realise there are improvements you can make.
Unfortunately, not all accountants offer tax planning or business advice, so if you work with an accountant it’s worth asking them about it. If they do then it’s a great opportunity for you to move forward, but if they don’t then we suggest seeing a business adviser to guide you through the process.
Taking Time for Your Bottom Line – Why Tax Planning is Important
Why does our team at BLG believe tax planning is one of the most important annual events for all our clients?
For business owners, it’s a great opportunity to down tools for 5 minutes and take stock of where they are at. It’s also 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 envisage where you want your business to be in 3 months-time, in a years-time, in 5 years-time depending on your goals.
As business advisers, tax planning is an opportunity for us to help business owners be proactive with their business, provide valuable input around their projected earnings and tax position and show you how the business is performing as opposed to how you think it’s performing. This planning is extremely important for the long term success of any business.
Make tax planning that one time of the year where you actually do set aside a day to step back from your 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!
What does Tax Planning involve?
In more detail, tax planning means reviewing your current business, asset, and liability position before the end of the financial year, and will give you an understanding of where the money you are making is going. It also involves identifying any opportunities or areas of concern in your business so you can make financial decisions in the short to medium-term that are well-informed. Through tax planning, business owners have the option to implement strategies before 30 June that manage your tax position.
How to get Started – Questions to Ask Yourself
If you are unsure about seeing an accountant or business adviser it’s a great idea for you, as the business owner, to review your business by asking some key questions. Answering these questions will help create a picture of how your business is tracking:
- 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 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?
- Are your investments providing the returns you were hoping for?
- How does this year’s performance compare to last year?
- Are there any opportunities you should be taking advantage of?
- Have you provided for any potential tax liability?
- Are there any strategies you should be implementing prior to 30 June to manage your tax liability?
Once you’ve answered these questions it is our hope that you will feel comfortable with your business position and ready to forge ahead. Or maybe the results were not crash hot like you were expecting and you need some direction. Whatever your review turned up, setting up tax planning is the recommended next step.
Whether you decide to see an accountant or business adviser following your business review, just make sure they offer ‘Tax Planning’, not just Tax Advice, as they require different approaches. We give you a hand with this below.
Questions to Ask Your Accountant or Business Adviser
So what about us? What should accountants or business advisers be able to offer to create an effective tax planning strategy for your business?
To determine whether the accountant or business adviser you are meeting with can help you in the right way, you should really only need to ask two questions to receive the necessary feedback. But make sure that any advice they do offer is tailored for your business. Following are the questions and the types of responses you should be getting back.
- How does your tax planning process work?
The accountant or business adviser should offer the following:
- A review of your year-to-date performance in comparison to previous financial years
- Feedback on your business performance compared to industry standards
- Commentary on any trends or areas of concern in your year-to-date figures
- A review of your financial structuring
- Business profit and income tax projections which in turn assist in all important cash-flow planning
- A projection of your year end results based on our knowledge of your business
- The ability to implement any changes that need to be made before the end of the financial year
- What are some of the tax planning strategies you suggest?
On the back of the above business analysis they should then suggest some strategies to help manage your tax liabilities and strengthen your balance sheet. Some of these include:
- Taking advantage of any government incentives like the $30,000 instant asset write-off
- Reviewing the remuneration packages of related employees
- Maximising your superannuation contributions following past reforms, and detail any impact the reforms may have on you and your family group
- Advising the minimum pensions to be paid from your superfund for the fund to maintain its tax exempt status
- Assessing the viability of any salary-sacrifice options
- Reviewing your current business structure
- Review of the groups assets and liabilities
- Ensuring compliance with Division 7A in relation to Director’s loan accounts and unpaid present entitlements (unpaid trust distributions)
- Reviewing your ledger for potential unrecoverable debts or obsolete items of stock or equipment to be written off
- Reviewing your Estate Planning and Succession Planning
- Managing and advising you of your estimated tax position
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 therefore be in a better position to take advantage of any opportunities available to you.
When Should You See Your Accountant or Business Adviser?
When it comes to tax planning there are specific items that need to be performed ahead of the end of financial year. So it’s important to decide on an accountant or business adviser you are happy with now and meet with them in the last quarter of the financial year to ensure your strategies are set up in the right way.
Making sure you have covered all your bases ahead of financial year end will put you in good stead and may save you thousands or even tens of thousands off your tax bill. Like many other aspects of your financial life, through knowledge and understanding comes clarity and improvement.
Little Effort, Big Gain – Next Steps
No matter how big or small your business is, tax planning is worth considering.
Remember, it’s not just about tax, it’s about gaining a better understanding of your business as a whole and putting goals in motion. With the right advice you can achieve more than what you expect.
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.
Your business is your livelihood so make sure you meet with a trusted accountant or business adviser for your tax planning.
If you are investigating a number of business advisers before making your decision, our team at BLG are available to delve into your business and show you a clear direction. There is no cost involved in an initial discussion with us about your business, and if you feel we aren’t the right fit for you then there’s no obligation to work with us, so why wait? We encourage you to get in touch today and get things moving!
Keep in mind your tax planning will need to be done prior to 30 June, ideally early in the last quarter of the financial year, so that any necessary action can be taken before year end.
Wishing you every success!