Small business owners are time-poor, and sometimes important strategic and financial decisions are discovered by accountants too late. If there is anything that a business owner cannot afford, it is to forget to have the important tax and financial conversations pre-emptively, rather than retrospectively when it is too late. Tax legislation operates in a way that rewards business owners who plan ahead in order to avoid future headaches.
There are many mistakes that can be avoided easily when you work on tax planning strategies with your accountant. Here’s just five:
1. Incorrectly timed tax deductions
Your accountant will understand timing issues and can assist you when it comes to being able to claim your deductions on time. For example, to be able to claim a tax deduction on a commercial business vehicle within the current financial year, the vehicle must not only be delivered but be ‘ready for business use’ by the end of the financial year.
2. Having unexpected income tax bills
Tax planning that’s based on actual YTD income, as well as client-specific tailored forecasting, will ensure tax bill amounts are estimated with greater accuracy, rather than ‘gut feel’. This will give you a better understanding of your tax liabilities and when they’re due. Your accountant can also predict your estimated instalments for the coming financial year.
3. Not setting up correctly the entities in time for EOFY
This is particularly important for tax minimisation vehicles such as bucket companies.
4. Not planning for different scenarios
Forecasting profit based on one set of figures is a great start but planning for multiple scenarios gives you a broader picture. At Carbon, we like to run a minimum of three different profit scenarios.
5. Understanding superannuation caps
Most business owners either neglect super or contribute lump sums sporadically. Tax planning can help educate business owners around building super balances in a tax-effective way and accurately forecasting cap amounts come 30 June to ensure concessional caps are not exceeded.
How Carbon can help
Tax planning is one of the most important thing that you should be working with your accountant on. Effective tax planning not only reduces your overall tax payable but helps grow your net worth and allows you to accurately budget for the next 12 months. By working with an expert on all your tax needs, you’re ensuring that the strategies you set in place work best for you and your business and are properly forecasted. Get in touch with our accounting team today to get started on your tax planning.