As the end of another financial year approaches, conversations around taxes are back on again. Cost of living is up across the board and so on top of all of this it’s no fun to add to it with taxes. Is it really a dirty word though?
According to accountants, if you have earned a decent enough income that you have a tax bill to pay at the end of the year, it isn’t all bad news. If you are paying tax, this is a positive sign that your business is doing well. For example, if your business earns $200,000 profit you would be paying tax this year of just under $65,000. While this sounds bad, it translates into after tax income of $135,000, which should be viewed as a good outcome.
Tax planning is about long-term vision and sensible decision-making, not just quick purchases to reduce your tax bill. This can seem complicated, and there are often (almost always) changes to legislation that need to be considered when making decisions. Plans can be impacted by this change and should always be checked and reviewed over time. This stuff can be confusing toon a good day and it is always recommended to consult with an accounting professional.
One of the big changes this year is the end of the Immediate Write-off for capital purchases, which ends at 30 June 2023. If you are planning on adding new equipment or vehicles to your business you need to understand how these things work, and the implications of not taking delivery by 30 June which include missing the immediate deduction which requires delivery to have taken place. You may, in fact, end up worse off if you miss this without the tax saving, and without the cash.
While you will see a run of end of financial year advertising from vehicle and farm machinery dealers which may entice you to spend on equipment you think you need in the interests of paying less tax, it is worth considering if the purchase is part of your business plan. Will you need this equipment or will it end up costing you more in the long run? When cashflow is tight, rather than having a full shed, having a healthy bank account even after paying some tax might be preferable.
Taxes are essential for any government to provide public services including healthcare, education, aged care, and infrastructure amongst
other things. Without taxes, it would be difficult to maintain a functioning society. Responsible tax planning is vital for both individuals
and businesses, as it ensures compliance with all applicable laws and regulations. Plenty of tax is collected and nobody likes to see our
politicians waste this money needlessly, but it does do a lot of good. We all want to see politicians spend our taxes wisely, and should
look at our own business finances with exactly the same view.
Make sure it all adds up for you and remember to get some help if you need it!
Forsyths - Principal Business Services