As the end of the financial year approaches, it’s crucial for businesses to start planning for the next year. Your business may already have undertaken a thorough review of your current year end tax position. If that is the case, it is likely that you also have a plan in place to manage your profits in a tax effective manner , the next step is to plan for the year ahead. Identifying potential tax liabilities and opportunities for legitimate tax savings can boost your cashflow and improve your business performance in the upcoming financial year. Consulting with a tax professional or accountant, like our team at DFK Everalls in Canberra, ensures you have a comprehensive plan in place. In this article, we’ll discuss the importance of planning for the next financial year, how to identify tax liabilities and savings opportunities, and the benefits of having a well-rounded tax plan.
Why Plan for the Next Financial Year?
A solid tax plan for the upcoming financial year helps you make informed decisions regarding business growth and investment opportunities. Obviously. it’s better to have the plan in place at the beginning of the year to give you time to adjust or implement strategies and/or get appropriate documentation in place before it’s too late. A plan will enable you to identify potential tax liabilities and minimize their impact on your business while taking advantage of tax savings opportunities to improve cash flow. Plus, you’ll ensure compliance with tax laws and avoid penalties while staying on top of industry-specific tax changes and incentives.
Spotting Tax Liabilities and Opportunities for Tax Savings
The simplest way to minimise your tax liabilities is to ensure that you have the necessary documentation to be allowed to claim either:
- a tax deduction at all, eg you need a day by day Working from Home diary; or
- the maximum tax deduction (or use minimum taxable value) for certain expenses eg keeping a car logbook to maximise your deduction or minimise your taxable value for FBT purposes.
You can also minimise your tax liabilities by watching the timing of certain transactions, like making sure:
- your June Super is processed, paid & received by the Super Fund before 30 June;
- old, useless plant & equipment or stock is sold or thrown out before 30 June;
- any bad debts are officially written off before 30 June;
so that you are eligible for the corresponding tax deduction this year rather than having to wait till next year.
Being fully aware of various tax thresholds enables you to identify in advance which thresholds you might be getting close to crossing and therefore gives you time to implement a strategy to mitigate or at least it gives you the heads up that that you are going to incur some extra tax. For example,
- Loss of Small Business CGT Exemptions when your Business goes over the $6M Net Assets threshold;
- Payroll tax thresholds – especially noting that different states have different thresholds and rates; and that if you have team members working in different states (including working from home just over the border from Canberra) then you might be liable for payroll tax in those states even if your business’ payroll is under the ACT Threshold.
- Div 293 tax – this is the extra 15% tax charged on your concessional super contributions if your Adjusted Taxable Income (eg before rental property losses and other deductions) exceeds $250,000pa.
It’s also important to stay up to date with all the Federal Budget announcements regarding tax incentives so that you can take advantage of any relevant opportunities. The currently available incentives include:
- Small Business Technology Investment Boost
- Small Business Skills and Training Boost
- Small Business Energy Incentive
Talk to our team today to find out what incentives are available to you.
The Perks of a Comprehensive Tax Plan
Having a comprehensive tax plan in place offers several benefits. You’ll enjoy improved cash flow by optimizing tax savings and reducing tax liabilities. Plus, you’ll gain greater clarity on your business’s financial outlook, enabling better decision-making. You’ll minimize the risk of non-compliance and associated penalties, and you’ll be better equipped to respond to changes in tax laws and regulations. Finally, a solid tax plan serves as a foundation for ongoing tax planning, allowing you to continually refine your strategy.
Getting Ready for the Next Financial Year
Tax planning for the next financial year is an essential part of managing your business finances and ensuring long-term success. By identifying potential tax liabilities and opportunities for tax savings, you can start the new financial year on the right foot. Consult with a tax professional or accountant, like our team at DFK Everalls in Canberra, to ensure you have a comprehensive and effective tax plan in place.