TAX PLANNING

Every farmer and small business owner needs to be acutely aware of the tax planning opportunities that can save thousands of dollars in tax, but the relevant action needs to be taken BEFORE the financial year ends. Most of the best tax minimization strategies have to be implemented in the next few weeks. But before you launch into any action the first job is to quantify the size of the tax ‘problem’. To do this you have to work co-operatively with your accountant or tax agent. Having spent the last 33 years in public practice, I think I know a thing or two about what Lord Denning said ‘ was in every man’s right to minimize his tax within the law’.

Take the following steps quickly:

1. get all your tax data entered or organized for the period 1/7/2012 to say 31/5/2013

2. extrapolate income and expenses for the last month [June 2013]

3. get this data to your accountant as quickly as possible and work with him/her to sort out issues like private surcharges, depreciation, debtors, creditors and closing stock

4. consider these issues: superannuation, delaying income, bringing forward expenses, looking at your legal structure, prepayments…..there are a whole range of tax related matters that will impact your tax so talk about them as soon as the numbers have been crunched.

5. get your accountant to do some sensitivity or ‘what if’ analysis so you can immediately see the impact of adopting certain strategies.

6. remember some tax savings are permanent whilst others merely push the ‘problem’ into the next tax year. Talk to your accountant and find out what will work best for you.

You must find an accountant who you have a sound rapport with. Get them to explain ‘cloud software’ to you and how you can set up your back office systems so they mesh seamlessly with the the tax agent’s system. It is not appropriate for you to set up a chart of accounts in your software without first seeking some input from your accountant. Both systems have to match if double handling of data is to be avoided. Talk about the use of SUSPENSE accounts to clear problem transactions.

The point of this ‘meshing’ is to facilitate the speedy and accurate processing of financial data. This is a critical first step in getting the fiscal foundations of your business right !!

When you need to make financial decisions quickly and accurately the starting point is good data , and that is a joint responsibility.