Strategies to Minimise/Delay Tax 

This is the exciting part. How to legally minimise and or delay your tax.

With the above group tax planning summary, its now time to plan your tax minimisation strategies. As discussed, the above document should be your worst case tax payable scenario. The “do nothing” option.

Tax planning and tax minimisation strategies available will depend on many factors, such as:

– Your profit
– Business structure (the type of business entities you have)
– Size of your business entities (eg. do you qualify as a Small Business Entity and can you take advantage of the concessions available)
– Tax losses
– Ability to contribute to super
– New legislation that may apply

Tax Planning | Tax Minimisation | Tax Deferral Strategies can include:

Tax deductible concessional contributions into superannuation

These contributions into super are tax deductible and can be an effective way to reduce your tax obligations and build your super.

Depreciation

– This may seem automatic, however there are many different depreciation rates and types available depending on the size of entity and wider group. It is well worth doing a depreciation health check – just to make sure you are getting the best outcome.

– Small businesses with an aggregated  turnover less than $10m qualify for the small business depreciation pool which is quite advantageous.

Maximise your tax deductible expenses – this goes without saying, but its worth the effort. May include:

– Write off bad debts
– Travel
– Insurance
– Interest on business loans
– Repairs and maintenance

Pre pay expenses

Depending on your entity size, you may be eligible to prepay expenses from the next financial year.

Establish a “bucket company”

If you operate in a discretionary trust, you may like to consider establishing a “bucket company”. This allows for income to be taxed at the company tax rate. A bucket company can do two main things. First is reduce the tax payable across the group and the second is smooth out high income years with lower income years. A catch when operating your business in a discretionary trust, is whatever the profit is in a year, it needs to be distributed to a taxpayer. This can see some years with high rates of tax being paid (when profit is high) and some years with relatively low rates of tax paid (when profit is low) and often – nothing in between. A company can help smooth this out. Author’s note: This can be a complex strategy and will need careful consideration.

Time the sale of an asset

You may be selling an asset – check if the asset (a capital asset) and the entity selling is eligible for the 50% CGT discount. This will allow for any gain to be reduced by 50% if the asset has been held for more than 12 months.

Purchase of a new asset

Under current depreciation rules (May 2022) most entities are eligible for instant depreciation write offs. Be careful though, as the asset needs to be installed and ready for use to be eligible. Even outside immediate asset write off rules, there are still generous depreciation advantages when purchasing an asset.

Sale of Plant and Equipment

Selling plant and equipment in your business, many don’t realise that the sale is on revenue account and often the cost base of that asset is $0 as it has been depreciated. You may have piece of plant you sell for $100k, that has been fully depreciated and that $100k will simply add to your profit. Care on the timing needs to be taken and also consideration on the timing if you are looking to purchase a new asset… try and have this in the same year as a sale for the new asset depreciation benefits.

Pay Employee Superannuation

Superannuation liability at 30 June isn’t deductible for tax purposes, unless its been paid, so bring forward this obligation and claim a tax deduction.

Company loss carry back tax offset

This allows a company to carry back a tax loss to a prior year when there was an income tax liability and receive a refund. Effectively applying the loss against prior year tax paid. This is relatively new legislation, please see more here.

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