Timing your tax liability

23 May 2011

Managing timing and efficiency is about causing your tax liability to fall at the best time for you. You do this by bringing forward expenses or deferring income.

What should you consider

The efficiency part is about ensuring that tax is being paid by the entities or people where you can enjoy preferential tax rates. Think about the following:

• Declaring bonuses before June 30, even though they may not be paid until after that time
• Ensuring June quarter Superannuation Guarantee Charge (SGC) payments for employees are made before June 30;
• If you are a Small Business Entity (SBE), prepaying some of your expenses before June 30;
• Paying dividends;
• Committing to necessary consumable expenses pre June 30;
• Making Trustee resolutions to distribute trust income;
• Deferring income until after June 30, where possible;

The right strategy

Some of these strategies revolve around deferring income to the following year and bringing forward expenses and tax deductions into the current year. Don’t always accept this as the right strategy.

If you are in a start-up business and not generating a profit yet, you may not want to defer your taxing point. While saving tax always seems like a good idea consider the rate of the tax saving. It will be a mix of personal and possibly company tax rates.

Time your tax

Tax timing requires you to have a view about your current year position and any differential position for the following year. If you’ve done your EOFY review, you’ll know where you stand and that makes timing your tax significantly simpler.

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