It’s a couple more months before you need to lodge your taxes again. While there’s still time before you need to get into tax planning, you might want to consider getting ahead of your taxes through pre-emptive tax planning so that when the time to lodge arrives, you are not in for a nasty surprise.
If you have had a steady income over the past year with no new investments or sources of income, then there is likely to be little change in your tax liability. However, if you have had changes in the past year affecting your income such as starting a new business, or perhaps earning rental income through investment in a new property – your tax calculation for this year may vary significantly from the previous year. Factoring these in, you may find yourself owing a sizeable amount of taxes you are not financially prepared for.
Other reasons why you should get an early start on tax planning
- Not only will you be financially prepared for it when the time comes, it will also ensure a smooth tax filing process.
- If you know beforehand what you might owe, you can take steps to keep aside money to meet your taxes instead of dipping into your savings.
- You can take appropriate steps to avail tax deductions like making contributions to charity, performing repairs on your rental property or prepaying interest on mortgages and other tax deductible loans to reduce your tax burden. Business owners can consider pre-paying superannuation for their staff to avail deduction this financial year.
- You can check to see if you are able to write off bad debts to claim a tax deduction or are eligible for deduction on a portion of the cost of your business assets.
- You avoid the stress of having to get all necessary documentation in order, in time.
- Regular tax planning will cultivate financial discipline as it inculcates the habit of making sound financial decisions throughout the year and not just during the tax season.
- For the business owner, it’s the time for you to reflect upon your business structure and assess the financial viability of your business in terms of cash inflows, cash outflows, surplus cash reserves, net profit etc
By planning early, you also have the opportunity to ensure that your taxes are filed correctly. The complexity of lodging taxes has left even large corporations finding themselves owing tax to the government due to ignorance or wrongful interpretation of tax laws sometimes. One case in point is Qantas, which was asked to pay $34 million additional tax due to GST on non-refundable airline tickets where the passengers did not show up for their flight.
Qantas’s argument that GST did not apply to cases where there was no flight was dismissed by the High Court on the grounds that even if the passenger did not travel, there was a promise of flight and its associated services, which Qantas made to the passenger in return for money. Just imagine the hassle and costs avoided if only Qantas had prepared their taxes early.
So, while you get started with your early tax planning, here are a few tips that would help you be more prepared for your next round of tax lodging:
- Keep all necessary documents including relevant bills and receipts in order and organise your paperwork beforehand.
- Consult your accountant to see what deductions and tax write-offs you may be eligible for.
- Keep abreast of changes and additions to tax laws. Ask your accountant about how they may affect you.
- Discuss tax minimisation strategies with your accountant upfront and implement them within the financial year.
- Pay your expenses like superannuation payments for employees, interests to SMSF trustees, insurance payments etc. within the financial year and delay income sources to reduce tax for the current year.
For the business owner or property investor, filing taxes may be more strenuous given that you have more numbers to manage. This is where having an experienced accountant come in to assist with your tax planning help greatly while you focus on your business. At Superior Accounting Group, we will guide you to get your records up to date and advise you on applicable tax deductions so that you can minimise your tax liability. Get started on your tax planning today.