Your definitive guide to Business Tax Planning Strategies

With 30 June just around the corner many business operators across Perth and greater Western Australia are thinking about tax planning for business and their structures.

Why is tax planning important?

Taxation is a primary factor in the after-tax returns from a family business. And tax planning is an important step in strategically managing your forward tax liabilities and the current liabilities.

In particular: taxation is a real time issue. With the prevalence of ongoing real-time tax correspondence through Single Touch Payroll and monthly Business Activity Statements the ability to “magic up” transactions is simply not an option. Further, digital stamps as an evidence trail require that tax planning and tax transactions are properly executed on the dates they occur – not with hindsight.

Is tax planning only about reducing tax?

As tax compliance for higher net wealth families is becoming increasingly difficult tax planning is not only about reducing tax – it is also about making sure that you execute your tax strategy. This could include ensuring that dividends are properly declared, tax elections are signed on the correct dates, loan agreements are executed and bonuses are paid.

So tax planning involves both the opportunity to reduce tax and the ability to stop penalties arising and keep current tax strategy operating.

When should I do tax planning?

The process of tax planning is a year long affair. The primary impact of tax strategy is done when you create, sell or adjust assets.

However, in terms of the ability to impact something before the end of the financial year then tax planning needs to be started and finished before the end of that year. If you need to move assets around, pay accounts or deal with assets you should really look to have your tax strategy for 2022 completed on or before the middle of June so that you can still have time to execute the advice.

How does tax planning work?

The process of undertaking a tax plan varies significantly from family business to family business. A family that owns a mutli-national business in financial distress will have a different approach and style to a family with a large locally owned property portfolio. However the following approach is common with tax planning:

1. Westcourt will undertake a review of your business and investment performance.
2. We will highlight and discuss areas of tax law that could impact your business and investments including the position of government grants that might apply to you.
3. We will review the level of taxes paid by you and your various investments.
4. We will review the current structure of your investments and businesses to see if they still suit the tax regulatory environment and the operations of your business.
5. We will engage with other advisors where they might be affected including lawyers, finance brokers, money managers and insurance advisors.
6. We will project your forward tax payments to help you understand and manage your cash.
7. We will identify strategies that need to be completed before 30 June and the value affecting you to do the same.

The above process can be done very quickly for families with simple tax affairs (and due to our robust systems) or it can take longer for families with more involved affairs.  However, the overall strategic approach is still relevant.

How much does it cost for tax planning?

At Westcourt we are committed to upfront pricing. If you do not agree to the cost of a potential service you will not pay it – simple.

Our tax planning advice starts from $165 + GST for simple trusts that need a written resolution. And many smaller, streamlined clients do not more than this. And the cost for more complex families and family businesses has been more than $100k for difficult and detailed positions. One thing is common across all of our clients – the scope, price and strategy is agreed in advance so you are never surprised with a nasty bill.

What tax strategies are you recommending?

The strategies vary significantly and the same strategy can in some instances create a significant difference to people with very similar instances. However, the following items are typically discussed:

1. The reducing company tax rate.
2. Changes to personal tax rates.
3. The ability to claim an immediate tax deduction for plant purchases.
4. Superannuation strategies to avoid excess contributions taxes including carried forward thresholds and downsizer contributions.
5. Superannuation pension payments to ensure super pensions remain tax free.
6. Compliance with loan accounts and the obligation to make repayments.
7. Succession planning strategies and the transfer of assets as part of a succession strategy.
8. Salary sacrifice options and salary payments.
9. Business restructuring options.
10. Ensure trust profits are paid to the correct beneficiaries in a tax effect and commercial way.
11. Checking the reportable fringe benefits are being processed through Single Touch Payroll.
12. Documenting and calculating employee bonuses that might be paid in July.
13. Managing franking accounts to ensure dividends paid are franked.
14. Reviewing capital gains and the ability to commercially generate a capital loss.
15. Writing off unrecoverable debtors or old stock.
16. Reviewing the positions for Windfall Gains Tax.
17. Capital gains tax exemptions including the Small Business CGT concessions.
18. Identifying the currency of motor vehicle log-books.
19. Reviewing tax opportunities for family businesses in remote or regional areas.
20. Looking at land tax costs and property portfolio structures.
21. Increased superannuation pension payments to reduce death taxes.
22. Documentation of transactions and resolutions to prove the date they occurred.
23. Reviewing your estate plan for the currency of the plan within a tax environment for families that are changing location, new family members or changing attitudes by family members.
24. Identifying the type of expenditure in your business for government grants like the R&D Tax Offset or the Export Market Development Grant.
25. Tax profiling assets to ensure the asset type is sitting in the correct tax structure (such that low taxed assets are not sitting in low tax structures).

Can I do it myself?

Yes you can. All tax advice is optional. The mere act of lodging a tax return can be done directly with the ATO. However a tax strategy must be documented to be truly effective – the need to manage the ongoing knowledge and complex strategy cannot be left to memory.

At Westcourt we are focussed on one client demographic – making families in business great.  Our commitment to one market type together with our demonstrated deep knowledge of tax law gives us a competitive edge to firms who are focussed on everything.

Our deep focus, together with our documented strategic approach to tax advice allows us to create benefits to families in business that are not simply identified or even understood by many other advisors. And given our commitment to upfront independent pricing we are a natural choice for families in business – so why not give us a call?

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