Hi there, my name is Ben Walker – Author, Award Winning Chartered Accountant and Founder of Inspire – Life Changing Accountants and I’d like to share with you an idea around Tax Planning.
What’s Tax Planning for healthcare business?
One of the services that we do for our business clients each year is this process called ‘Tax Planning’.
Tax Planning is a proactive process to implement in your healthcare business using legal strategies to reduce your tax bill. We do this process from March through to June each year for our Australian clients. If you are in New Zealand or other parts of the world, it might be a bit different for you.
Our financial year is from July through to June. We’ve got four quarters – September, December, March, and June.
Now that we’ve gone through March, April and May, we know what September, December and March quarters will look like. Based on how the business is going, we might be able to work out what the estimate for June might be in terms of profit.
What we need to do for the business is estimate what the profit is going to be. We actually look at that from a business and a personal perspective because every business has an owner. How we take money out of the business also affects how much tax that family pays.
Tax planning is a broad approach where you have a look at the business group and also the individuals and all the entities within that family. We want to have a look and estimate the profit of the whole year for everyone. What we can do from that is work out how much the estimated tax bill is. We work through all of our legal tax strategies, advise and decide together with the client. The process from that point onwards through to 30 June is to implement any actions that are required.
How does Tax Planning benefit myself, my family and my healthcare business?
Let’s say, you wanted to take advantage of the instant asset write off that the government’s announced. We need to actually go and buy an asset and get that installed, ready for use by 30 June to be able to claim it this year. Do keep in mind, there might be some actions required and some cash needed before 30 June.
As an example, let’s say we work out the families, the business and the family group profit is $300,000. That’s about $100,000 in tax. We discuss with the client all the different strategies, decide together and end up on three to five strategies. As a result of that, the tax payable has reduced from $100,0000 to $75,000. So for that client, the value of tax planning is $25,000.
Some of this can be pretty substantial in what value we provide for a client. It’s a process of working together with them. If they’ve had a big year (we’ve got lots of clients who are doing the same or better) regardless of what’s happened from a global perspective in the last 12 months, and we’re seeing massive tax bills depending on the client. We can see that in this example, the value of tax planning is at $25,000.
When should Tax Planning for Healthcare businesses be completed by?
Keep in mind, these things do take time to implement sometimes. If cash needs to move, it all needs to usually get done before 30 June. If you need to make superannuation contributions from a tax perspective, it might save you some money. The cash has to move before 30 June or write off some bad debts. You need to write them off before 30 June or prepaid expenses if you want to use that strategy. They’re all examples of what you might need to take action before 30 June.
I’d encourage you to talk to your accountant if you don’t normally do this process. Even if you need to pay them for tax planning, usually it will end up saving you more money in tax than it costs you in accounting fees. That’s my recommendation if you run a business and you’ve had a decent year.
The other thing that’s interesting about this year is that we’ve had stimulus measures like JobKeeper. Jobkeeper is a reimbursement that we received is actually taxable. But, if you received cash flow boost, it is not a taxable payment from the government. So, this year is going to be a bit tricky for tax planning, so definitely get in touch with your accountant and get that process started sooner rather than later.
If you would like to talk this over, myself and the team at Inspire – Life Changing Accountants would love to help, you can contact us here:
About Ben Walker:
Ben Walker founded Inspire CA at the age of 23 with nothing but a borrowed printer, a laptop and a simple idea: what if, instead of just doing tax and reporting on history, accountants could give game changing advice that could help people write a better future for their business and their family? Four years on, Inspire has been showcased as a global example of what an Accounting firm should be, thanks to Ben’s disruptive approach to throwing out timesheets & charging by the hour, his challenge of the traditional ‘old school’ model of the accounting industry and belief that Accountants change lives. He is a winner of the coveted Anthill Online 30under30 award for 2014, was named a finalist in the Brisbane Young Entrepreneur of the Year awards and has been featured in many publications including the Courier Mail, Small Business Big Marketing Podcast with Tim Reid, Brisbane Business News & B Mag.