Working with a proactive tax planning accountant can deliver great tax-saving results. Small business tax planning is crucial for managing your finances effectively. You should implement smart tax strategies. That’s why our clients like working with a proactive tax planning accountant. We can help you to maximise your savings, reduce tax liability, and improve your financial position. Proactively planning your taxes will help you legally minimise the tax you owe and optimise your financial resources.

Effective tax planning helps you manage cash flow more efficiently. By understanding your tax obligations in advance, you can plan for upcoming expenses and ensure sufficient funds are available to meet your tax obligations on time. Planning avoids the risk of cash flow issues and potential penalties from late payments.

Furthermore, tax planning enables you to make informed business decisions annually. You can choose strategies that minimise your tax liability by considering the tax implications of various financial transactions, investments, and business decisions. This strategy also helps maximise your after-tax profits. This strategic approach to tax planning can contribute to your business’s long-term growth and success.

One primary objective of tax planning is to reduce your tax liability. While it is essential to remain compliant with tax laws, there are legitimate ways to minimise taxes. This involves identifying and taking advantage of deductions, credits, and exemptions that apply to your business. By carefully analysing your income and expenses, you can find opportunities to reduce your taxable income and lower your overall tax result.

Timing is also crucial for tax reduction strategies. Strategic planning for purchases and expenses can optimise your tax deductions. For example, prepaying expenses before the end of the financial year allows you to claim deductions in the current year rather than spreading them over multiple years.

Making Informed Investment Decisions & maximise super

Another aspect of tax planning is evaluating the tax implications of your investment decisions. Whether you are considering purchasing a rental property, commercial property, or other business assets, assessing the impact on your cash flow and tax position is essential. By understanding the tax consequences of your investments, you can make informed decisions that minimise your tax liability and maximise your returns.

Contributing to your superannuation fund is an intelligent retirement planning strategy. Furthermore, it is a tax-effective way to save money. Contributions made from your pre-tax income are taxed at a lower rate than your regular income. Maximising your superannuation contributions can reduce your taxable income, potentially lowering your overall tax bill. This allows you to save for retirement while enjoying immediate tax benefits. Our strategy helps clients explore available options when deciding upon a contribution strategy.

The Role of an Accountant in Tax Planning

Working with an accountant is a smart choice for small business owners who want to maximise their tax savings, ensure compliance, and achieve their financial goals. As your accountant, we play a crucial role in tax planning by providing expert advice, guiding you through the complexities of tax laws, and developing effective strategies tailored to your business needs.

Let us explore tax planning and how we can assist you!

As a new client, the first thing we do is review the previous Year’s Tax Return. We suggest reviewing last year’s tax return to understand your financial situation, identify any changes, and ensure that any prior advice was acted upon and is still relevant.

We would like to understand your circumstances. Please discuss any significant life or business changes with us, such as marriage, divorce, the birth of a child, the purchase or sale of a property, changes in business revenue or expenses, or any significant investment gains or losses. These changes can significantly affect your tax situation. If you own a business, review your business structure to ensure it’s still the most tax-efficient for your situation, considering any changes in tax laws or your business.

If you’re planning any significant financial transactions, such as selling a property or a business, remember we can help as your accountant to plan these transactions to minimise tax impacts.

Things that help proactive tax planning

Timing of Purchases

One of the essential aspects of small business tax planning is timing your purchases strategically. We can help you determine the optimal time to make significant purchases or investments to maximise your tax deductions.

Analysing your financial situation and business goals can provide valuable insights on when to make these transactions to minimise your tax liability.

Staying on Top of Lodgement Dates

Late lodgement of tax returns and failure to meet lodgement dates can result in penalties and interest charges. We aim to effectively help you stay organised and ensure that your tax returns are lodged on time.
Our experience and knowledge ensure we understand the latest tax laws and regulations that could affect your tax liability. We also know how to assist you in accurately reporting your income, deductions, and other relevant information to minimise the risk of penalties and reduce your tax liability.

