Tax planning for Hamilton and district businesses

Small and medium-sized enterprises (SMEs) rely on efficient tax planning to help keep their business profitable. Clients in the Hamilton area rely on Sinclair Wilson’s professional tax planning service.

Tax planning is a pro-active way of arranging your financial affairs to keep your tax burden at a minimum and retain dollars in your pocket. No one likes to pay taxes and Sinclair Wilson Hamilton can assist by putting a plan in place to minimise your tax liability.

Tax is imposed on your “taxable income”, which is your assessable income less your deductions. The tax amount is then reduced by any tax offsets you are entitled to.

One effective tax planning measure is to reduce your taxable income. This can be done by either reducing your assessable income or increasing your deductions.

Reducing your assessable income
Options to reduce your assessable income include:

• Deferral of sales until next financial year
• Consider the timing of the sale of assets which are likely to have capital gains implications
• Consider the timing of income items such as insurance recoveries
• Consider the maturity dates of term deposit.

Increasing your deductions
Options to increase your deductions may include:

• Consider the option to prepay expenses
• Immediately writing off newly purchased assets costing less than $20,000 (subject to eligibility criteria)
• Stocking up on consumable items
• Making superannuation contributions
• Making donations to taxable gift recipients (registered Australian charities).

Example:
Mary has a taxable income of $38,000. The tax payable on this amount is $3,897.
If Mary applied the above strategies by upgrading to a new computer costing $1,499 and reducing her income by $5,000 by invoicing some customers at a later date, this would reduce her taxable income to $31,501 and her tax payable to $2,527. A tax saving of $1,370 or 35%!

For many of our primary production clients there are additional options to consider including farm management deposits and primary production averaging.

Other tax planning strategies which can be used, depending on your business structure, may include careful evaluation of the distribution of profits to individuals on lower marginal tax rates and payment of partner salaries.

Tax planning is very relevant to all businesses whether it is the sale of your business, restructuring, changes in ownership, sale of assets or if your business is likely to achieve a large taxable income.

Sinclair Wilson’s Hamilton-based specialists are here to assist you with all your tax planning needs and ensure your business pays the least amount of tax and you can increase your wealth.