9 Tax Planning Strategies to help you Pay Less Tax

Anita van Wyk Tax

Leading up to the end of the financial year, now is the ideal time to implement as many tax saving strategies as you possibly can. By planning ahead, your business can avoid any nasty surprises, plus if you do have any additional tax to pay, you will have plenty of time to start preparing for the cash flow impact this may cause.

If your accountant is only contacting you after the financial year has ended, then you could be missing out on opportunities for maximising tax deductions that could be costing your business thousands of dollars. So, in order to optimise your tax position before June 30, we’ve complied a list of a few simple tax planning strategies that could ultimately minimise or defer how much tax you will need to pay.

How to ensure you don’t miss out on valuable tax savings this financial year

1. Consider your expenses and deductions

To take advantage of tax incentives or concessions, such as the instant asset write-off which has increased to $30,000 for assets installed / ready to use by 30 June 2019 (businesses less than $50M annual turnover), it is imperative that you review your expenses and deductions. By doing so now, you can also highlight any opportunities to make spending decisions close to the end of the financial year more tax effective.

2. Review your Superannuation

When reviewing your Superannuation, it is important to look at both the timing of your payments and the amount contributed. The amount of money you can contribute to a Super account each year has been reduced in recent years, therefore, a review of your Superannuation contributions as part of you tax planning strategy is crucial if you want to maximise the concessional contribution caps.

In order to receive a tax deduction in the current financial year, Superannuation contributions must be paid and clear your account BEFORE June 30. So, it’s important to make sure all your complete payments of your Super contributions on time.

3. Write-off inventory

Conducting a stocktake before or on 30 June can highlight any adjustments that need to be made to your final closing stock which can directly impact your tax position, including writing off any old or obsolete stock.

4. Determine unused Fixed Assets

A review of fixed assets should be undertaken every year so that any assets no longer used in the business can be written off, for future tax planning.

5. Write-off bad debts

The end of the financial year is a great time to review your debtors ledger to determine if there are any bad debts that should be written off. A bad debt must be written off before 30 June (ideally through a director or trustee minute) to be effective for tax purposes. Writing off a bad debt does not prevent you from still trying to recover the debt. Don’t forget that if you write off a bad debt and you account for GST on an accruals basis, you can also claim back from the ATO the GST that you would have previously remitted.

6. Consider your “owner earnings”

A review of how you are remunerating yourself and others in your family group i.e. salary, dividends, profit distributions, is a key tax planning step that is often overlooked or undertaken too late, resulting in unnecessary tax consequences.

7. Review your Director/Owner “loan accounts”

To avoid any unexpected tax consequences under the Division 7A rules, it is also critical that you undergo a review of any balance sheet loan accounts prior to 30 June.

8. Recognise your revenue

A review of your revenue and how and when you are recognising revenue in your accounts is equally important, as this can have a significant impact on your tax outcomes.

9. Ensure you have the right Business Structure

Another great tax planning strategy is to review your businesses’ trading structure. In doing so you have the opportunity to optimise your tax position and ensure you are protecting your valuable assets. With recent changes to the company tax rate, this is even more relevant than before.

Any tax planning strategies must consider the cash flow consequences that could result for your business, so it is important to always check these decisions with your accountant. However, it is also important to make sure that your accountant is starting to plan for your tax return prior to June 30. If they are not, then perhaps it is time to consider moving on to a less retrospective and more proactive service.

Proactive tax planning

Lucent advisory offers tax planning as a standard practice for all our tax clients as we believe this is a critical step that cannot be missed. We know that effective tax planning relies on being proactive, so that you have the information you need to make the right decisions at the right time.

So don’t leave tax planning to the last minute, get in touch today to find out more about our Tax services.