Navigating the intricate realm of taxation is a crucial aspect of financial management that individuals and businesses alike must master to ensure both compliance and financial well-being.
As the fiscal landscape continues to evolve, the significance of effective tax planning has never been more pronounced. From maximizing deductions to leveraging incentives, understanding the best strategies for optimizing tax planning can lead to substantial savings and enhanced financial outcomes. In this guide, we will delve into the essential principles and expert insights that can empower you to navigate the complex world of taxes with confidence and make informed decisions to secure your financial future.
Whether you are a seasoned investor, a business owner, or simply aiming to enhance your financial acumen, these strategies will serve as your compass in the pursuit of tax efficiency and financial success.
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Robyn Jacobson, CTA, Senior Advocate, The Tax Institute
“Tax law and regulation can be very complex, especially as you accumulate assets, debts, losses and other financial factors.
“It’s vital to understand which tax deductions you are eligible for and make the most of them to ensure you’re paying the correct amount of tax for your circumstances. If you’re a business owner, take advantage of business-related deductions, write-offs, credits and tax offsets, and structure your business in a tax-efficient manner.
“Plan for your taxes throughout the year – not just at tax time. Consider making tax-smart decisions throughout the year, including adjusting your PAYG withholding, estimated tax payments, or making strategic financial decisions based on changing circumstances.
“It also doesn’t pay to cut corners or try to get ‘creative’ with your taxes. The potential penalties if you’re caught doing the wrong thing simply aren’t worth it, and the ATO is increasingly accessing and using data to identify non-compliance. A good tax practitioner can ensure your tax planning is optimised without the risk of landing you in hot water.
“Finally, remember that your financial situation is unique, and what works best for someone else may not be the best strategy for you. I’d always recommend talking to a qualified tax professional to ensure that you’re optimising your tax planning while also fulfilling your obligations appropriately.”
Megan Bishop, Partner, Tax Disputes at Holding Redlich
“To optimise tax planning, carefully consider your entity structure and seek professional advice early on to help you choose the right option – company, trust or partnership. Each have different advantages and disadvantages for distributing profits, defending claims and succession planning.
“Adapt your tax planning strategies based on industry-specific considerations. For example, innovative companies may qualify for research and development tax incentives, while small businesses can benefit from a range of tax concessions and relief provisions.
“Understand the tax implications of your investment portfolios as the treatment of capital gains and income can vary. Assets like real property, Bitcoin and shares have different tax consequences based on whether they are held as capital or for business or profit-making purposes.
“Always keep proper documentation – this includes trustee or company constitutions, minutes for director’s decisions and records of any important changes. The Australian Taxation Office uses extensive data analysis to monitor regulatory compliance of all businesses and information is cross-referenced with other sources, including international agencies, so transparency and accurate reporting is vital.
“It’s also important to obtain professional advice to review and tailor these strategies to your own circumstances and objectives.”
Scott Wiltshire, Vice President and GM at Oracle NetSuite
“Embracing a proactive approach to tax planning can help businesses anticipate tax liabilities and allocate funds accordingly to ensure healthy cash flow.
“A proactive approach should include the regular review of actual and projected income, capital expenditure, and depreciation to better understand the business’ tax position and to plan for expected tax liabilities.
“Leaders should also consider implementing a robust suite of business applications that streamline the process of calculating, reporting, and remitting taxes, ensuring that the business meets all regulatory requirements accurately and on time. Technology systems that provide a single real-time view into all financial information and leverage AI and automation can support proactive tax planning, while enabling time and resources to be redirected towards more strategic business initiatives.
“When calculating payroll tax, businesses need to consider all the relevant deductions, such as income tax. This is easily automated with the help of business applications, by reducing the risk of human errors thereby minimising potential compliance issues.
“With tax capabilities embedded in an integrated suite of business applications, organisations can enhance financial visibility, forecast tax liabilities more accurately, and enhance decision-making.”
Meredith Fannin, Director and Co-Founder at Darkwave
“Tax Planning is generally seen by clients as something to do near the end of the financial year, rather than something that should always be done on an ongoing basis so any issues or opportunities are identified early.
“The best way to achieve a positive outcome at tax time is to be organised and to develop strong internal recordkeeping so no deductions are lost or misplaced. Using online accounting/bookkeeping software such as Xero, Rounded or one of the other apps that link to your bank account is the first step in ensuring all items running through your accounts are accounted for as a business expense.
