The how-to guide to tax planning

Tax calculator

March is upon us again, and this means just one thing – tax season is near! Here’s what you should be doing now to prepare your business for the end of the financial year.

I always tell my clients that tax planning starts at the beginning of the new financial year and is something that should be continued throughout the year. A lot of the nitty gritty should be worked out in this period. With nine months of ‘actuals’ we can look at forecasting for the remaining 3 months based on these, and consider any tax issues that may pop up.

When your proactive accountant approaches you around this time, remember that he or she is simply trying to curb any issues that could occur. We’re not miracle workers and cannot deal with this after the year has ended. There are many business owners who don’t believe they need to get involved with tax planning, but without it accountants can’t estimate your liability.

When I do tax planning, I always provide the client with the tax saving in the calculation. I provide them with a plan of how to reduce their tax and show them how I calculated this and what their tax saving is. They can then compare the cost of the tax planning against the fees charged to prepare it.

So, as the year flies by before our eyes, here are some quick tips to keep in mind leading up to 30 June:

1. Look at deferring income and raise the invoice in July. Be careful of WIP (Work in Progress).

2. Bring forward expenses that you will require for July/August, consider cashflow.

3. Look at the prepayment of expenses.

4. Stock take on trading stock at cost or market value.

5. Dividend, royalties and rental income could be arranged for payment to fall due after 30 June.

6. Defer selling an asset until after 30 June, remember that real estate is taken as being sold on contract date and not settlement.

7. Realise any losses that you may have to offset any capital gains you may have.

8. Look at immediate write off for items brought under $1,000 if in SBE.

9. Look at purchasing any plant and equipment, vehicles or trucks on Chattel Mortgage before June as the GST credit is a bonus and depreciation and interest deduction.

10. Review your depreciation schedule and scrap any items that can be scrapped.

11. Review receivable reports and write off any bad debts.

12. Perform any repairs and maintenance needed before 30 June.

13. Make any donations or deductible gifts you’ve been meaning to.

14. Look at topping up your super, preferably into your own Self Managed Super Fund.

15. Pay bonuses to staff, as they give you a tax deduction and will keep your staff happy.

16. Have your end of financial year party before 30 June, but watch out for FBT issues here.

These are just some items that you should review and keep in mind as we steam into 30 June. As a side note, if you operate through a trust you will need extra consideration with distributions to minors not $416 and div 7A issue that can trap you