Tax planning: where are the real benefits?

Some tax planning only creates timing benefits rather than real savings. So the question is; what delivers real results?

Albion, Australia (prHWY.com) October 27, 2012 - Some tax planning only creates timing benefits rather than real savings. So the question is; what delivers real results?

The majority of tax planning falls into one of three categories - health and hygiene decisions that every business should review each year, timing benefits, and permanent savings.

The timing benefits do exactly that. They create tax savings that should ultimately materialise over the life of the business but they bring them forward. Typically, these are triggered by either deferring income or by bringing forward expenditure. This income or expenditure would have fallen in a later year causing the tax impact to also fall into that later year. Your actions change that and bring the tax benefit into the current year. As a simple example, declaring bonuses prior to the end of June 30. The declaration of the bonus prior to June 30 means that your company is committed and liable to the payment of the bonus, albeit that payment will not be made until after June 30. In this case you are able to take up the deduction in the 2011 year whereas if you did not declare the bonus and simply pay it in say July 2011 then the tax deduction would fall into the 2012 year. In either case you will be eligible for the tax deduction; you simply have the ability to bring forward the timing. Doing this has no impact on the recipient of the bonus. They will only declare it in the year of receipt.

Subject to any differential tax rates that could apply to the tax saving between years, it normally makes sense to take advantage of the tax benefit at the earliest possible opportunity. It saves you cash, gives you the time value of the tax saved and the immediacy of the benefit creates greater certainty for you. Where you operate through an entity structure such as a company, if you have any years where you incur tax losses for the year, those losses are quarantined in the company and you will have to wait until a future year where profits are made to recoup those losses. If your business is always profitable this is less of an issue. However, there are plenty of businesses who have made profits in previous years but then find themselves in one or more loss years. Taking advantage of timing benefits for tax normally makes good sense. And, there are a lot of opportunities to take advantage of those timing benefits. Sometimes the action of one day can make the difference of a year in when the tax is paid.

Talk to your adviser before June 30 and they can outline all of the opportunities in your business for tax timing benefits. Once you have this information, you can make the decisions on what you want to do and get the best plans for investments and wealth creation .

Check out http://www.integritywealth.com.au for complete information!


Street Address 5B, 85 Hudson Road, Albion 4010
Postal Address PO Box 321 Clayfield Qld, 4011
Telephone 07 3326 8500

email : info@integritywealth.com.au

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