Tax planning is an essential part of managing your business’s finances and cash flows. It involves structuring a company’s affairs to ensure that they are compliant with tax laws and regulations while minimising the amount of tax paid and utilising existing tax incentives and concessions. In this blog post, we will explore some of the reasons why a business would want to consider tax planning before 30th June.
- Maximizing deductions
One of the primary reasons a business would want to consider tax planning before 30th June is to maximise deductions. Deductions reduce taxable income, which, in turn, reduces the amount of tax payable. By reviewing taxpayers’ expenses for the year, businesses can identify deductible expenses that they may have overlooked or forgotten. Some examples of deductible expenses include office expenses, travel expenses, and depreciation on business assets. By taking advantage of all available deductions, businesses can minimise their tax liability.
- Timing of income and expenses
Another reason businesses should consider tax planning before 30th June is to manage the timing of income and expenses. By deferring income until after 30th June, businesses can reduce their taxable income for the current financial year, and therefore, reduce the amount of tax payable. Conversely, by bringing forward expenses, businesses can increase their deductions for the current financial year, which again reduces their taxable income and the amount of tax payable.
- Superannuation contributions
Businesses can also take advantage of tax planning opportunities related to superannuation contributions. For example, by making superannuation contributions before 30th June, businesses can claim a tax deduction for those contributions in the current financial year. This reduces their taxable income and helps build retirement savings for business owners and employees.
- Loss harvesting capital gains tax
For businesses that have made capital gains throughout the financial year, tax planning can help to manage their capital gains tax liability. Businesses can offset their capital gains tax liability by reviewing their investments and determining which assets they could sell at a loss. This strategy is known as tax-loss harvesting and can help to reduce the amount of tax payable.
- Changes to tax laws
Finally, businesses should consider tax planning before 30th June because of changes to tax laws. Tax laws and regulations are subject to change from time to time, and businesses need to stay up-to-date with any changes that could impact their tax liabilities. By reviewing their tax position before the end of the financial year, businesses can ensure that they are compliant with any new tax laws or regulations that may have come into effect.
In conclusion, tax planning is an essential part of managing any business’s finances, and there are many reasons why businesses should consider tax planning. By maximising deductions, managing the timing of income and expenses, making superannuation contributions, managing capital gains tax, and staying up to date with changes to tax laws, businesses can minimise their tax liability and improve business cash flows maximising their profitability. Therefore, it is crucial for businesses to seek professional tax advice from EASE a tax expert to ensure you are taking advantage of all the available tax planning opportunities before the end of the financial year.