When there are so many legal ways to structure your affairs to save tax lawfully, we are often surprised by the short sightedness of those who lose sight of the bigger picture of being in business. And that is to generate an income far larger than you could by working for someone else. After all, isn’t that one of the main reasons you went into business in the first place?

So let’s chat about the tax concern.

What would you rather?
Earn $1M and pay $450k tax? Or would you rather earn $100k and pay $30k in tax?

I’m not sure about you, but I think the first option makes more sense. All you need to do is shift the way you look at your tax position and put some structures and systems in place to legally minimise the tax you pay.

That’s when an annual tax planning session with us comes into play.

Avoidance, evasion or minimisation?

‘Tax avoidance’ is the term used when you deliberately set up contrived schemes and structures solely for the purpose of obtaining a benefit.

‘Tax evasion’ is when you deliberately try to hide income from the Australian Taxation Office.

Both these practices are actively pursued by the ATO.

‘Tax planning’, on the other hand, is the legitimate way of being efficient in minimising your tax liability.

Tax planning should be viewed with the purpose of increasing your financial position. Spending money needlessly on assets and other items that you or your business don’t need just to save money or to reduce your earnings will often reduce your wealth position.

So please be mindful of the ultimate objective of being in business and let us help you with strategies to keep you in a better financial position than worrying about how much tax you are going to pay.

Here are 10 legal Tax Planning Strategies that may help you minimise your Tax Bill.

As always, please seek financial advice from your accountant and adviser before acting on any of these strategies yourself.

1. Plan ahead.
The most important strategy with tax minimisation is to plan ahead. Meet with your business adviser at least annually to focus specifically on tax planning – AND well before EOFY. Allow us time to work with you on these strategies. June is almost always too late.

2. Consider starting your own Self Managed Super Fund (SMSF).
SMSFs are taxed at only 15% and there are a number of other tax breaks available in these entities. If you have not set one up yet, we can discuss the appropriateness of this in your tax planning session.’

3. Spend up.
Before the end of the financial year and provided cashflow is fine, consider bringing forward next year’s necessary spending that can be used as a tax deduction before 30 June. Then prepare your tax return early to claim the deductions sooner.

4. Have your business in the correct entity.
Companies that are small business entities now pay a flat rate of tax of 25%. Introduced in the 2021-2022 financial year, this is the lowest level it has been in 50 years.

5. Plan to earn capital profits rather than normal income.
Individuals get a 50% discount on capital gains tax when they hold the asset for more than 12 months. Let’s discuss.

6. Use a Family Discretionary Trust to divert income and protect your assets.
Trusts provide flexibility by allowing you to divert your income to family members resulting in your paying a lower rate of tax.

7. Claim your motor vehicle expenses.
There are numerous ways of claiming these expenses and the outcomes are substantially different depending on your circumstances. Make sure you use the best method by talking with us first.

8. Invest in property.
Australians love investing in property due to the ability to claim the related expenses. A negative gearing property strategy allows you to claim the losses on your rental property against your other income thereby reducing your tax. Not for everyone, so speak to us first before you go property shopping.

9. Use the Tax Offsets and rebates available to reduce your tax liability. Franking Credits from shares and a range of other offsets should always be investigated.

10. Consider salary sacrificing.
Especially with your superannuation contributions. This is a useful strategy to reduce tax and provide for your retirement.

We are always looking for opportunities for our clients to save tax.

However, we are also always looking for opportunities to assist you to increase your wealth.

Feel free to reach out to book your tax planning or financial review session now. This meeting has the potential to save you thousands of dollars in tax payable.

Don’t leave it until the EOFY. We should be discussing it with you now.