Would you rather pay 48.5% tax on business profits or 27.5% or less?
Tax planning aims to minimise tax payable by taking legal and active steps and applying strategies to constructively change your circumstances now and in the future. It makes sense that if you know what is possible you have choices and options that with some planning and change can yield significant benefits.
Tax planning is very involved and specific to each individual case. The four main strategies involve increasing deductions, decreasing income, assessing rebates and income diversion possibilities, and evaluating the relevance and benefits of tax planning ‘vehicles’ – i.e. establishing or changing a business structure (partnership, company, trust or super fund).
Too many taxpayers are quite simply paying way too much tax regardless of whether they are an employee, a business owner or an investor. Tax law can be complicated and not all accountants are equal in their knowledge or application of knowledge. Also, if a taxpayer is doing their own tax, it is easy to miss benefits and savings.
So how do you know if your accounting professional is switched on? Well here are two key questions to ask them and your accountant’s responses will help you decide:
- Am I in compliance with the tax, superannuation, employment, and other laws?
- How can you help me to legally reduce the amount of tax I pay?
The effect on your business of having implemented good tax planning is huge. It can mean the difference between paying 48.5% tax on your business profits and paying 27.5% (or less). This makes a big difference to your cash flow for funding business growth.