Peregian Accounting Services can help you minimise your tax liability. Minimising your tax payable is the result of tax planning that looks at your existing investment strategy and examines the tax effectiveness of your investments to see whether you are paying more tax than you need to.
Valid tax-saving strategies include the following:
Investing in superannuation government co-contributions, undeducted contributions
(from after-tax income), and salary sacrificing into your superannuation up to the concessional contributions cap of $25,000 per year for under-60s or $35,000 per year for those aged 60 years or older in 2013-14.
As a result of recent law changes taxpayers 50s or older will be able to contribute up to $35,000 per year from 1 July 2014. At this stage, the cap for under-50s won't be increased to $35,000 until 1 July 2018.
Setting up a self-managed superannuation fund (we suggest you need at least $250,000
to invest due to the high annual maintenance and audit costs of an SMSF).
Pre-paying expenses to reduce taxable income, such as prepaying some of next year’s
interest on an investment loan to claim the deductions against this year’s income.
Using tax-effective investments, examples of which are available from ASIC as
product rulings.
Using gearing strategies to increase tax deductions.
Setting up a family trust for distributing income and protecting assets.
Using the 50% capital gains discount available to individuals, superannuation funds
and trusts by holding appreciating assets directly or through a trust instead of a company.
Where possible, deductible expenses should be paid by high-income family members,
and interest-bearing investments should be held by lower-income family members.
Tax minimisation is not the same as tax evasion. Tax evasion is a crime that involves deliberate attempts to lie to the ATO about business activities, or not paying tax that is owed. An example of tax evasion that the ATO is currently targeting is operating in a cash economy and then not declaring cash income you have received in your BAS or tax return, thereby avoiding tax that would be due.
Most taxpayers want to do the right thing. Occasionally mistakes are made, however, that result in under- or overpayment of BAS and/or income tax.
Some common mistakes are:
Claiming GST credits on wages and superannuation, stamp duty, bank fees and charges.
Claiming GST credits when the supplier is not registered for GST, or has not charged GST.
Claiming full GST credits on purchases that are used partly for private purposes.
Not claiming the GST on a business purchase when entitled to.
Not claiming the GST on the purchase of a motor vehicle when entitled to.
Not recording the sale of business assets or paying GST on their sale.
Incorrect allocation to accounts, for example, expenses that should have been
recorded as asset purchases and refunds on purchases that have been mistakenly
recorded as income.
Bank reconciliations where the balance recorded in the accounting software doesn’t
equal the bank balance.
Inconsistently or incorrectly applied GST codes.
Poor cash handling, especially when it comes to recording petty cash.
Perhaps the biggest mistake clients make, though, is not recognising when to stop trying to do it themselves and allow a professional bookkeeper to take over. If you spend more time bookkeeping than running your business you may start to run down your profits. Correcting and rearranging accounts, amending previous lodgements and paying penalties when a business’ books have been poorly prepared all costs more money in the end than you may have saved by doing your own bookkeeping.
Looking after your own books always takes more time than clients expect, so you should thoroughly examine the benefits and the costs of preparing your own accounts.
