ACCOUNTANTS – SUPER-HEROES OF TAX PLANNING

The Australian Taxation Office (ATO) advises that every taxpayer has the right to arrange their financial affairs so that they pay minimum tax. This is the process of tax planning and is quite legal provided the measures taken are legitimate and within the intent of the law. Tax avoidance schemes, however, are outside the tax laws and will attract the attention of the ATO, possibly incurring paying back taxes and penalties.

For any accountant working in the area of tax planning, there are a few attributes they need to ensure that they are acting in the best interests of their clients while also working within the law. Every year brings changes to the tax rules and regulations, so one of the best habits an accountant can have is to keep up to date, so they are always giving their clients accurate information.

Among the benefits of being members of relevant professional organisations is access to such information, as well as conferences and regular training programs to keep members current. It is a good habit to also set up a regular schedule to check taxpayer alerts and product rulings issued by the ATO. This helps the accountant to be aware of any issues their clients may raise or even become involved in, so they can offer advice and exercise caution.

This all becomes even more important for accounting firms that are managing the administration of self-managed superannuation funds (SMSF). These funds are regulated by the ATO to ensure that the retirement benefits of the members are being effectively managed. This requires a heightened level of compliance that trustees find difficult to manage themselves, particularly given the penalties for non-compliance with statutory requirements.

Companies such as SMSF Assure employ accountants to establish and manage the complex administration systems needed to create, process and securely store the SMSF information of their clients. This requires people with habits like being organised, using sound decision-making techniques, prioritising forward planning, time management and regularly checking and verifying management reports.

Accountants working in the SMSF area are supervising tasks such as maintaining individual member records and accounts, investment records, preparing PAYG payment summaries where applicable, collecting and facilitating dividend payments and monitoring cash balances to ensure the SMSFs can meet obligations.

These are just some of the responsibilities that, along with verifying transaction reconciliations throughout the year and maintaining a diverse investment register, are just as important to the fund trustees as tax planning.

HAS THE END OF THE FINANCIAL YEAR CAUGHT YOU OUT?

The end of the financial year is almost here, so business operators should already have their tax planning strategy for this year established. If not, there is still time to review the situation and have some short-term processes in place in order to meet the 30 June transaction deadline. The following information should assist for those business owners who do not have the guidance of a bookkeeper or accountant.

Where possible, pre-pay some of next financial year’s expenses in this financial year. Typical expenses that could be paid now are rent, insurance, professional subscriptions and others. At the same time, review customer invoices already in your system to identify those you could postpone until July. The object is to increase expenses and reduce income in this current year by deferring both until next year. Just make sure your cash flow can accommodate these transactions.

This year, the ATO (Australian Taxation Office) is allowing instant tax write-offs of $150,000 for both new and used assets, so you can immediately deduct the business assets purchased from the assessable tax. Check the ATO website for eligibility criteria.

Every business has debtors it is hoped will settle their outstanding invoices, but now is the time to be realistic and review them objectively. If they are unrecoverable, you can write off these debtors in the current financial year, regardless of the year in which they were incurred.

Superannuation is another area where you need to be up to speed with tax planning. If you are a sole trader or a micro business, you may be paying into a retail superannuation fund. If you haven’t already done so, top up your voluntary superannuation contributions before 30 June, up to a limit of $25,000. However, if you have an SMSF (self-managed superannuation fund), there are specific things you need to be doing before the financial year end.

Remember that an SMSF exists solely for the purpose of providing retirement benefits for its members or their dependents. SMSFs are regulated by the ATO and there are severe penalties for non-compliance with items such as reporting, timelines for lodging documents and other statutory requirements.

For this reason, tax planning for an SMSF could differ from the typical end of financial year transactions that a business can legally perform. For business owners who, especially at this time of the year, are knee-deep in running their businesses, the last thing on their minds is likely to be the extra work involved in managing their SMSF.

Many business owners have found the best of both worlds by engaging companies similar to SMSF Assure to help them manage their administration responsibilities, make smart decisions and avoid costly mistakes. In this way, they are able to still be involved in building the investment portfolios that will ensure a comfortable retirement for the members, without the time-consuming and administration work involved.

For those of you who have left your tax planning until the last minute, deal with today’s issues and start planning for the next financial year. It will come around soon enough.