‘Tax Planning – WHY’

While there are plenty of facts and figures out there about ‘Tax Planning’, a better question we should be asking ourselves is ‘WHY do we need to do it?’ What are the real benefits of planning your tax rather than sticking to the ‘Mad Scramble’ at EOFY? Many people cringe when they hear or think about anything to do with tax. Primarily because we don’t take the time to understand it enough to respect it and what it can do for us. We tend to push it aside until absolutely necessary at which time we bundle it up and dump it on our accountants. When in fact what we should do is to realise that a little tax planning can go a long way towards reducing tax expense or an unbudgeted tax debt, but most importantly, planning ahead can get us ahead in life. Rod Lingard from Plandd Financial says, “ At Plandd we have refocused, in part, that ‘EOFY crazy scramble’ into our philosophy of ‘Preparing for Later, NOW!’ so let’s approach EOFY under this philosophy. EOFY happens every year at the same time without fail – we could call it a habit we have to have. Our life is measured by years and each one has always had an EOFY so let’s use the regularity to our advantage – let’s leverage the regularity NOW to prepare us for LATER when we need it more.” Income tax is one of the largest expenses for most businesses and individuals, so to gain the best benefits requires careful planning, budgeting and monitoring. When your taxes are understood and anticipated by planning, you can actually regain control over your cash flow, debt repayments and other obligations. ‘Annual Tax Planning’ should be an integral part of your overall financial strategy. Annual Tax Planning is not just a once a year activity when you lodge your return, it’s designed to maintain, reassess and consistently monitor your financial strategy for changing circumstances, evolving tax legislation and compliance responsibilities. Benefits of Annual Tax Planning Meeting Your Annual Tax Planning process doesn’t need to be complicated, but it should be very thoughtful. You can evaluate your current tax tactic and find ways to optimise your financial situation further. While tax rules are complicated and every business and family has a different situation, knowing how to use tax planning properly helps you keep more of your hard-earned money. Reasons for Annual Tax Planning We all have different needs when it comes to tax, however there are generally four types of planning to consider – Short Range, Long Range, Structural, and Tactical Intergenerational Tax Planning. Mark Oliver – Co-founder & Broker of Lendd Group Pty Ltd – “Your mortgage is an integral component of your overall financial strategy because of the length of time mortgages are current for. With house prices going up, the equity in your home should be going up as well – leverage this equity correctly to maximise the benefits, through both tax and financial gain.” Now is a good time to take a look at both your expected taxable income for the current financial year, and your projected/expected taxable income, as they will help guide your tax planning strategy. Your tax planning should be designed to make the process low risk while also minimising taxes owed through a legitimate and safe tax strategy. Benefits of Tax Planning To experience significant benefits first understand how to adopt an excellent tax plan – benefits may include:

• Lower tax rate This is of course always the main goal. With the right planning, you can reduce your effective tax rate using lesser known or currently available tax strategies.
  

• Reduced taxable income Instead of focusing on a reduced tax rate, you also find ways to more broadly distribute income and reduce how much income is taxed.
  

• Flexibility in tax payment Proper planning provides a more flexible approach to paying your taxes allowing you to reduce the impact on your company or other business entity.
  

• Tax credits Better tax planning allows you to find legitimate ways to leverage tax credits including maximising the availability and use of company franking credits.

All these benefits help improve your bottom line, putting more money either in your pocket for personal reasons or back in the company for growth purposes. Ways To Reduce Taxable Income We are all looking for ways to reduce our taxable income and with all our different circumstances we can’t list all of them – here is several ways for businesses – Home Based Business, Travel Expenses, Vehicle Expenses, and Tax Losses. These are common deductions and your eligibility needs to be confirmed by your accountant yet they are often overlooked by small business owners. They can easily be included in your tax planning strategy. Many Australian businesses fail to make use of potentially generous concessions in this area of tax planning. Morgan Wilson, from Creditte Chartered Accountants & Advisors – “Having accurate and current information is another important aspect of tax planning that can help you maximise your deduction and allow you and your accountant to make informed tax decisions. By working closely with you to develop a true partnership, we get an in-depth appreciation for your business, ownership structure, industry, marketplace and competitors. We factor in all sources of income, your short and long term goals, and your personal and business objectives so that we can approach all advice with an awareness of your total tax and financial position. With the right advice, you have the comfort and confidence to make the right decisions for you, your business and your family.” This article should convey that there are some serious considerations and planning to do when it comes to decisions about tax – your future depends on it. Be advised that these life-changing decisions are not to be taken lightly, it is seriously recommended to work with people you can trust – select a specific TEAM that supports your values, advises objectively and honestly with all the correct information plus will work in your best interest – not just trying to sell you the next trend. It takes more than one person to become successful, it also takes time, experience and knowledge – “We are only as good as the people around us.” – join our TEAMS today. Author: Mark Oliver – Lendd Group Pty Ltd – Mortgage, Refinance, Personal – www.lendd.com.au E: mark@lendd.com.au P: 1300 053 633

“Personal Finances are like a Game of Chess – It’s how you play the game that ensures a better future. If your assets are chess pieces, you may know what pieces you have but do you know what they can do? Do you realize the immense value they can create when moved in the right way, in the right order, and at the right time?”

Thank you to Morgan & Rod for providing professional comment: Morgan Wilson – Creditte – Chartered Accountants & Advisors – Founder & Director – creditte.com.au/ Rod Lingard – Plandd Financial Pty Ltd – Preparing for Later, NOW! - www.planddfinancial.com.au