Getting a better tax deal

October 2014

When we read about the ability of big business to minimise their tax, small business and individuals often ask how they can in fact get a better tax position.

The answer is that with some planning and knowing your position, you can get a better outcome for your tax situation. Being proactive, seeking out the right advice can make a big difference to your tax.

How can smaller businesses get a better tax deal?

Larger companies tend to spend more on advice to not only identify current opportunities but to understand the tax impact when acquiring new businesses, selling assets, structuring or restructuring.

By the time many businesses seek tax advice, the contracts have been signed and it's often too late to improve the tax position or unwind a problem. If you're looking to improve the position of your small business, here are our key tips:

Understand what is available to you

Concessions do exist for small business and other entities if you know where to look. Often business just doesn't have the time or feel the need to invest to explore anything beyond the compliance basics. Working with the right advisory team, however, can make the world of difference.

Get you structures right

A lot of small businesses fall into the trap of looking at their structure once they've achieved a certain level of growth or decide it's time to make significant changes – like bringing in investors or selling the business, for example. By the time your business is established, the cost of changing the structure may be prohibitive. If you plan right from the beginning with flexibility and tax efficiency, yes the upfront dollars may be more but you will enjoy the tax benefits and accommodate change better as you grow.

Ensure that income and profits flow effectively

This follows on from getting your structure right. Once you have the right structure in place, you can optimise tax efficiency for how income flows to you, providing you plan it in advance.

Can individuals get a better tax deal?

Individuals have fewer choices when it comes to minimising tax but there are still opportunities depending on your circumstances.

Salary packaging, structure your investments

Salary and wage earners will have limited flexibility over direction of their income. Salary packaging can provide some tax benefits. Beyond that however it will be more a matter of how you structure your other investments to optimise your tax outcome.

This applies at both an income and capital gains level. The use of trust structures, appropriate negative gearing, and maximising the benefits of franking credits can all assist in reducing your tax exposure. Debt re-organisation can often produce a better tax outcome at the same time as saving money by revisiting currently competitive lenders.

Consider your business

Business owners and the self-employed have greater flexibility over how they receive their income and you should take advantage of this. Smart tax planning causes income to fall in the right places and maximises the use of lower marginal tax rates.

Act early to get the best position

All of this requires some focus and attention early in the process. Don't wait until your tax liability is 'hurting' you. Take advice early and have a tax plan to ensure that your tax outcomes are as efficient as possible. Contact us on 02 9957 4033 for more information.

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Last updated October 2014. This article is provided for information purposes only and should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.

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Disclaimer

This article is provided for information purposes only and correct at the time of publication. It should not be used in place of advice from your accountant. Please contact us on 02 9957 4033 to discuss your specific circumstances.