As part of good business management and governance it is important to plan and minimise, where possible, taxation liabilities.
The compliance requirements of quarterly BAS preparation means that business owners are usually in a position to look at actual figures for 9 months and then make predictions for the remaining section of the financial period.
The estimates can be based on historical data or could be based on what the business owners anticipates will happen. That is for both income and expenses.
Armed with all this information, tax liabilities are able to be calculated for the individuals or the business depending on where the taxing point is.
After the tax liabilities have been calculated, it is necessary to examine potential strategies to minimise this tax liability.
Deferring income to a later year or accelerating planned expenditure, assist in reducing your current year's tax.
However, it is important that a tax minimisation strategy is examined with the overall tax savings and also the cash available.
When considering putting money into a FMD with borrowed money you need to look at the best usage of your money:
Overdraft interest rate 8%
FMD Interest Rate 2%
Primary Production Average Tax Rate 12%
Under these circumstances there is no advantage in tying money up in an FMD for 12 months to save 12 cents in the dollar tax and only receive 2% on the money that is invested.
Likewise to put money into superannuation in these circumstances would also not be a wise use of money unless you are closer to retirement. Any superannuation contribution that you claim as a tax deduction attracts 15 cents contributions tax.
As you can see tax planning is not just spending all the available funds that you have, rather it is looking critically at you position and then planning a strategy which utilises available resources in the best possible way and to limit cents in the $ tax obligations.
If you would like to know more information in relation to your current position and potential strategies, call us today on 55 851 522 or call into one of our offices.