Tax Planning 2021: 6 Steps to Save on Tax

On average, we save more than $10,000 for our small business clients every year in tax. The reason we are able to do this is because we help them plan ahead before the 30th of June.

We’ve all heard the saying ‘by failing to prepare, you are preparing to fail’ and this holds true when it comes to tax. Without planning, you could be paying far more than you need too resulting in higher tax bills and worse cash flow.

We know tax time can seem daunting and more often than not, it can appear like a minefield that is impossible to navigate, but you don’t have to plan for tax all by yourself. Here at PCR Accounting & Advisory, we have saved millions in tax for our clients by coaching them that preparation is key to coming out on top.

If you leave your tax planning until the end of June, quite frankly, there may not be enough time to do anything significant to legally reduce your tax. So, for 2021, you should start planning for tax time NOW.

Step 1:
When beginning a tax planning journey, we request details of your expected income and business profits for the 2021 tax year (1 July 2020 to 30 June 2021). This includes all wages/employment income, interest and dividends and rental income received business profits/losses, and any capital gains/losses you expect to make. If you aren’t on one of our ongoing plans to help manage your tax already you should consider contacting our team so that we have financial information prepared for you.

Step 2:
Based on this information, we estimate your taxable income and your tax payable BEFORE any tax planning strategies. For example, we may calculate (based on your information) that you may have a taxable income of $150,000 for 2021 plus $100,000 in business profits that need to be distributed. This is vital as your income (& where your income is from) determines your tax position and the options available.

Step 3:
Once we’ve calculated your taxable income, we can think of your tax planning options. Some of these may be things to do in your business, and some of these may be investment/wealth creation options. An example of this might be to increase your superannuation contributions or to prepay interest on an investment or even to defer income.

Step 4:
It is in this step that we put in a range of different tax planning options to maximise the benefit of the tax planning options, to help best manage your cashflow and minimise your tax. We can discuss the options with you and the impact they have on your overall tax.

Step 5:
Once we’ve got all the information we need, we can apply the appropriate strategy. We will provide you with a report in plain English that clearly and concisely explains the tax planning strategies we recommend, and exactly how much tax you can expect to save.

Step 6:
Finally, we provide you with an easy-to-follow action plan, to ensure that both you and our team can get everything completed that needs to be done prior to 30th June.

COVID-19 Considerations for Tax Planning
This last financial year, there was a lot of government assistance and significant changes and, therefore, it is more vital than ever to complete tax planning.

If you have received a JobKeeper payment, this will be assessed. Furthermore, there are clients which may have had reduced PAYG tax instalments, meaning that you may have paid less tax than usual. This could result in possible unexpected tax bills for some.

With the change to the instant asset write off, clients that have purchased new cars, equipment or have equipment-heavy businesses could end up with tax losses. This might not be the most tax-efficient outcome and so it is more important than ever to ensure that you maximise your overall position this year.

For many business owners, the end of the financial year is one of the most stressful few weeks on the calendar, but it doesn’t have to be. With the help of PCR Accounting & Advisory, you can ensure your business maximises its tax savings and avoids any unwelcome surprises.

If you need help with lodging your company tax return with the tax department, contact our expert tax accountants at PCR Accounting & Advisory on 03 9847 7516.

Owner of PCR Accounting & Advisory, Peter Marmara-Stewart is a top-tier accountant and financial advisor dedicated to helping clients reach their business goals and achieve financial freedom. Peter is highly regarded for his client-focused approach and entrepreneurial spirit, catering to a diverse range of professionals across a wide scope of industries all across the country. Peter’s expertise can help you plan effectively, set goals, maximise profits and protect your assets. Get in touch today on (03) 9847 7516.