It upsets me when I hear someone, who is not a client of ours, mention that their tax bill was a huge shock. Sure, every year is different and something unexpected might result in a change to your income, but your tax bill should never be a shock.
It should be something you actively strategise to minimise. If you’re in business and you don’t see your accountant BEFORE the end of June, you’re playing with fire.
We start the process in April each year. By this time three-quarters of the year’s figures are reconciled, and we use income and expense estimates for April, May and June to project your expected taxable income.
Then comes the fun part. (Yes, accountants really do find tax planning exciting.) We work with you to devise a detailed plan of what you need to do to get your tax bill to YOUR acceptable level.
Last year we had a client come in during April, who’d achieved high profits. They were looking down the barrel at a tax bill of over $150,000. Taking into account their personal and business goals, we put some legitimate strategies in place, including maximising super contributions and prepaying some expenses, to get their bill down to around $50,000. Another family business saw us three times before the end of June to keep a check on the overall position of their different entities. Again, using legitimate means, we worked with them to reduce their tax liability by around $4,500 and had the added bonus of getting them to position where they were eligible for increased family tax benefits.
Of course, we won’t achieve the same result for everyone, it will depend on your individual circumstances. But no matter what your profit margin and wealth position is, the key is to plan early. There should be no nasty surprises come 1 July.