Avoiding Unnecessary Spending

While tax deductions can be beneficial, it is essential to avoid unnecessary spending solely to obtain a tax deduction. Tax is one part of the decision-making process for small businesses. As your accountant, we will guide you on whether certain expenses are justified and aligned with your business goals. They will help you make informed decisions that make financial sense and avoid unnecessary spending that may not provide significant tax benefits.

Starting the Tax Planning Conversation

Using a Tax planning Accountant, we stress that tax planning is an ongoing process that requires proactive engagement. It is recommended that the tax planning conversation be started well in advance of the end of the financial year. Being proactive allows you to assess your financial position, review your business goals, and develop a comprehensive tax plan.

As your tax planning Accountant, our role is to suggest strategies to minimise tax liabilities based on your financial situation and goals. This could involve strategic investments, retirement planning, charitable giving, or other tax-efficient moves.

Formulating an estimate of your tax liability for the current year is essential in tax planning. Understanding any potential tax bill or identifying additional savings strategies before the year-end can give you a planning control. If you are self-employed or have significant income not subject to withholding, your accountant should advise you on making estimated tax payments to avoid penalties. We can review this at any time of the year.

Future planning means going beyond the current tax year. Working with an experienced accountant is invaluable in navigating the complexities of tax laws and developing effective tax planning strategies. Start your tax planning conversation with us today and see if we secure a brighter financial future for your small business.

How do I sell my commercial business property? When selling your business, your business operations and HQ are an essential and strategic part of your business.

Most businesses operate from a premise of some sort, so when it comes to exit planning, your decisions on what to do with your business premises is equally important as one of the essential items that require serious discussion and planning.

When it comes to planning, the first thing to do is to review how and what you use your office, factory shop, etc., as part of the business on a day-to-day basis. For that reason, the location may be the reason for the business’s success,. Coupled with the possibility that the business building and surrounds such as a hotel, fun park or caravan park may be the selling point. The business HQ property may also have been purpose-built, and your business sale value may be exploited if the business and property are sold as one package.

Further your business may have multiple premises to consider, which factor into the strategy along with what can be sold, consolidated, and required moving forward.

Strategic Review of the Business, how it operates and where

As part of the exit strategy, take a moment to review the business. In short look at the location it operates to help you work through your exit planning:

• Will, upon exiting or selling, the business be relocated?
• If the business is to be sold separately from the property, how does this affect the business disruption?
• CGT issues?
• Will the owner wish to sell or retain the property for the next generation, and how will this take place?
• Are there other uses for the property, e.g., development or retirement?
• If the business operates from home, consider whether this is the right location for selling the business.
• What are his wishes for the family and passing the property on to the next generation?

Is your property ready for Sale?

The owner needs to review the property to ensure it is in a sellable state. Take a moment and look at:

• Access and potential change of Council Zoning. What points of access are there in and out of the property?
• Fire safety:  Does the property comply with fire safety and other emergency safety factors?
• Security:  Is the property safe and secure?
• Surfaces:  Do they feature lead paint and dust? Are the floors slippery, OHS?
• Hazardous materials and toxins:  Does the building present any dangers associated with asbestos used in its construction?
• Old fuel tanks and other old substances – Banks hate these when it comes to financing
• Installed plant and equipment:  Is the equipment, such as air conditioning systems, in good working order and maintained?
• Lighting: Is the property well-lit for the purpose you intend to use it?
• Air quality: Is the building adequately ventilated?
• Is your property have sentimental memories? Will this influence you and should be considered as being held for the next generation

Consider all options!

There are some options to consider when it comes to your business real estate you own. These can be classified as follows:

• Keep the property and treat it as a long-term investment
• Transfer to SMSF
• Sell with business
• Sell the property separately from the business
• Relocate the business and develop the property before selling the business
• Leave to next-generation – family farm
• Sale-leaseback arrangement

Sell or keep your freehold property

Let’s first look at why you may not sell the freehold property and choose to keep it and sell only the business:

• It might be too hard to consider – too much work
• The passing of the land onto family – save for subsequent generations, so needs to be kept
• The property value may exclude or reduce the number of  potential interested  buyers if the property is sold with the business
• You may start another business on the property
• It is better sold as a development opportunity
• Maybe a good long-term investment
• Strategy – especially for hotels etc., where you may wish to sell the business but take back long-term for a family
• Your real property may have been used to guarantee a business loan, i. Selling the property may impact another loan security used in another part of the business that is not being sold.
• The business may have multiple uses, or some businesses may work on the same premises.

