Do you have a smart – but still legal – approach to tax planning?
For the most part, paying taxes every year is an essential part of running a small business. Some financial obligations, such as rent for your office space and wages for your employees, are negotiable, but for the most part with taxes, you owe what you owe. It's difficult to have any control over that.
If you plan carefully for the little things, there are ways you can keep your tax burden to a minimum.
Having said that, if you pay close attention to the latest changes in the tax code and plan carefully for the little things, such as the exact timing of when you collect certain payments, there are ways you can keep your tax burden to a minimum. The trick is to be smart about managing your tax bill without doing anything illegal. There's a fine line that you must be careful not to cross.
Taking advantage of a new company tax rate
One of the keys to success in business development is managing your finances well, and that absolutely includes making sure not to lose too much of your revenue to taxation. Fortunately, Smart Company noted that this is getting easier – the House of Representatives and the Senate recently passed legislation to lower taxes on small businesses by 1.5 per cent for those that are incorporated and 5 per cent for those not incorporated.
Tax expert Theo Sakell told the news outlet that with this in mind, it might be possible to draw up new tax strategies to avoid paying too much tax under the older, more expensive system.
"If you derive business sales income, you may be able to defer sales invoicing or bring forward sales invoicing in appropriate circumstances," Mr Sakell said.
Why pay at the old, prohibitively high tax rates if you don't have to? By rearranging some of the payments flowing into your business, you might be able to save a significant sum.
Limiting yourself to legitimate tax planning
There's a fine line between creatively rescheduling payments and breaking the law, though. The Australian Taxation Office warns business leaders that it's OK to change the timing of certain cash flow moves, but it's not allowable to game the system by lying about payments or hiding them from the government. If you're at all unsure about the finer points of these rules, you might need a tax accountant to explain them.
Fortunately, at Wilson Porter, we are happy to help you out. We have a team of chartered accountants in house who are well versed in the current tax rules, and we're happy to help you navigate the modern financial climate. Just call us up if you need any help at all.