“We also often see issues with businesses signing long term contracts, where they haven’t sought advice on what entity name that agreement or contract should be entered into. This is important not only for tax planning purposes but also for asset protection considerations for the business and the individuals running the business.
“Finally, having all your information reconciled and reporting readily available means you can make decisions such as whether to put some extra money into Superannuation earlier, or whether to purchase that new laptop.”
Davide Costanzo, Chairman of Tax Committee and Director at Moore Australia
- “If you are planning a business sale soon, accessing the small business CGT concessions may be very useful and can save business owners substantial amounts of tax. Strategies can be put in place now to access these concessions in the future.
- Reviewing your business structures on an ongoing basis may assist if you feel your current structure does not offer enough flexibility, or is resulting in substantial tax and compliance costs. Speaking to a tax advisor on your restructuring options may be fruitful as there are rollovers and concessions available which can negate some of these pain points.
- Businesses across Australia have found staff retention difficult over the last few years and there are strategies than can be put in place from a tax point of view which may help retaining key staff. These can range from the provision of concessionally taxed employee share schemes to concessional or exempt fringe benefits which might not result in an additional tax liability for business owners.
- If you are planning on buying plant and equipment this year, small businesses (less than $10m aggregated turnover) may be able claim the full cost of an eligible asset below $20,000 as an immediate upfront tax deduction. Any assets above this amount will be subject to the small business depreciation rules.”
Mollie Eckersley, Operations Manager, ANZ at BrightHR
“Tax planning is just one of those aspects of running a business that you really shouldn’t cut corners with. Consistency is key, but not always easy to live up to.
“The trick is to have a straightforward tool that it just makes sense to use. If you have to go out of your way to track expenses and keep detailed logs, time-strapped business owners just can’t keep up. And the one thing you don’t want is to lose track of your expenses.
“Tools like the PoP mobile app centralises expense tracking. If employees can send expense claims, business owners can approve or decline each claim; and view, export, and save secure logs of all expenses in one place this process becomes so much easier. Once expenses become centrally and digitally managed, you don’t need to worry about referring to multiple dashboards or hunting for receipts.
“Come tax time, you can make sure you get maximum tax savings because your detailed expense records are available at your fingertips. It needs to be that easy. Ultimately, the best strategy I would recommend for optimised tax planning is to keep it simple.”
Robyn Graham, First Class Accounts Fraser Coast
“For optimal tax planning, consider the following strategies:
- $20K Asset Write-Off: Any asset under $20K, such as new equipment, can be written off this year.
- Training Incentive: Claim 120% on training and technology updates in this FY. The training provider must meet certain registration criteria for the bonus deduction so check with the ATO.
- Personal Super Contributions: For sole traders or employees, contributions are 100% deductible. If you haven’t reached your super threshold over the past few years, you can contribute up to the full amount now. The current year limit is $27,500.
- Monthly Reviews: Regularly review your finances. Many overlook this, missing opportunities to enhance their financial health.
- Budgeting: If you haven’t, establish a budget based on current items or project a budget based on past data.
- Timely Super Payments: Avoid late super payments. Penalties are stringent, and delays are becoming more common.
- Tax Planning: After the March quarter, consult your accountant to ensure everything is set by June 30.
- ATO Payments: If facing payment difficulties with the ATO, it’s advisable to negotiate a payment plan. Note there’s an amnesty for FY 19-22, the ‘Covid period’.
“Stay proactive and informed for effective tax management.”
Elise Balsillie, Head of Thryv Australia
“Between juggling customers, staff and business growth, tax time is one the most time-consuming and overwhelming admin tasks to undertake.
“So, if filing your taxes fills you with dread, then two simple and effective strategies can help alleviate your anxiety: Go digital and automate.
“The simplest and most effective approach you can take is to get invoices and receipts digitised. Growing your digital presence and capabilities and making use of digital tools and software will take the hassle out of keeping track of transactions, payments and outstandings.
“And how do you stay on top of those aforementioned outstandings? That’s where automation comes in. Not only will it chase unpaid invoices for you, it will also simplify your small business processes and ensure your data is accurate and complete. It will make your business more efficient by freeing up time that can be used to focus on growth opportunities.”
