Knowing your tax obligation in advance goes a long way in solving lumpy cashflow or worse, a cashflow crisis that can occur when it comes time to pay your tax bill. This is particularly relevant this year as the COVID-19 situation has created unexpected changes to personal and business income, tax and cashflow.
In our view advance tax planning is an important financial management strategy. For Core clients our approach is this: If the benefits derived from advance tax planning do not outweigh our fee for service, our planning review is complimentary.
Advance tax planning is higher-level and strategic when compared with compliance matters which include tax reporting and tax return preparation. The outcomes include clear steps and personalised assistance to achieve tax efficiencies that directly support not only a healthy cashflow but also your personal prosperity as the business owner.
Advance tax planning involves thinking ahead and reconsidering decisions and courses of action to avoid less-than-optimal tax implications at the end of the financial year. Such decisions may include depreciating, purchasing or selling assets, lending, superannuation contributions, stock levels, work in progress and numerous claimable tax deductions.
The overarching financial health of your business depends on healthy, stable cashflow. This is why it’s so important to never underestimate the value of advance tax planning and getting the advice you need early.
The consequences of procrastinating may be that you will be unable to take advantage of available tax deductions and concessions that would have reduced your tax bill. In contrast, the sooner you start planning, the more time you will have to consider your options and select the most appropriate means of legally reducing your tax obligations. The benefits of doing so include having extra cash to put into activities to boost your business.
It’s important to consider advance tax planning as a vital component of your financial management systems and processes. Advance tax planning begins with a review of your tax outcomes with a view to understanding how much was saved as a result of effective tax planning or, if you failed to plan, how much tax you paid unnecessarily.
In our experience, forward-thinking business owners who engage in advance tax planning enjoy a range of benefits that flow from their tax-effective strategies. This includes paying no more than is legally required for meeting your tax obligations.
Advance tax planning positions you to manage your cashflow successfully as a result of your tax bill being smaller. Further, the process will pinpoint significant expenditures in the current tax year for which, crucially, you can then plan the best timing and payment method.
At Core, we offer tax report preparation services AND advanced tax planning advice. To learn about the benefits of advanced tax planning for your business or to make a tax planning appointment, please contact your Core business accountant on 07 5438 8088 or visit our Tax Planning page.