“Taxes are what we pay for a civilised society.” – Oliver Wendell Holmes Jr.
Tax planning is a critical aspect of business success.
Effective business tax management not only ensures compliance with tax laws but also significantly reduces tax liability, enhancing overall business profitability.
In this article, we’ll explore how expert tax accountants in Australia can play a crucial role in reducing your business’s tax liability.
Understanding the Role of a Tax Accountant
A tax accountant is a specialist in tax preparation, tax planning, and compliance. Unlike general accountants, experienced tax accountants also focus on the intricate details of tax laws and regulations, providing tailored advice to minimise tax liability.
Businesses need specialised business tax accountants to navigate complex tax issues and optimise their financial strategies.
Benefits of Hiring a Tax Accountant for Your Business
Time Savings
A business tax accountant saves you valuable time by handling the complexities of tax preparation and filing, especially during tax season. This allows you to focus on core business activities without the stress of managing taxes.
Expert Tax Advice for Business Owners
Access to professional tax planning and strategic advice can significantly impact your financial outcomes. A business tax accountant provides insights that can lead to substantial tax savings and business growth.
The Importance of Tax Compliance
Ensuring compliance with all tax laws and regulations is crucial. A tax accountant stays updated with the latest tax laws, helping you avoid penalties and legal issues.
Elite Financial Management
Improved financial management through accurate and timely financial statements helps in making informed business decisions. An expert tax accountant can assist in budgeting, forecasting, and overall financial planning.
Maximising Tax Deductions
Tax accountants ensure you claim all eligible deductions, minimising your taxable income and enhancing your cash flow.
Key Services Provided by Tax Accountants
Business Tax Return Preparation
- Business Tax Returns: Accurate preparation and lodgement of business tax returns.
- Maximise Tax Deductions: Ensuring all eligible tax deductions and credits are utilised.
- Tax Compliance: Ensuring you meet all of your tax obligations
Accounting Services
- Financial Reporting: Preparation of comprehensive financial statements, including balance sheets, income statements, business activity statements and cash flow statements. These reports provide a clear picture of your business’s financial health, aiding in strategic planning and decision-making.
- Cash Flow Management: Helping to monitor and manage cash flow to ensure your business can meet its financial obligations. This includes forecasting future cash flows, identifying potential shortfalls, and implementing strategies to optimise cash flow and liquidity.
- Budgeting and Forecasting: Develop detailed budgets and financial forecasts to support informed business decisions and long-term planning.
Business Advisory
- Strategic Advice: Offering strategic advice for business growth and development, including expansion plans, mergers, and acquisitions.
- Tailored Solutions: Providing customised solutions for industry-specific challenges, helping businesses navigate regulatory changes and market dynamics.
Strategies to Reduce Tax Liability For Business
Tax Planning and Timing
Early and strategic tax planning is essential to minimise tax liability. Customised tax strategies align with your business goals.
Example 1: Businesses should regularly review their inventory and determine the value of inventory before the end of the financial year. Holding obsolete stock or out of date stock means you are paying tax on that stock. Writing off obsolete and out of date stock will lower your taxable income and reduce your tax.
Example 2: Before the Financial Year ends ensure that you have reviewed the status of your Accounts Receivable. If the amount is more than 90 days old and you have made several attempts to collect the money and issued a Letter of Demand, you should consider writing the debt off as bad. This does not mean that you cease efforts to recover the debt. You must continue to exhaust all means of collection however you have paid GST and Tax on this sale which is unlikely to be recovered in full. Writing off this amount means you can at least recover the GST and not pay tax on that sale.
Business Structure
Optimising your business structure for tax efficiency can significantly cut how much you pay in taxes.
Example: On our recommendation, a sole trader client’s business recently switched to a company structure with the shareholder of the company being their Family Trust. The restructure resulted in being able to separate the risky asset of the business operation from the non-risky assets being Plant and Equipment and cash. An added benefit was the lower tax environment of 25% in the company structure compared to the top marginal personal tax rate of 45% plus 2% medicare. In addition we were able to create a structure that allowed for protection of Family assets into the future and support for adult children continuing their studies at a tax effective rate.
Superannuation Contributions
Additional superannuation contributions reduce taxable income and boost retirement savings. The ATO allows concessional contributions of up to $27,500 in FY24 and $30,000 in FY25.
Example: A sole trader running their business can therefore contribute the maximum $30,000 this year, lowering their taxable income and growing retirement savings. If the taxpayer has not made concessional contributions in the past they may even be able to contribute more than this by claiming up to five years back of unused concessional cap contributions -of course, you need to have the cash for this !!!!
Depreciation
Leveraging depreciation schedules helps reduce taxable income by writing off asset costs.
Example: A manufacturing company plans on expanding its ageing machines. It has been a very profitable year and they have a $1,000,000 taxable profit forecast for the year. They are advised to fast track the purchase of this equipment and purchase 10 separate machines under $20,000, significantly cutting their taxable income by $190,000 and saving $47,500 on company tax.
Investment Strategies
Tax-efficient investments reduce tax burden and grow financial portfolios.
Example: A profitable company that runs a business invests its spare cash in shares in public companies that issue fully franked dividends. The dividend income received has Franking Credits attached and the company does not pay any additional tax. In comparison when the spare cash was invested in term deposits earning interest the full interest was taxed at 25%.
Common Tax Mistakes and How to Avoid Them
1. Overlooked Deductions
Many businesses miss out on eligible deductions. An expert business tax accountant ensures all possible deductions are claimed to reduce your tax liability.
2. Incorrect Filings
Incorrect tax return filings can lead to penalties. A professional business tax accountant ensures accurate and compliant tax returns ensuring you meet all of your tax obligations.
3. Lack of Planning
Poor tax planning can result in higher tax liabilities. A small business tax accountant provides proactive planning to optimise your tax position.
Why Choose a Chartered Accounting Firm?
A Chartered Accountant (CA) has undergone rigorous training, exams, and continuing professional development, ensuring a high level of expertise and ethical standards.
Unlike non-chartered accountants, CAs are members of professional bodies like Chartered Accountants Australia and New Zealand (CA ANZ), which enforces strict codes of conduct and up-to-date knowledge in accounting, tax, and business advisory services.
This ensures that businesses receive top-tier advice, accurate financial management, and reliable tax strategies.
Choosing a CA provides peace of mind and confidence that your business’s financial health is in expert hands, ultimately leading to better financial outcomes and compliance.
Bishop Collins Chartered Accountants
Hiring an expert business tax accountant from Bishop Collins can transform your business’s financial health.
From strategic tax planning to comprehensive financial management, our services ensure you minimise tax liabilities and maximise savings.
Don’t leave your tax planning to chance.
Contact Bishop Collins today to schedule a consultation and start optimising your business taxes.