What is Tax Planning And Why Would You Do it?

Tax Planning can be summed up as understanding your financial position as it relates to tax, and planning your affairs such that you pay the smallest legal amount of tax possible.

Good tax planning can be make or break, because it can be difference between paying up to hundreds of thousands of dollars in tax or not.

Tax planning is typically done in the months leading up to the end of the financial year, the 30th of June. That way you have time to make the appropriate adjustments to minimise your tax burden.

Tax planning usually starts with a meeting with your accountant who will then work with you to provide the best solution.

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1) Understand your tax burden

The first step to improving a situation is understanding it, and it is the same with tax.

Business owners often have complicated affairs in which they themselves may not fully understand how much tax they are likely to need to pay for that financial year.

Tax planning provides more certainty for business owners, and therefore helps mitigate the risk of a large and unexpected tax bill.

2) Reduce your tax burden

Once you understand your tax burden, you can work with your accountant to legally reduce it.

This can be done in a number of ways, but it is critical you get a professional involved both from the perspective of minimising tax as much as possible as well as to ensure legal compliance.

3) Know when you’ll have to pay

Cash flow is critical for both businesses and individuals.

Knowing when you will need to pay tax is critical from a cash flow planning perspective.

The last thing you want is to not adequately plan for when you will be required to pay tax.

Ensure that you are fully on top of your tax affairs by doing tax planning with a professional.

Please get in touch with us if you would like help with your tax planning.