August 3, 2012
Accounting & Taxation, Financial Strategy
There is more than 100 different taxes in Australia – over 100! And when you consider that less than 10% of the revenue the government generates from tax comes from more than 90% of those different taxes, it’s easy to see why tax is such a burden on small business. So why not do something about it and consider what you can reduce the tax burden on you?
In the words of Kerry Packer, “Anyone who pays a cent more tax than they legally need to needs their head read“.
So what exactly is tax planning? In simple term, tax planning involves working out your estimated profit or taxable income for the year so you can estimate the tax liability on that profit level. From there, you can look at appropriate strategies to reduce your tax given your particular circumstances.
And an example of a basic tax planning strategy is to estimate your tax liability and then budget to ensure you have funds to pay the tax when it is due.
Most business owners leave tax planning until late in the financial year, which for some people is fine. However, if you produce consistent levels of profit each year and pay high levels of tax, you need to consider longer term tax planning.
And if you don’t want to do anything about then you need your head read!
What does longer term tax planning involve? Well, it varies to some extent from business to business, as everyone has differing circumstances. But generally, it involves reviewing (among other things) the following:
- The structure of your business
- Splitting income with other family members
- Reviewing ownership of assets which can include:
- Ownership of business assets such as business premises
- Ownership of investment assets
- Your superannuation, particularly with self managed superannuation funds (SMSFs) now being able to borrow to buy property
- Considering negative gearing into investments such as property and shares
These are merely a select few of many ways that your tax can be reduced. And not just for 1 year either – savings can be made that result in you keeping big $ each and every year.
As an example, we were recently able to save a client in Kerang more than $30,000. And that’s just in the first year!
And for another client in Bendigo, we restructured their business which resulted in an annual savings of over $35,000 each and every year. Considering that we implemented the structure change 13 years ago, that means we’ve saved the client close to $450,000.
So, while tax planning may sound like a boring subject, if you don’t take the opportunity to minimise your tax, then you really want your head read!
Do you need your head read?
If you’re interested in having one of the May Partners tax experts review your situation – so you rest assured that you’re not spending a cent more than you legally need to – feel free to contact us on 03 5452 1155. We’d be only too happy to help.