Why you may consider selling the best option!

Opposite to the above, here are some valid reasons why you would sell the property at the time of selling the business:

• Some businesses need specialised buildings and assets from which to conduct their operations. Therefore, you may have the opportunity to sell the property to a buyer who appreciates the attributes of the building.
• When deciding to sell the business,  will the purchaser of your business wish to relocate it to another location and may leave you with an unwanted property in the future
•  Investors avoid investing in highly specialised assets like laboratories or dedicated production facilities. The primary risk for investors is the use of the building should the tenant company, the buyer of the business, default or not renew at the end of the lease period.
• If your business is specific, it would most likely be best sold with the business for the buyer to have business certainty.
• Time to reassess the financial plan for retirement
• Issues of maintenance that will require significant capital moving forward.

Whatever you intend to do, take time to make sure the structure you have chosen to hold the business vs the property works for you from a tax and estate planning perspective.

Reduce the CGT pain – use the tax concessions available for small businesses and the sale of your business commercial property:

• General 50% discount but not for Companies and reduced for SMSF
• 15-year exemption: If your business has owned the premises for 15 years and you are 55 or over, retiring, or permanently incapacitated, you will not have an assessable capital gain when you sell.
• If you have held the property for less than 15 years – it must be held for 7.5 years
• 50% active asset reduction:  You can reduce the capital gain on your premises by 50%.
• Retirement exemption:  Capital gains from the sale of your premises are exempt up to a lifetime limit of $500,000. If you are under 55, the exempt amount must be paid into a complying superannuation fund or retirement savings account.
• Rollover: You can defer your capital gain from the sale of the business until another event happens that crystallises the gain. For example, suppose you sell your existing business premises and buy different premises for your business within a specified period. In that case, you can defer your capital gain until the new premises is sold down the track.

Traps when utilising the CGT concessions.

It is crucial to check that assets, such as the business real property owned by the taxpayer, have been held by a ‘connected entity’ for at least half the business ownership period (or 7.5 years).

Where the necessary level of ‘connection’ does not exist, it may be possible to implement a restructuring without material cost to ensure that the entities are ‘connected. ‘

Selling your business property: do you meet the definition of an Active Asset?

Where there is a question of whether the amount paid constitutes “rent”, a pivotal factor to consider is whether the occupier has a right to “exclusive possession” of the property. The payments will likely be classified as rent if such a right exists.  – means no active asset!

If the arrangement allows the occupier only to enter and use the premises for specific purposes and does not amount to a lease granting exclusive possession, the payments are unlikely to be rent.

In summary

• Exit planning requires advisors to review all aspects of the business operations, and the business location and premises impact the pathway chosen to obtain the best result for your client.
• Don’t ignore the legal implications of the property regarding lease and ownership.
• Think of generational ownership issues and how they may impact
• Look at specific property types and intrinsic matters
• If you ask a purchaser to relocate the business away from the present location – think about how and the implications for the business sale and ongoing stability. Also, the cost of relocation
• Plan the Tax, GST and stamp duty implications of the decision
• Don’t leave the planning too late

Of course, planning for any business should be part of every person’s business exit plan. Please note this is general advice. We welcome you to book a time to discuss your affairs and help you plan for a wealthy retirement.

Our Client Newsletter this month includes articles about:

• Property development – recent Federal Court decision
• Small Business skills and training boost
• CGT Small Business concession
• Post-tax personal Super contributions – benefits

Click here to download our October Newsletter

Contact us on 03 9597 9966 if you have any questions relating to matters raised in any of our Client Newsletters.

