Five top tips to prepare for tax time

The countdown to the end of the financial year is now on. And that means you should be starting to focus on your end of financial year position and any tax planning that is appropriate for you.

Don’t leave it till the last minute. Making no decision or rushed decisions can lead to the wrong outcome. Here are five things you need to do to get the tax time process moving.

1. Get your health and hygiene tax list together

There are lots of little things that need to be attended to and which can add up to tens of thousands of dollars in tax savings. These can include:

• writing off bad debts
• maximising stock valuation outcomes
• declaration of bonuses and director fees
• prepayments
• income deferrals
• trustee resolutions to appoint income
• maximising depreciation charges
• superannuation payments

2. Look for the bigger tax planning opportunities

Beyond these health and hygiene opportunities, there may be larger tax planning opportunities that should be considered.

This could include being eligible to claim R&D tax concessions, taking advantage of the loss carry-back rules to get a refund of company tax paid in the last year, and export market development grant eligibility.

All of these opportunities are time sensitive and time limited. The things you do between now and June 30 could make a significant difference in the benefit obtained.

3. Are you creating permanent benefits or simply a timing advantage?

Consider whether your decisions are creating a permanent benefit or simply deferring the tax liability to a later date.

Both can be valuable; however, permanent benefits will always be more valuable. This is relevant if you have to create a hierarchy of the options. You may not be able to do everything possible.

4. Keep in mind any cashflow implications

This is an essential consideration. Some of the options will require you to spend money, bring forward expenditure or defer income.

These will all have cashflow impacts and you need to ensure that creating the best tax outcome does not cause a short-term cashflow problem.

Calculate the funding impact of your choices, and if you need funding support from your bank then talk to them early. You need to map out how much you need, how long you’ll need it for and what is being covered.

5. Are there any risks?

Keep in mind there could be some risks with the decisions being taken. These could include tax, funding and business risks. Tax benefits always need to stack up on the risk-to-reward matrix. Quantify the benefit and assess any risks.

You should take advice on your tax planning. Spend some time with your accountant and map out a plan that works for you.