When Should You Review Your Tax Planning Strategy?
Written by: Michelle Flowers | Accounting Team
A tax planning strategy includes reviewing and evaluating your current financial position with the idea to maximise tax efficiencies, while ensuring compliance with tax laws.
It’s something every business or individual should be aware of to maintain maximum tax efficiency!
Tax planning strategies can be prepared for a standalone entity, an individual, or can include the evaluation of a group of businesses, individuals, time frames and events, in which case achieving tax efficiencies over the whole group.
What Does A Tax Planning Strategy Include?
Commonly, tax planning strategies are prepared prior to differing tax events occurring, such as but not limited to the sale of a business, sale of property, sale of shares, as well as at the time of approaching the end of the financial year.
There are also tax planning strategies around retirement, which would be prepared in conjunction with a financial planner.
Tax strategies include looking at the facts of the events, the dates of purchases, the dates of sales, the availability of small business concessions, the availability of capital gain concessions the possibility of superannuation contributions, the age of the individual, prepaid expenses, cash flow, debtors and creditors, dividends, franking credits, distributions and profit shares etc. Items like HECS debt and Centrelink eligibilities/obligations are also addressed where relevant.
Common Mistakes When You Avoid Tax Planning
Mistakes that happen when you don’t do tax planning, or you haven’t allowed enough time to implement the planning strategies (e.g. contributing money into superannuation prior to a particular date as per the tax plan) may result in excessive tax amounts payable and adverse cash flow outcomes.
Not doing tax planning may also lead to things such as:
- Cash flow shortages/struggles;
- Not having enough money upon retirement;
- High or excessive amounts of tax payable;
- Purchasing a business motor vehicle or piece of equipment in the wrong entity;
- Purchasing a business motor vehicle or piece of equipment with the wrong type of finance, which in turn has a significant impact on your cash flow;
- Purchasing an investment property in a structure that wouldn’t be tax effective;
- The timing of purchasing/selling assets may not be tax effective.
Why Review Your Tax Planning Strategy?
Tax planning strategies are relevant for the particular event or year in which they were prepared for.
Due to the regular updates in both Tax laws and Tax case outcomes presented through the courts, it is important to review or prepare a new tax planning strategy prior to the end of each financial year and at the time of each Tax event. Again, this includes relevant and specific consideration with the possibility of maximising tax efficiencies, while ensuring compliance with relevant Tax laws.
Think that you might want to take a look into tax planning? Check out this previous blog we put together: Tax Planning for Businesses, Sole Traders + Individuals.
Signs You Need A Tax Plan
If you are experiencing any of the following, we recommend that you contact Canny’s for a tax planning strategy – whether small or large:
- You run your own business;
- If you are going into/starting up/purchasing a new business.
- If you are selling a business;
- If you are running low on money when your GST/PAYG/Super/IAS obligations are due;
- When you’re purchasing a new car/piece of equipment to utilise in your business;
- When you’re selling an investment property;
- When you’re purchasing an investment property;
- Feeling like you’re paying too much tax;
- When you’re thinking to yourself “my friends don’t pay as much tax as me”;
- When you’re wanting to retire in the future, this can be 20 years in the making (can never start too early on this tax planning strategy).
Note: If you have a Discretionary Trust, e.g. a Family Trust, it is imperative that you do review your situation annually prior to the financial year end, as you have a separate legal requirement to prepare Trust Distribution Minutes. You would want to incorporate tax planning strategies at this time, ensuring the most effective tax outcome.
There is no one-size-fits-all strategy when it comes to Tax Planning, but you can get an idea of how much you’ll save before your strategy begins. Check out this previous blog we put together: Just How Much Tax Can I Save By Tax Planning?
Canny Accounting + Professional Taxation Advice
Staying ahead of tax obligations and changes can be a challenge. At Canny Accounting, we pride ourselves on having continually updated skills and knowledge of Tax law. We can put this into place at any time, to help ensure that you’re not paying too much tax if you don’t have to.
We emphasize Canny Group’s professional tax planning focuses on ethically minimising overall tax obligations and ensuring there is no involvement of tax avoidance. The amount of tax savings achievable is contingent upon your individual circumstances, and there is no one-size-fits-all strategy!
We love to and get very excited about being able to assist people and businesses from paying excessive amounts of tax where and when we can.
Get in touch with our team as the end of the financial year is approaching to see where our team can help! Let’s look at setting you up for your (or your business’s) future.