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Dividend vs keeping the profits in retained earnings

Should I pay a dividend from my company? When it comes to running a successful business, one of the most important decisions you’ll have to make is what to do with your profits. Should you pay a dividend to yourself as the business owner, or reinvest the money back into the company? It’s a question that many business owners struggle with, and there’s no one-size-fits-all answer.

We argue that paying dividends is a great way to reward the owners.

Others believe that reinvesting profits is the key to long-term growth and success. In this article, we’ll explore the pros and cons of both options, so you can make an informed decision that’s right for your business.

Understanding Dividends and How They Work

First, let’s define what a dividend is. A dividend is a payment made by a company to its shareholders, usually in the form of cash or additional shares or allocated to the loan account. Dividends are paid out of a company’s profits and are distributed on a regular basis, such as quarterly or annually.

There are different types of dividends, such as regular dividends, and special dividends.

Regular dividends are the most common type and are paid out on a regular basis. Special dividends are a one-time payment made by the company, usually when the company has extra profits. Stock dividends are paid in the form of additional shares of stock instead of cash.

Pros and Cons of Paying Dividends to Shareholders

Now that we know what dividends are, let’s explore the advantages and disadvantages of paying dividends to shareholders.

Advantages of Paying Dividends

One of the main advantages of paying dividends is that it can be a great way to reward you as the owner. Shareholders receive a share of the company’s profits, and this can help to attract new investors and retain existing ones.

Importantly paying dividends reduces Retained Earnings. This reduction in retained earnings for a small business helps :

• The flow of profits for tax purposes
• The impact of holding too much capital that exposed if there is a legal claim against the company.

Disadvantages of Paying Dividends

One of the main disadvantages of paying dividends is that it can limit the company’s ability to reinvest in the business. When a company pays a dividend, it’s taking money out of the company that could be used to fund growth initiatives or invest in new projects. If the company doesn’t have enough cash to fund these initiatives, it may need to raise additional capital through debt or the owners lending money back

Another disadvantage of paying dividends is that it can create expectations among shareholders. If a company pays a dividend, shareholders may expect the company to continue paying dividends in the future.

Advantages and Disadvantages of Keeping Profits in the Company

Now, let’s explore the advantages and disadvantages of keeping profits in the company, rather than paying dividends.

Advantages of Keeping Profits in the Company

One of the main advantages of keeping profits in the company is that it allows the company to reinvest in the business. By reinvesting profits, the company can fund growth initiatives, invest in new projects, and improve its products or services. This can help to increase the value of the company over time and attract new investors.

Keeping profits in the company can also help to reduce the company’s reliance on external financing. If the company has enough cash to fund its growth initiatives, it may not need to raise additional capital through debt or equity financing. This can help to reduce the company’s debt load and improve its financial health.

Disadvantages of Keeping Profits in the Company

One of the main disadvantages of keeping profits in the company is that it can inhibit profit reward and extraction. If the company doesn’t pay a dividend, shareholders won’t receive a share of the profits in the short term.

As the owner this has 2 serious disadvantages

• NO reward in short term for your hard work
• Taxation – distributing in a regular method allow better tax planning
• Not declaring a divided but still taking the money may create a DIV 7a loan – not advisable

Another disadvantage of keeping profits in the company is that it can create excess cash that isn’t being used effectively. A business owner should have a clear plan for how to reinvest its profits. If not, it may be better to distribute the profits to shareholders in the form of a dividend.

Finally take profits as you go and dont leave it for someone else if something goes wrong ie liquidation or legal action . Paying out dividends is like passing the gate way of no return. Be careful though as declaring a dividend with poor trading can lead to insolvent trading!

Criteria for Deciding Whether to Pay Dividends or Keep Profits

Let’s look at some criteria for deciding which option is best for your business.

Analyzing the Financial Health of the Company

One important criterion for deciding whether to pay dividends or keep profits in the company is the financial health of the business. If the company is financially stable and has excess cash, it may be a good idea to pay a dividend. However, if the company is in a growth phase and needs to reinvest profits to fund growth initiatives, it may be better to keep the profits in the company.

