Your business can end up paying more in taxes than it should without tax planning. Find out how your accountant can help you save on taxes in this post.
Tax Planning: How the Right Accountant Can Help You Legally Pay Less Tax
With 30 June fast approaching, Australian business owners know that it’s tax crunch time again. Both businesses and individuals need to review their financial year to determine their taxable income and calculate tax deductions. This is also the period when tax planning is crucial.
If you haven’t been keeping track of your income and expenses in the last 12 months diligently, filing your tax return can become a real headache. This is why having the right accountant to do your tax planning is essential to ensure you exhaust all means that will allow you to legally pay less tax in the process.
Tax planning — what it is
To ensure tax efficiency, businesses turn to tax planning — a method whereby a financial plan or situation is assessed or analysed from a tax point of view. Through the application of tax planning, businesses can ensure that all components of their financial plan work together in achieving tax efficiency. These include the profit and loss statement, balance sheet, cash flow statement, and so on.
Tax planning benefits businesses in the following ways:
- Lowering the tax rate
- Reducing the total amount of taxable income
- Achieving greater control over the timing of tax payments
- Ensuring that available tax credits or tax relief are maximised
With an experienced accountant advising you and handling tax planning, you can confidently look forward to minimising the amount of tax you’ll need to pay during the current tax year through legal means.
Ways to minimise tax legally
For efficient tax planning, your accountant will go through a lot of documents and do the necessary paperwork and calculations to determine sources of tax savings. Some of the ways by which you can save on taxes legally include:
Ensuring your books and receipts are organised
By keeping your bookkeeping and documentation organised, you can keep an eye on the margins of your products or services. In doing so, you’ll be able to track the overall profitability of your business and calculate overhead and administrative costs. With tighter books, you can also identify vulnerabilities in your business that you may be unaware of early on.
In addition, your accountant will have an easier time reconciling your bank account and checking the balance to your bank statement — both of which are important prerequisites in calculating income tax.
Clarifying tax deductions you can claim
Missing tax deductions could lead to you paying thousands of dollars more than you should — money that could be put to good use in growing your business. Common tax deductions you need to keep track of include travel expenses, office rent (including your home office), Internet, phone, power and utility bills, vehicle maintenance and fuel for company cars, software subscriptions, etc.
Setting aside funds for your tax bill
While everyone is aware that businesses and individuals need to pay tax every year, cash flow problems sometimes prevent owners from saving money for tax purposes. To ensure you have the necessary funds come tax time, open a separate bank account for your tax and super. This means setting aside estimated monthly amounts toward sales tax or goods and services tax (GST), income tax, and superannuation contributions.
With this in place, you’ll avoid unpleasant surprises, cash flow issues, and penalties.
Taking advantage of government incentives and grants for small businesses
Since you’re paying taxes, you should also be looking at what government grants are available to help small businesses like yours. For example, there’s the Research & Development tax incentive for businesses that design and manufacture their own products. For e-commerce businesses, the Export Marketing Development Grant is meant to support exporters that market their products abroad.
These are just a few of the legal ways by which you can legally pay less tax. Of course, it always helps to ensure you lodge on time and remain compliant.
With a reliable accountant as your tax planning partner, you can breathe easy and stress less during tax season.