Business Tax Planning is one of those things that seems common sense to most business owners, but is it actually common practice?

Perhaps there are fears around ‘more fees’ because of the additional time you may spend with your accountant to conduct your annual business tax planning. Perhaps it is simply a time pressure issue? Sure it’s on your accountants radar, but you’re flat out running your business and wearing the many hats you need to juggle on a day to day basis. Before you know it, 30 June pops around and it’s time to get everything ready for the accountant.

But what happened to tax planning? For the large part, unless you take action well prior to 30 June, there is a lot less your accountant can do for you if the prior planning and actions haven’t been implemented. So our point via this article is two-fold.

1. Tax planning is valuable

We know for a fact there is high value in conducting careful planning & strategising well prior to 30 June to ensure you are minimising your annual tax liability. Implementing tax strategies starts from day one (or May 1, as we see it). Having effective business structures, measuring profit numbers, reviewing targets and goals are essential business practices throughout the year. However it is important to have a pre 30 June meeting to stop and measure more specifically and begin to forecast the yearly result to ensure the best possible tax outcomes are achieved.

So here are just 2 clients examples that elected to take our business tax planning option last financial year; (names and exact figures are with-held, but you’ll get the idea)

CLIENT A

• Small Business Owner
• Annual Turnover $500,000
• Original Forecast Profit $150,000
• Original Forecast Tax Payable $45,000
• # of Suggested Strategies/Actions = 4
• Revised Tax Payable after Tax Planning $$23,000
• Business Saving $22,000
• Investment in Tax Planning $1,200 

CLIENT B

• Farmer – Cropping & Livestock
• Annual Turnover $2,500,000
• Original Forecast Profit $450,000
• Original Forecast Tax Payable $124,000
• # of Suggested Strategies/Actions = 6
• Revised Tax Payable after Tax Planning $43,000
• Business Saving $81,000
• Investment in Tax Planning $1,800

Does Business Tax Planning pay for itself? Absolutely! When you look at these examples, a business owner would have to be out of their mind not to spend the minimal amount of time and money required to get these sort of results. Clearly we have demonstrated some really positive results here, but these are more the norm than the exception. All situations are different, but it is not hard to justify the investment even if your tax liability is fairly static.

2. It must occur before 30 June

The key is, the planning has to occur well prior to 30 June. The process in a simplistic form goes like this:

1. Get all your bank and coding records up to date so interim year to date figures can be gathered and assessed.
2. Forecast major income and expense items for the remainder of the year.
3. Combine this data for an end year result forecast.
4. We then consider your current position, historical records, future goals and directions.
5. Then we schedule to meet with you and discuss the findings. Here we explain;
   • Your original forecasted tax result if no action was taken. (approx)
   • Then we discuss some strategies and actions that are available to you.
   • We finish by agreeing on what are the best actions to take and we document these for you.
6.  Finally it’s up to you to implement these strategies prior to 30 June.
7. We also take a further step here and follow up with a phone call to ensure you’ve been able to get the actions implemented.

So you can see the process (well at least for our firm), needs to start in early May to allow enough time to arrive at the strategies and actions and then most importantly allow you enough time to implement everything.

So if you’re feeling that you’ve been missing the boat in recent years, perhaps it’s time to ensure proper business tax planning occurs for you this year.