Tax planning is an essential step you’ll need to consider to ensure you organise your finances and pay the correct amount of tax while also saving your business money.
In today’s guide, we’ll detail why tax planning is critical to business success and how it will elevate your finances.
What is Tax Planning?
Tax planning is a strategy with the intention of minimising tax liabilities by making use of deductions and credits that your business is eligible for. Many companies enlist the help of a professional to ensure they have a more extensive understanding of which deductions they qualify for, but you can pursue tax planning independently too.
Why is Tax Planning Important?
Tax planning is an excellent way of ensuring your business isn’t paying more than you need to regarding tax. After all, who wants to lose more of their hard-earned cash than they need to?
With tax planning, you can save money, helping your business grow financially. Devising the best strategy will take some time, but the end goal of minimising the tax you need to pay will stay the same and provide the encouragement you need to plan your taxes effectively.
Does My Business Need Tax Planning?
As a business, you must start using tax planning techniques to put your company in the best position to make future financial decisions. As effective tax planning lowers your taxes, you’ll stand a better chance of maintaining commercial success and establishing better profit.
Overall, tax planning is a simple way that helps you save money, legally pushing your company’s potential to the optimum level.
How Do I Do Tax Planning?
There are several strategies you could take when tax planning. Let’s take a look at a few simple considerations you can implement to get started with tax planning;
- Know your tax bracket: The first step to tax planning is to know your business and the tax bracket you fall under. In Australia, we use a progressive tax system, so as your income increases, so does the tax you pay. So, if you were to make less than $18,000 per year, you don’t need to pay any tax. After this amount, it increases.
- Take advantage of deductions: Understanding which deductions your company is eligible for is an excellent way of lowering your taxable income. For example, if you work from home, you’ll be able to deduct the likes of energy bills.
- Make informed investments: Every expense and investment you make should be met with a critical mindset, considering how cost-effective this expenditure will be for your business. Going into investments with this mindset will help you to have a better cash flow and tax position.
- Consider timings of purchases: You can save your business money and elevate your tax position by timing purchases. For instance, you can claim deductions in the same year when prepaying expenses instead of spreading over multiple years. You can do this by timing your purchases before the end of the financial year.
Looking for Help with Planning Your Business’s Taxes? We Can Help
At Advisory One, we offer a range of accounting and business advisory services to elevate your company’s financial success. Contact us, or pop into our office located at Shop 1/205 Howick Street, Bathurst, NSW, Australia today to find out more.