Do You Have a Strategy for Minimising Your Tax Liability?
It was Benjamin Franklin who famously quipped that there are only two certainties in life;— death and taxes. And whilst you may have little control over the former, proactive tax planning can significantly alter the outcome of the latter.
During my time spent working in business services, I have observed an interesting effect;— individuals and companies who approach their tax obligations in an organised and proactive manner tend to pay significantly less income tax in the long-run than those who do not. It is not necessarily an effect that is noticeable in any single year, but is something I’ve found more readily observable over multiple financial years. So it is unfortunate that many taxpayers choose not to give their taxation affairs priority, or are perhaps ignorant of the benefits of tax planning, or even of the concept itself.
Proactive tax planning begins well before the 30 June financial year-end and is all about asking yourself, ‘What can I do now, before year-end, to reduce my income tax liability, after year-end?’
For an individual, answers to that question might include:
Bringing-forward any work-related purchases to before 30 June (rather than after);
Enrolling-in and paying for a work-related training or education course;
Prepaying any work-related memberships or subscriptions for the coming year in order to get a tax deduction in the current year, et cetera.
For a business, answers to that question might include:
Bringing-forward capital asset purchases to reap the benefits of any available up-front deductions and depreciation expenses;
Accessing business tax concessions where there is a risk that imminent legislative changes may remove such concessions in the coming year;
Payment of staff performance bonuses prior to 30 June so that a tax deduction may be claimed in the current financial year, et cetera.
Whilst the available tax planning strategies will vary with a taxpayer’s circumstances, the key to proactive tax planning is that a strategy is developed and deployed before year-end.
Accordingly, I encourage all of my clients to schedule a tax planning meeting before the 30 June financial year-end, so that I may develop a strategy to reduce their tax liability and thus maximise their long-term wealth.
Benjamin Franklin was correct;— tax, like death, cannot be avoided… but it can be minimised.