From April through to May every year we recommend that you:
Identify the likely tax payable as things stand now; and consider how to reduce that tax through simple and effective strategies.
Your tax planning strategies may include:
- Contributing extra funds into superannuation. (Keeping in mind the $25,000 cap)
- Stocking up on consumable items that you will use in your business over the first couple of months of the new financial year. Common items include stationery, postage stamps and other consumables.
- Crystallising capital losses to offset any capital gains already triggered during the year.
- Reviewing your personal spending over the year to see if there is anything that could be classified as a business cost that you have allocated to drawings or private spending.
- Reviewing the "structure" under which you own your assets or operate your businesses to determine if you have the most tax effective set-up.
- Advertising or promoting your business through various means (eg. having flyers or business cards printed). This will reduce your profit before the end of the year but perhaps increase your income in the new financial year.
- Bring expenses forward into the current financial year that you would normally pay early in the next financial year anyway. Common examples include insurance and replacing low cost assets (items under $1,000 each)
- Maintaining a logbook for your car (if not owned by your business) for at least a 3 month period. This may allow you to use one of the other methods of claiming a vehicle and obtain higher tax deductions in doing so.
- Get all of your medical bills sorted to see if you are over the threshold for a tax benefit. If you have spent over $2,060 on medical costs, or even quite close, then making that trip to the dentist; refilling those prescriptions; or buying those glasses that you have put off until now will improve the quality of your health and save some tax at the same time.
- Consider donating to charities as a way of contributing to the community whilst saving you a little tax.
- Prepaying interest on one or more of your rental properties. In doing this, you bring forward deductions into the current financial year. There are two immediate advantages in that: a dollar saved now is worth more than a future dollar; and, claiming the deduction in a period with higher personal tax rates will produce a greater tax saving. However, be aware that this will mean you need to keep pre-paying in future or forego a deduction.
- Undertaking a maintenance program on the assets of your business and/or other assets. By doing this on a rental property, for example, you increase its value and can use this to attract higher rents and/or higher valuations to enable you to invest in more real estate. By maintaining the business assets, you will (hopefully) have less downtime in the busier seasons.
Most importantly though, by communicating with us you have more chance of paying less tax than you would if you leave matters until after the end of the financial year when you do your tax return.
Should you wish to discuss your tax planning needs in more detail please call the team at GGA.