Considering the Company’s Growth Potential

Another important criterion is the company’s growth potential. If the company has a high growth potential, it may be better to reinvest profits in the business. Thereby funding growth. However, if the company doesn’t have many growth opportunities, it may be better to pay a dividend . Reward shareholders and extract the excess cash from the business.

Evaluating the Shareholder’s Preferences

Finally, it’s important to consider the preferences of the company’s shareholders. Some shareholders may prefer to receive a dividend, yet the other business owner may prefer to see the company reinvest profits in the business. It’s important to understand the preferences of the company’s shareholders and make a decision that’s in their best interests.

Look at the Franking account as a small business and see how this may impact your future tax liability personally. Remember declaring a franked dividend have credits attached. However, while tax is paid with the lowering of the company tax rate there may be top-up tax payable

Top-up tax is effectively the shortfall of tax that may be incurred in the event that a shareholder is on a higher tax rate ie tax credits typically for small business is @ 25% but you may have taxpayers on higher rates such as 32.5% and beyond

Conclusion and Final Thoughts on the Dividend vs. Profit Debate

In conclusion, the decision to pay a dividend or keep profits in the company is a complex one that requires careful consideration of the company’s financial health, growth potential, and shareholder preferences. While paying dividends can be a great way to reward shareholders and attract new investors, reinvesting profits can be the key to long-term growth and success. Ultimately, the decision will depend on the unique circumstances of each business. By weighing the pros and cons of each option and considering the criteria outlined in this article, business owners can make an informed decision that’s right for their company.

Is your business sale ready for that next opportunity? Selling a business is a complex process, but it doesn’t have to be overwhelming. With the right strategies and preparation, you can maximize the value of your business and make it sale ready.

Selling a small business can be a daunting task, but with the right exit plan and growth strategies, you can make sure that you get the best deal possible. Retirement may seem like a distant goal, but with careful planning and the right resources, it can become a reality.

Let’s explore how to get your small business sale ready by understanding the basics of exit planning, growth strategies, and retirement options. With this knowledge, you can start your exit plan strategy today.

Here are five steps to help you do just that. By following these steps, you will be able to increase your business’s value and attract potential buyers with ease.

Introduction: What Does it Mean for a Business to be Sale Ready?

Being sale ready is an important step for businesses that are planning to enter the market. It involves preparing the company and its assets to be attractive to potential buyers. This includes creating a clear financial structure, developing a business plan, and ensuring that all legal items are met. It also means having an understanding of the company’s value. But where you may have an opportunity to improve on that value before going to the market. You need a good understanding of the business value and being able to communicate it effectively to potential buyers. Being sale ready is essential for businesses that want to maximize their return on investment. Ultimately it also ensures a successful sale transaction.

Step 1: Analyze Your Current Financials & Identify Areas of Opportunity

Financial analysis is an important part of any business strategy. It helps identify areas of opportunity and improvement to make the most of available resources. By analyzing your current financials, it is possible to identify areas where changes can be made . This can maximize profits and look at reduce costs. This Analysis also helps measure the performance of the company in terms of its financial health.

We offer a ValueBuilder Asssessment that can provide valuable insights into potential future strategies to work on your business value.

Step 2: Review & Update Your Internal Processes

Keeping your internal processes up to date is essential for any business. It helps ensure that your team is working efficiently and effectively and that tasks are completed on time. Regularly improving your internal processes can help you stay ahead of the competition, save money, and improve customer satisfaction. In this article, we will discuss the importance of reviewing and updating your internal processes, as well as some tips on how to do it effectively.

Step 3: Invest in New Technology & Innovations

As businesses move towards digitization, investing in new technology and innovations is becoming increasingly important. Investing in the right technology can help businesses stay competitive and increase their productivity. It can also help them save time and money, as well as improve customer experience.

In this step, we will explore how businesses can use the latest technology and innovations to their advantage. We will look at different types of technologies. And how they can help businesses streamline their operations, automate tasks, and generate more revenue. We will also discuss how to evaluate the potential of new technologies before investing in them.

