5 reasons you NEED to do your tax planning this year

“I love paying tax”… said no one ever!

Tax planning is something we encourage our business clients to do every year in the lead up to 30 June and this year, with the impacts of COVID-19 on businesses, it is even more important. It’s a process that allows us to forecast and manage the future profit or loss outcome and therefore provide a degree of certainty around future tax obligations. Business Advisor, Christian Sloniec explains his 5 reasons you need to do tax planning this year.

Here are the 5 reasons you NEED to do tax planning this year:

1. KNOWLEDGE AHEAD OF TIME

Tax planning will provide you with an accurate estimate of your tax obligations for the next 12 months. Having this information well ahead of time will ensure you are better equipped to manage the situation. It will help provide certainty around your actions, enable you to plan strategically and will help you effectively manage your business’ most important resource – its cash.

2. REDUCING TAX EXPOSURE

Business 101 – if you are making a profit, then expect to pay some tax.

Most business owners understand this. However being hit with a tax bill higher than you expect isn’t fun and being expected to pay it within 2 weeks is 10x worse.

Once we estimate your business profit for the year, we will recommend strategies to put in place to help you manage your tax requirements. In some cases, these strategies are simple and can be implemented in your business internally. In other cases they are more complex, and you may need our assistance.

3. RECOGNISING OPPORTUNITIES

One of the big opportunities available for businesses this year relates to the updates to the Instant Asset Write-off provisions announced in the October 2020 budget. In simple terms, for eligible businesses, all new and second-hand assets purchased up until 30 June 2022 can be fully deducted at the date of purchase.

Of course, we wouldn’t recommend you to use funds you may not have to purchase assets you may not necessarily need. However, if you’re looking to upgrade to or invest in new equipment it’s certainly worth looking into.

Some other opportunities to consider may include:

• Prepaying expenses for next financial year
• Increasing voluntary super contributions
• Review and write-off bad debts

4. GOVERNMENT STIMULUS PACKAGES

Throughout this year, we have seen many different forms of government funding provided including JobKeeper programs, Cash Flow Boosts, Employment Subsidy programs and Small Business Grants.

Whilst these packages have been extremely helpful with keeping businesses afloat, they each have different tax consequences. Tax Planning will enable us to provide you the tax outcomes associated with receiving these various forms of funding.

5. FLEXIBILITY

The tax planning process usually starts in early-mid April. This enables clients to get an understanding of their annual result and have the flexibility to implement strategies as required before the end of the financial year. It also means we can update our tax planning analysis and process if necessary if things quickly change in a short space of time.

Although there’s a cost attached to this process, the ROI is very significant – eg. spending $1500 on a tax plan and saving $10K of tax is money well spent.

Given all the uncertainty most businesses have been through the past 12 months – we can all agree this financial year has been unlike any other, so the level of assurance tax planning will provide is so valuable in times like this!

If you would like to book an appointment with our team to discuss your personal situation, please do not hesitate to get in touch by email or calling (08) 8172 1444.