Tax planning strategies are employed by a business to help achieve their financial and business goals. A good tax planning strategy include saving options whilst reducing unnecessary payments towards taxes and fees. It should help a business maximise reliefs, create smart retirement plans and allowances and ensure that the correct tax bill is paid by the business. 

 

For a new business, tax planning gives the owner a sense of the potential profit areas which may be currently underexplored or as yet untapped. It further helps with finding new investment options and the best way to structure those investments. Some of these effective strategies are listed below. 

Tax planning basically is the action taken to ‘minimise tax liabilities to ensure all available allowances, deductions, exclusions and exemptions are working together in the most tax-efficient manner to reduce the total tax bill’. This is important for a new business as financial planning helps with achieving financial and business goals, as well as reducing the amount payable on income tax, overall reduction of the tax rate, enabling better control of when taxes are paid and importantly maximising tax reliefs and increasing available tax credits. 

If you are making personal super contributions, then you may be able to claim the contribution as a tax deduction, which helps reduce your assessable income. It is best to seek the advice of a company financial adviser for professional tax planning to help you maximise the benefits. Superannuation is a proactive approach to secure your future. Smart moves towards boosting superannuation are salary sacrificing or making after-tax contributions. With salary sacrificing you can redirect part of your employees’ salary into super, which will be subject to the concessional contributions cap. This will help with gaining a tax reduction while also increasing superannuation savings. If money can be spared, after-tax contributions are a great way to increase the super. 

For a business, bad debts are those you incur from business related activities, such as debts you cannot collect but have previously reported as gross income. Bad debts include loans to clients and vendors, credit sales to customers and business loan guarantees, among others. 

 

Seek professional help to review the bad debts and then take action to write it off via adjusting your accounts to represent the real amounts of your current accounts. You need to remove it from your receivable accounts, as your business balance sheet will be affected by bad debt. Direct write-off method and allowance method are the two ways to write off bad debts. Check with your tax adviser for the best method for you to adopt. 

This process verifies that your drafted invoices are complete and accurate. By doing this to a planned schedule and scope it ensures that everything is on track. It involves two processes namely functional reviews and the detail reviews which follows thereafter. This is quite effective for businesses with multiple departments as it helps reduce minor human errors that can occur during invoicing. 

For any business inventory is the hub and reporting inventory on your tax return is essential towards determining your income or loss for the year. Inventory accounting is an essential component of an accurate balance sheet and helps to figure out the cost of goods sold (COGS). For tax purposes, COGS is usually determined annually by starting with your opening inventory and closing inventory of the previous year. 

There are a range of concessions that allow small businesses to transfer assets from one entity to a related entity without triggering a tax liability. You can decide and choose which concessions suit your business as long as you satisfy the stipulated conditions. Each year you will have to check if your business qualifies for small business concessions.