Updated: Jun 5
✦ As June rolls around once more - and with it the end-of-financial-year chaos - I want to share with you 10 tips to both reduce the stress and maximise your returns.
When you’ve been a Chartered Accountant and Business Advisor for as long as I have, you can sense the tension in the air when June 30 looms large on the horizon.
So if you’re dreading the coming month and all the numbers and brainwork you’re in for, I have 10 ways to kick that overwhelm to the curb and get your head in the game for this final stretch of FY2021-2022.
1. There is no Tax Time
Woah, what? That might be a weird one straight out of the gate, but this one always stops my clients in their tracks. Much like 'super foods' and 'anti-aging', 'tax time' is not an actual industry term. It's a marketing term.
But much like the examples above, it's had a dangerous impact on the 'thing' which it refers to. There is no specific 'time' to be thinking about tax. We should be considering smart tax minimisation options as part of our regular 'sit-down' with our numbers.
As frequently as doing wages, paying invoices, checking the account or placing orders, so too should we be 'checking in' on our tax and keeping opportunities to save or spend wisely top-of-mind.
2. Tax is not the same as your car rego. It's not a bill due every year.
Another head-space shift I need you to make - stop thinking about your tax as a bill. Tax is not an annual subscription to the ATO.
If you want to maximise the opportunities that the taxation system presents to your business, you need to stop treating it like a bill you have zero control over that just turns up unannounced throughout the year.
Similarly to the above, this can be one of the single biggest shifts in how you think about tax that can open your eyes to its true potential. How often do you think about wages? Balancing Xero or MYOB? Paying your suppliers?
Awareness of the way tax works means there can be all sorts of opportunities such as varying your tax instalments when things change. Even the idea of getting a refund needs to be revisited - do you want the ATO to have your spare money so you get a refund? Or is it better to keep a closer eye on the details and give them the appropriate amount each quarter?
3. Tax Avoidance is NOT the same as Tax Evasion.
"Whilst tax evasion is illegal, tax avoidance is not. Tax evasion is the illegal practice of not paying taxes by not paying the taxes owed; reporting taxes that are not allowed legally; and not reporting income. It can apply to employment taxes, sales taxes, and income taxes.
On the other hand, tax avoidance is a legitimate way of minimising taxes through methods indicated in the tax law. Businesses can avoid taxes by availing of all legal deductions and by sheltering income from tax payments through other legitimate means." (thanks to @fclawyers for this well-worded explanation).
Too many business owners leave opportunities on the table by flinching at the term 'Tax Minimisation’'. In the immortal words of Kerry Packer: “of course I am minimising my tax… as a government, you’re not spending it that well that we should be donating extra.” Food for thought, right?
4. Tax Avoidance does not make you a bad person.
“I’m a good, tax-paying citizen.”