Step 4: Build Strong Relationships with Strategic Partners

Building strong relationships with strategic partners is an essential part of any successful business. By forming strategic partnerships, businesses can leverage the resources and expertise of other organizations. The aim is to create more value for their customers. Through collaboration, businesses can gain access to new markets. From here thet can develop innovative products and services, and increase their competitive advantage in the marketplace. Strategic partnerships also provide an opportunity for businesses to share knowledge and expertise, helping them stay ahead of the competition.

The next step for getting your business sale ready.

There are many areas in which you can improve your business to make it sale ready. We offer you the opportunity to complete a detailed review of your business. Let us help you find those hidden gems. You can undertake a free Valuebuilder assessment here,

Being sale-ready means you can be ready to for any potential offers and be confident in selling at the maximum value achievable. This is called business freedom and allows you to be ready for Mr. Right who will love your business as much as you do.

The last 2 years have highlighted major issues for small businesses and cash flow is one on top of the list.

Small businesses have been plagued by closures and staff absenteeism due to Covid. This can account for why some businesses’ cash flow is facing an uphill battle in recovery. But there is also a fundament lack of planning by some small businesses. Not knowing where you going is like a hose that you turn on it flicks and turns and you have no control.

Cash flow when it trickles it is painful!

Typically when cash flow impacts things blow out. Our friendly ATO becomes the bank of last resort. Changes in Debt reporting on CRA reports of tax debt may make it harder for some small businesses to recover. It’s a tool the ATO now can use to be recognised as a Creditor in the public domain like any other supplier. Don’t ignore the ATO as they won’t don’t like taxpayers that don’t engage with them. Better to open up to them about your situation than ignore them and shovel your way out of a hole later on.

Nether the less positive cash flow is an opportunity that every business can undertake.

Don’t be like an emu with its head in the sand. Take a positive stand. Start with predicting when the cash will come in. Fundamentally 80% of the hard work is done if you know that the cash is coming in the door. Struggling to predict cash in the door . Start with Sales Budget . Look at last year’s monthly turnover and then replicate that into the coming year. Then don’t forget to invoice your customer. It’s surprising how many people forget or delay the invoicing process

Slash costs but make sure it is for the right reason

When it comes to costs, slash where appropriate but don’t slash costs that are fundamental to the business or costs that help you make money. As a small business accountant Gartly Advisory can help you.

When you’ve worked out your budget put it straight into your cloud software and each month see if the actuals are close to or better than what you predicted. So when the cash starts rolling in remember the golden goose 10% for the ATO, 10% for investment and 10% for you.

When you need a  Small business accountant who can provide you with advice that you can act on, talk to Gartly advisory

Small Business Accountants

Gartly Advisory is a passionate small business accountant. We help the businesses that grow and provide you with timely information to work fast in this challenging environment.

Taking a proactive approach to your needs, we can work with you to help you meet your taxation and business advice needs

Our team can help you make sure your accounting system runs like a racing car, ready for the following formula one.

Accounting software no worries we use all types

Our hands-on approach can look under the bonnet for any of the popular accounting packages such as XERO, MYOB, Quickbooks, and any other program for that matter. In addition, we encourage our clients to ensure their records are accurate so timely decisions can be made. The moving parts of small business, you the business owner and having a trusted business adviser

Running a small business, big or small, can be taxing and sometimes lonely. You will need the support of a Chartered Accountant to help you work through the maze of situations that confront you as a small business owner.

We are here for you and help many small business owners make profitable decisions, reinforce that you are doing things right or be a second set of eyes to help you find a way forward

We use data analysis to help you make your next move to make an informed decision. We also encourage our clients to plan and explore what their business can deliver in value and freedom.

Please book an appointment with Geoff Gartly and his team

We are  one of the best  small business tax advisers and accountants based  in Melbourne

Start a fresh journey with a proactive accountant.

We’re always happy to discuss your needs and your business objectives Call (03) 9597 99667