Profit - and hopefully lots of it - is everyone’s goal, however the sad fact is, the more profit you make, the bigger share the ATO will be after.
The decision you need to make is how much of your hard-earned cash do you want to give them, and how does that fit into your family’s business plan? These are the questions all good accountants should be discussing throughout the year to ease the burden come tax time.
I recently managed to catch up with Sarah Becker of James Becker & Co, a progressive, rurally focused accounting firm based in Rockhampton.
We put our heads together and came up with some useful tips, and traps to avoid, when preparing for end of financial year with your accountant.
1. There is a massive difference between profit and cashflow. Profit is on the books, cashflow is what pays the bills. Just because you have no cash in the bank doesn’t mean you don’t have a profit and tax to pay.
Many businesses have suffered unnecessarily due to an unplanned tax bill and no cash in the bank to pay it.
2. Take advantage of a lean year. There might be some tax planning you can do now to help take advantage of bad seasons. Don’t waste potential opportunities to benefit from a bad year.
For example, you might be able to utilise pre-existing Farm Management Deposits (FMD’s) or forced sales.
3. Banks hate ATO tax debts. If you are about to review your lending to renew a facility or borrow more, then an ATO debt will almost always damage your chances. Always plan to minimise the chance of a tax debt.
4. Get advice on whether a tax deductible contribution to super is a good idea for you.
Part of the objective of your agricultural enterprise is building your families wealth, and superannuation is a great tax effective way of building up off-farm assets.
5. Farm Management Deposits (FMD’s) can be a great way to manage your tax liability, however only if it is part of the bigger business plan.
It is important you have a conversation when the FMD goes in, planning for how you are going to bring it out. The last thing you want is your FMD ending up a short-term band-aid that will come back and bite you in the proverbial backside.
6. If you run your business in a family trust, make sure that you complete your annual trust minutes before end of financial year, otherwise it might lead to a nasty tax surprise down the track.
7. Finally, nothing should come as a surprise, especially with tax. You should know your business better than anyone and part of knowing your business is ongoing tax planning with your accountant. Don’t ever leave planning until right at the end of the financial year.
Do your March BAS then start planning to take action before end of financial year, even if the season has not been kind and you’re not expecting any profit.
These are all really great tips to help you prepare for the end of financial year, but remember, they don’t replace the invaluable advice and tax planning from a great accountant!
If you think others might benefit from this blog, please share this blog and help me spread the word.
Cheers,
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