Most businesses and individuals have a Tax Accountant. This is someone who every year (or for a business it might be quarterly) prepares their tax for them. This is what we call tax preparation. But did you know that in most cases your accountant isn’t actually working to save you taxes. For the vast majority they are merely preparing the paperwork for your tax and ensuring that it is accurate. It is taking information from you and preparing that information into the right forms and documents for the Australian Taxation Office (ATO). It is a task that is focused on compliance.
However, there is another way – Tax planning!
Tax planning directly helps you minimise tax. This is a proactive and forward planning activity that aims to put practices and structures in place that will reduce your tax liability legally.
The activities of tax planning and tax preparation should be separated. Completing compliance and submitting paperwork to the ATO is important, it is a necessary part of business and needs to be done at a high level of accuracy. However, it isn’t even remotely similar to tax planning. The two activities need to be approached very differently. Tax preparation also takes place after the event. Tax preparation is about reporting on what has already occurred, however, for tax planning once the time has passed it is too late. Tax planning should be done in advance so that the right structures are in place before the tax event.
Is your Tax Accountant providing you with Tax planning services?
If you aren’t sure whether you are getting tax planning from your Tax Accountant then you probably aren’t. Tax planning should be a clear and structured process and conversation with clear agreed outcomes and actions that you would then ensure were executed before the end of that tax period. It may require to you purchase new equipment, invoice a client early or hold off on undertaking some work.
Tax planning is a very important part of your business. Paying more tax than you need to can certainly hurt your bottom line. In many cases you can make more profit without increasing revenue if you reduce your tax liability. So this can be a much more efficient way of increasing your profits.
At the Azure Group we are very proud of Tax planning services we provide for our clients. We understand the significance Tax plays on our client's wealth and place enormous emphasis on Tax Planning to manage their overall tax position.