Wouldn’t it be great if there were some magic method whereby we could all enjoy the benefits of improved government services right across the board without having to pay tax? We would get to keep everything we earned and still have all the services that make us very comfortable. Instead of dreaming about the impossible, we should be thinking carefully about what we do pay in tax, and how that could be legally minimised.
For people in business who have to deal with all the different types of tax that apply to their situation such as FBT (Fringe Benefits Tax), GST (Goods and Services Tax), Payroll Tax and others, the advice of skilled and experienced accountants is essential to ensure that any strategies they use are legitimate. The tax rules change from one federal budget to the next so something that was acceptable last year may not be acceptable in the current tax year.
Check Taxation Position Annually Prior to the End of Financial Year
The concessional tax rates and eligibility criteria can also change, which may affect the viability of any of the strategies that are already in place. These should be checked every year against the current legislation to see if any adjustments need to be made. The best time to do that is several months before the end of the financial year, rather than leaving it until tax returns are to be lodged. Reviewing taxation strategies at this stage provides enough time to implement alternative tax minimisation methods before financial year close off.
There are a number of familiar strategies that are still useful in reducing tax including salary sacrificing and/or salary packaging, making tax-deductible contributions to superannuation, managing super contributions within the caps set down by the government and borrowing to invest. Negative gearing of property, shares and other investments is another method. All of these strategies are complex and need to be managed correctly, so seeking professional advice before taking action is essential.
Many Legal Ways of Reducing Tax Available to Business
As well as these types of methods, for business owners there are standard methods of reducing taxable income such as writing off obsolete stock, and reviewing the current depreciation schedule. This is often overlooked in a busy environment. What typically happens is that assets that have become damaged or obsolete are thrown out, but still remain on the depreciation schedule. By removing them, they can be written off, provided they are not part of pooled assets.
These are not the only methods available, and as every situation is different, reducing tax should be approached from that aspect, preferably with the guidance and advice of an accounting professional.