Dhanush Ganglani, Managing Director, Eden Exchange
“Effective tax planning involves a mix of smart strategies that can enhance your financial situation while still “playing by the rules”.
“First things first, begin by conducting a thorough analysis of your finances to identify potential deductions, credits and incentives. Accurate record-keeping is essential to substantiate your claims and reduce the risk of audit.
“Selecting an appropriate business structure, such as sole proprietorship, partnership, corporation or LLC is also crucial. Each has distinct tax implications, so understanding their differences is essential in aligning your setup with your tax goals.
“Investment planning is another avenue for tax optimisation. Explore tax-efficient investment opportunities like retirement accounts or funds to make the most of your strategy. Tax rules can sometimes feel like a game of musical chairs as they are often evolving. So make sure to keep an eye on any changes in tax law, ensuring your plan stays up-to-date and in line with the latest regulations.
“And if you’re gearing up to sell your business in this fiscal year, getting your financials organised and presentation-ready is a must-do. This meticulous preparation can be the game-changer in maximising your business’s sale value. Plus, it’s a great way to attract potential buyers by showcasing just how profitable your business really is.”
Charlie Wood, CEO, Wiise
“Effective tax planning is essential to the management of any business, from minimising tax liability to increasing cash flow. In these uncertain times, where budgets are tight, tax planning is even more important. No business wants to waste cash or be stung with higher-than-anticipated tax bills.
“Tax legislation is complex, and while obviously it’s vital to have expert support, even the best tax experts can’t help if they don’t have accurate data to work from. Even before thinking about strategies, you need to have a single source of truth.
“Sadly, far too many businesses are still running on Excel spreadsheets. This means data is often lost or hard to find, not to mention the impact of human error. The most important strategy is to implement accounting or enterprise resource planning software. Beyond the real-time data and financial reports throughout the financial year, this will help make tax time easier and avoid unwanted surprises.
“The best software tools will also help businesses keep up-to-date and compliant with evolving legislation. This includes opportunities to save tax where the government has made special provisions for SMBs or specific industries, such as the Small Business Energy Incentive, as well as identify grants and other programs.”
Andrew Jeffers, General Secretary at Shruriken Consulting
“When it comes to tax planning, the usual suspects often take the spotlight—prepaying interest on investment properties, seeking instant write-offs through purchases, or venturing into financial schemes for deductions. The fact is if you are at the end of the year trying to reduce your tax it’s too late. The decisions made now may merely recoup a fraction of your spending, so is it wise to spend $100 to salvage a mere $25 in tax?
“Effective tax planning demands foresight, ideally before a venture is etched in stone or at the year’s outset. The cornerstone of successful strategies lies in optimal structures—like family trusts – and precise timing of capital gains or losses. Notably, provisions such as the small business 15-year exemption offer unique opportunities in the context of one-off capital gains relief during business sales.
“Further insights include the tax-free extension of primary residence status for up to 6 years, even in absence. Holding assets for over a year, triggering the small business 50% active asset test reduction, embracing the small business retirement exemption, and applying the small business roll-over provision all add to the toolbox of effective planning.
“Emphasising the crux of effective tax planning, engaging a capable accountant to meticulously assess your strategy and structure across situations is paramount. An important reminder: crafting tax strategies solely to slash your tax liability is illegal. Stay the legal course, and secure your financial future with well-crafted, compliant planning.”
Chris Dahl, Co-CEO, Pin Payments
“Optimising tax planning for small businesses involves several key strategies to maximise tax efficiency. While meticulous record-keeping remains a fundamental aspect of effective tax planning, the current tech landscape now offers opportunities for automation and greater optimisation. Platforms like Xero and other payment systems seamlessly integrate with business banking and simplify expense and income tracking. Likewise, innovative apps allow real-time receipt uploads directly to accounting or payment platforms, digitising receipt record keeping.
“Make sure you understand where you can leverage small business rebates and asset write-offs, to shield substantial portions of taxable business income from undue burdens. You might also consider making additional superannuation contributions to your own fund throughout the year for additional tax benefits. Seeking counsel from a qualified accountant or tax advisor well-versed in small business taxation is essential to prevent any mistakes and to ensure your claims are legitimate. A tax advisor will give you personalised guidance on your business’s unique circumstances and structures, guiding you through the intricacies of tax planning, while ensuring compliance with pertinent tax regulations.”
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