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Monthly tax tip:
Most taxpayers will assume that it’s always best to claim everything possible in each tax year to ideally pay the lowest amount of income tax. However, there are some deductions that you can choose to claim in a later year if the outcome is positive. These deductions can include depreciation of assets, super contributions, directors fees, certain prepaid expenditure, cash expenses and the list goes on. It may seem a bit backwards to not claim a deduction that is available but sometimes this creates a better tax outcome which will later be enjoyed. This is why tax planning can be so beneficial for small business owners.
If tax rates are set to be increased or certain tax offsets will be removed and not available, then it might make sense to save some tax deductions for a future year when it’s likely that income tax will increase for the tax-paying entity. For example, an entity may be claiming tax losses from a previous year that will reduce their tax liability in the current year. That entity will no longer have those losses to claim in future years so it might make sense to claim the least amount of deductions possible so that they can be claimed in a later year. Instead of paying a low tax rate or no tax in one year and then a very high tax rate in the next year, they instead pay the average tax rate which will save them money over those few years. For some, this may mean tax savings of a few thousand! We have certainly had clients with this outcome after tax planning has been applied. This is why tax planning is recommended and can make such a difference for some taxpayers.
If you would like to schedule a consultation with us then please jump onto our website where you can see our availabilities and book a time that suits you.
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