Building on last month’s focus on the importance of Financial Health Checks, it’s equally important to start your tax planning well before deadlines approach. Tax time often sneaks up quickly. It can be stressful for many, but it doesn’t have to be. By ensuring your financials are up to date, you are best positioned to identify your tax deductions and offsets and know what you need to pay.
Taxation is a critical component of financial management. GST, income tax, capital gains tax, rates and other taxes are charges from government on individuals and businesses for public services. They must be paid, but how much you pay depends on how effectively you navigate the system.
Tax planning involves estimating your income and expenses for the remainder of the financial year, understanding your estimated tax position, and implementing appropriate strategies to better manage your tax. A well-developed tax plan ensures you pay only pay what you need to pay.
The Rural Financial Counsellors at the Rural Financial Counselling Service NSW (RFCS NSW) are experienced in helping people understand and take control of their finances. While RFCs are not taxation experts and can not provide taxation advice, their case management model highlights tax requirements, issues, opportunities, and options to guide you.
The Rural Financial Counsellors are seeing an increasing number of farmers going through farm debt mediation as a result of making capital purchases. Farmers are commonly advised to make capital purchases such as farm machinery, to receive the initial tax deduction. However, if these purchases are made through financing, farmers need to ensure they can afford the repayments. We encourage farmers to consider other options, such as farm management deposits to reduce their tax bill.
The top tips for tax planning from RFCS NSW are:
- Always talk to professionals: Engaging with tax professionals ensures that you benefit from expert knowledge and are up to date with information on tax planning and compliance. Professionals can offer tailored advice, identify tax-saving opportunities and assist in making informed business decisions.
- The earlier you start the better: Commencing tax planning early in the financial year allows you and your accountants to proactively manage finances and implement strategies effectively. Waiting until the last minute may overwhelm accountants during peak periods.
- Consider some of the big issues: While having a tax professional on your side is imperative, their knowledge is only as good as the information you give them. To get the most from your working relationship, it is important that you know your business inside and out and spend some time considering some of the conversations and issues you are likely to discuss during the planning process, including:
- Bringing forward or delaying income and expenses to pre or post-30 June
- Trust distributions and the effects on beneficiaries
- Review of farm management deposits
- Superannuation planning/contributions
- Major capital purchases
- Debt reduction
- Changes in off-farm income
- Impact of accumulated losses
- Impact of deferred income/forced sales
- Review of averaging position.
RFCS NSW can guide you through your preparation work, analyse your financial circumstances and develop an action plan to help you improve your tax position and profitability.
