Tax Planning: 5 Tips To Minimise Your Tax Liabilities

January 5, 2022    Accounting Services Perthwa

Paying taxes is one of the key responsibilities of every individual who receives any form of payment. So, as a business person in Australia, you must have a structured system of careful tax planning, monitoring, and budgeting. When you have a complete understanding of the taxes, you can effectively manage them, have full control over the effect of the taxes on your business finances, control your debt repayments, cash flow, and various obligations. 

Therefore, contact a qualified tax planning consultant whenever you decide to launch your own business. This blog discusses five top-quality tax planning strategies to help you maintain your essential business finances.

Tip 1: Properly Plan The Business Cash Flow

As the owner of your business, you have to regularly purchase equipment and supplies and pay your employees and taxes, leading to cash flow highs and lows. Large tax bills can easily put pressure on household and business finances.

But having a proper plan of your business cash flow and knowledge of the tax deadlines will reduce your stress, and you can focus more on other essential business aspects.

Tip 2: Plan For Payment Dates

When you miss a tax payment date, it may lead to serious consequences, like paying hefty fines. That is why careful planning for the tax payments is necessary, as it helps a person avoid unnecessary costs.

If you want to reduce your stress and take your business to a position suitable for steady success, it is advised to schedule tax payments and make a budget much before the payment deadlines.

Tip 3: Pay Superannuation Liabilities And Other Expenses

Using superannuation as a tax planning strategy can also be an option. The reason is that it is an additional deduction that can effectively minimise your tax bill.

Paying the superannuation liabilities will help you obtain a deduction one year earlier. When you plan for an early deduction, you will have increased flexibility in your cash flow and budget. Also, if you make additional superannuation contributions, you can reduce your taxes.

In addition to superannuation liabilities, you can also pay other expenses a little earlier. It will also help you get a deduction, significantly reducing your immediate tax obligations.

Tip 4: Provide Current And Accurate Information

Providing current and accurate information is another essential tax tip that helps business people increase their deductions. Correct tax information also proves to be beneficial for accountants when making important tax decisions. Tax planning in 2021 in Australia requires you to comply with the following obligations.

  • If any COVID-19 stimulus payment is involved, you must include it in your tax return. For example, if your company has received JobKeeper payments, that information must be included as assessable income in the income tax return of your business.
  • If you use a business vehicle, make sure the logbook is up-to-date. You have to obtain a new one if the current logbook has crossed the five-year mark or the usage of your vehicle has changed significantly. If necessary, you can also invest in any mileage tracking digital application.
  • If your company has stock, you must do the necessary stocktake by 30 June every year. However, it will not be necessary if the estimated closing stock is under $5000.
  • When claiming GST on various costs, you must include records of private use of business assets like motor vehicles. So, if you want to claim 100% GST on motor vehicle costs but your private use of the vehicle was 20%, the annual GST private apportionment claim must be considered here for an adjustment.

Tip 5: Account For Gst On A Cash Basis

There are two methods of accounting - cash-basis and accrual-basis. While cash-basis accounting involves documenting revenue and expenses when cash exchanges occur, accrual-basis accounting identifies and records whenever a revenue or expense occurs. 

In Australia, GST registration is required when the annual turnover for your business is more than $75000, and if your business is registered for the GST, you have to make the BAS tax return. A business activity statement or BAS is sent to the Australian Taxation Office (ATO) to report all business taxes like GST, PAYG withholding, luxury car tax, fringe benefit taxes, etc.

Now, when you do the GST accounting on a cash basis, you will pay the GST to the ATO when receiving payments, not at the time of issuing an invoice. GST cash accounting is also beneficial for improved cash flow.

Other Additional Tips For Small Business Owners

Here we’ll discuss some useful tax planning tips, which can be beneficial, particularly for owners of small businesses.

Small business restructure rollover

This tax planning tip can be highly beneficial if you convert your family partnership to a family trust. As the owner is not changing, you will only need to transfer an active business asset of one small business entity to another small business structure. It means there will be no payable capital gains. However, you must be careful about state transfer taxes.

Temporary full expensing

The Australian Government offers a temporary full expensing stimulus measure, which you can take advantage of.

  • If new depreciating assets are first held and used for a taxable purpose between 6 October 2020 and 30 June 2022, you can deduct the business portion of those assets’ costs.
  • The business portion of second-hand depreciating assets can also be deducted.
  • If you have made improvements to eligible depreciating assets, you can apply the ‘temporary full expensing’ to the business portion of their costs.

What Are The Benefits Of Annual Tax Planning?

If you want to have complete control over your business finances, annual planning for business taxes is critical as it offers the following benefits.

  • Better reporting
  • Improved cash flow
  • More control over your cash flow
  • Improved goal setting and tracking
  • Improved decision-making

Who Can Help You?

You must keep in mind that your annual tax management should be thoughtful and not complicated. You can type ‘how to pay less tax’ on the Google search bar, and Accounting Services Perth will come as a top search result. Our professionals can help you assess your current tax strategy and discover new ways to create a better situation.

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