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Four Reasons You Should Be Tax Planning

Article By Jeff Little | | Accounting & Tax

Did you know you can build your wealth in the long term by making use of tax laws, regulations, and strategies to reduce tax liability?

The benefits of tax planning include facilitating wealth building by allowing individuals, businesses, or a combination of the two to retain more of their income, which can then be reinvested to build wealth over the long term.

Tax planning involves reviewing one’s income, expenses, investments, and other financial affairs to identify areas where taxes can be minimized. This can include strategies such as tax-deferred investing, taking advantage of tax credits, and structuring business activities to minimize tax liability. The goal of tax planning is to reduce tax liability while still staying compliant with tax laws and regulations.

In short, tax planning is a valuable tool for maximizing financial resources and achieving long-term financial goals. So, what are the four most important reasons you should be tax planning.

Minimize Tax Liability

Tax planning allows individuals and businesses to take advantage of tax laws and regulations to reduce their overall tax liability. By planning ahead, you can take steps to minimize your tax bill and ensure you are paying only what you are legally obligated to pay.

This may include having a strong working knowledge of tax laws and regulations, making use of tax deductions, taking advantage of tax offsets, considering tax-effective investments, and structuring business activities to make use of tax saving strategies.

Improve Cash Flow

Tax planning can help improve your cash flow by deferring taxes or spreading payments over time. For example, deferring income or taking advantage of tax-deferred retirement accounts can reduce the amount of taxes owed in the current year, improving cash flow in the short term.

Ensure Compliance

Tax laws and regulations are constantly changing, and tax planning helps you or your business stay compliant with the latest rules and regulations. This can help avoid penalties & fines for non-compliance and help maintain a positive reputation with the tax authorities.

Make sure you are keeping accurate records, staying informed about tax law & regulation changes, filing tax returns on time, accurately reporting your income, claiming deductions and credits accurately, and of course seeking advice & supportive guidance from a tax professional.

Facilitate Wealth Building

Tax planning is an important part of wealth building and financial planning. By reducing tax liability and improving cash flow, individuals and businesses can retain more of their income, which can then be reinvested and used to build wealth over the long term. Additionally, tax planning can help individuals and businesses take advantage of investment opportunities that might otherwise be unattainable due to high tax liabilities.

There are many ways to facilitate wealth building through proper tax planning, including minimising deductions and tax credits to reduce tax liability and increase disposable income, making use of tax-advantageous investment vehicles (for example superannuation funds and annuities), taking advantage of tax free savings accounts, utilising estate planning strategies, and planning for retirement to build assets and reduce tax liability in retirement.

If becoming educated as an expert in tax planning best practice isn’t something you have time for or want to do, that is why Altitude is here to help.

We encourage you to get in touch with your Altitude Adviser, because we’ve done the complicated part of understanding all the fine print, so you don’t have to.