In case you didn’t notice, two important events occurred over the weekend – the official end of daylight saving in the misguided states and the official START of the TAX PLANNING season everywhere.
Yes, in less than 13 weeks, most of us will be due to lodge our annual income tax return. While some may delay the inevitable until this time next year (which, I admit, can be a form of tax planning), the time to do something about how that return will look is fast running out.
I am not suggesting that now is the only time for us to be mindful of tax planning. It is just that now is the window when the end is in sight and you need to take action and make sure you are in the BEST tax position.
We also need to remember that all levels of governments (irrespective of their political persuasion) are looking to widen the tax base. Our responsibility as long-suffering tax payers is to widen our tax planning focus to consider the myriad of extra fees, levies, surcharges, duties etc that are used to disguise the removal of funds from your pocket.
I realise that governments need to raise revenue to keep their various constituencies running. I also accept that governments genuinely attempt to avoid waste. However, the frequent and monumental failures to do so suggest that wastage is inevitable and we should therefore give them less to waste. And that’s all my editorial committee will allow me to write on that topic!
If you are going to reduce the impact of taxes on your wealth creation plans, you need a tax plan that operates throughout the year (not just in the next three months). You will need professional help to make sure it is comprehensive but you must understand what you have to do and when so it will be effective.
Keeping good records is fundamental to an effective tax plan. It is possible to electronically store most documents so losing a piece of paper can be avoided.
It is necessary to be aware of any transactions that occur throughout the year that may have wider tax consequences. Major transactions such as buying or selling assets are obvious but refinancing loans, changing residences or insurances need to be considered as well.
There are also transactions we can initiate that will positively affect our tax exposure. Restructuring, investing effectively, salary packaging etc may work for you when implemented correctly but again, professional help is recommended.
Given that we are smart enough to wake up an hour earlier in summer without having to adjust our clocks, surely we are smart enough to effectively minimise our taxes.