When it comes to tax time, different accountants may employ different tax strategies in a bid to reduce your taxable income as much as they can. There are a lot of options when it comes to getting your taxable income down, so it is important to consider your options if you have had a good year and are facing a solid tax bill. Some of the most common tax minimisation strategies include:
Think about tax time all year:
The best thing that you can do is make sure that you are thinking about your tax obligations throughout the year, rather than just at the end. This is especially true if you are a small business owner, as you might get stuck with a bigger than expected tax bill if your records aren’t up to scratch.
If you have had trouble in the past, then you should think about using a decent accountant to keep your tax affairs in order for the entire year. They should be able to advise you on logical financial decisions for your business, should pick up on problems before they become major, and should be able to help you keep your taxable income down at an acceptable level.
Consider spending or future spending:
If it looks like you are having a better than average year and are going to have a decent chunk of profit at the end of it, then you should consider offsetting some of it with tax deductions. Think about what sort of costs you are going to have over the next year or two. If you are going to need materials or physical things to run your business, see if you can but them before the end of the current financial year. Doing this will help reduce your taxable income. In the same way, if you have had a poor year, consider deferring costs until the following year, where you may have a larger taxable income.
Put money aside for retirement:
If your business has had significant profits for a particular year, then you could consider putting some of these profits into a retirement fund or superannuation account. In many cases, doing this will reduce the amount of tax that you have to pay significantly, as well as setting you up for the future.
Use an experienced accountant:
An experienced accountant will know the tax system inside out, and they should be able to pick up areas where you can minimise your taxable income. Whether these come in the form of things like fuel and GST credits, or in the form of deductions will depend on your business.
Tax can be a terrible pain in the neck for people who don’t have some sort of accounting background. If you don’t do things properly, then you may find yourself paying more tax than you should. It is often worth speaking to an accountant about end of year tax minimisation strategies to maximise your profit – try it today!