Paying too much Tax? How to know and what to do about it.
When we go to bed at night, we dream of a world where families have the freedom to of choice of what they do with their time, to have the freedom to put family first, and to be able to create a beautiful business and family that they're absolutely proud of. Our Inspire TV channel, which you guys have taken the effort to sit in on and attend today is our means to educate the young family and small business community of Brisbane on all the different strategies and ways we can help you build that business that gives you the freedom to put family first. That's our introduction to today's topic and also today's episode of Inspired TV.
The very specific topic we have is about paying too much tax. The first guide is: How do you know if you are paying too much tax? I am sure we all, in business, may have that feeling or that inkling and the most important next step is to find out what the hell to do about it.
We think that this is how an accounting firm should run: Imagine yourself as a business owner driving on the highway and then you're in your vehicle. As the owner of your business or that vehicle, you're in the driver seat. For an accountant to be able to do tax returns and financials, they’ll be looking in the rear vision mirror while you're driving down the highway. Now if you were only to focus on this historic perspective, how far would you get? Not very far we think. That's what makes Inspire different. We have that perspective about what's going on in the past and the future - the bigger picture; looking through the front windscreen, for us to act as your co-pilot.
We don't want to break any laws or end up in jail but there's definitely opportunity out there to implement some of these strategies we're going to talk about today, which do end up saving many of our clients tens of thousands, if not hundreds of thousands over the years. In fact, this is exactly how we do it:
How do you find out your current tax rate, or what you might be paying?
It’s a little bit complex to calculate it but you just add up all the, not the next net tax payable or refundable for the year, but the actual tax on your notice of assessment or your company's notice of assessment and work out as a percentage of your total profit how much tax did you pay.
What should someone be looking for out of their accountant nowadays?
An open channel of communication. A couple of the key things that people usually get wrong and that we identify is, "Hey, had you gone and seen your accountant before you bought a vehicle or something like that, you could of saved five grand in GST or you could of structured it better so it's less administration headache. Your loan could‘ve been different." Basically, while there's a tax implication of keeping close to your accountant, there's also other cash flow benefits. Making sure you're getting the right advice when you're making key business decisions.
You should definitely look out for someone who just keeps that open channel of communication and work with an accountant who doesn't mind the odd phone call or an email - or actually gives you a call.
One of the reasons people don't call their accountant is because they think they're going to get charged for it. Is that standard across the industry or is that an old school indicator that you might be with one of those the dinosaur accountants? What should we be looking for?
The older business model is to start the clock every time the accountant thinks about you or talks to you and bills you by the hour. That means that if you do ring them up and ask them, "Hey, what entity should I buy a car in?" That you probably would get a bill for a couple hundred bucks to follow that call. That’s the norm of an old school accountant.
With this sort of fresh breed of accountant, you see more value based models - a fixed fee or upfront proposal that lets you know what you're getting yourself into before you accept. You know the ... How much communication and touch points you have with them throughout the year and working with us, for instance, you're able to call us and we're not going to charge you unless you're wanting some advice on a business merger or something like that. That's obviously something we can't do over the phone. Yeah. If you ring us and said, "Hey, I'm buying a car. How do I buy it?" That's a call we won't charge you for.
What is a business structure?
This is a massive, massive point. That if you don't use a company or trust but you run a business, and this is one that's very close to our heart. We love business structures and working with clients to map out the best and most suitable option for them. If you don't use a company or trust, it only leaves you as either a sole trader or you're a partnership.
Both of those straight off the bat have a massive risk for your trading activities. You could get sued, and that could bring in your family house and your family assets to pay for that lawsuit. Also using a company or trust gives you flexibility of who pays the tax from your business profits. That could be your husband or your wife - but if you're a sole trader you pay the tax on the lot, you don't have a choice of spreading it out.
For every dollar in tax we save a small business, we give a family in need a days worth of access to life changing help. Here are some of the impacts -