It’s hard to fathom but we’re almost half way through 2015 and only a month away before the end of the financial year. June marks your last opportunity to review and take action on your tax position before we roll over to the next financial year. Come July 1st you start again.
An important part of our financial advice work includes understanding our client’s tax position. We must be registered with the Tax Practitioners Board, which authorises us to provide limited taxation advice. This does not make us accountants or replace the need for one as our roles are quite different. Our scope for providing financial advice goes far beyond that of the accountant to include an in-depth understanding of your current personal financial situation and where you are heading. In many aspects, this is more important as it gives us a basis for what everyone is trying to achieve. Once this knowledge is overlaid with your tax position, it gives us a much better opportunity to begin suggesting ways in order to minimise and manage tax. Tax minimisation could relate to situations that involve personal income, business income, capital gains, trusts and superannuation. In many cases the result is enhanced when the accountant and financial planner work together in the clients’ best interest.
In a recent example, an accountant we often work with mentioned that one of their small business clients had a large Div 7A company loan, which he had been trying to unwind over a number of years. These loans are not popular with the ATO and all parties were keen to see it repaid. We became involved and began asking the client further questions about their future in the business, succession planning and looming retirement plans. This background research gave us enough of a basis to recommend using their existing super money to buy the business premises and free up the necessary cash to pay out the loan. All aspects were handled personally and carefully managed to minimise tax and risks to the client. As you could imagine, both the client and accountant were pleased to see this dealt with before 30 June.
Unfortunately, all too often we see complacency around tax and financial management. Most, if not all people have an accountant. Fewer engage with a financial adviser. The relationship with an accountant is built on trust and respect over many years so they are rarely questioned.
The key point I’d like to emphasise is that dealing with your finances prior to the end of the financial year could save a significant amount of your hard earned income. The longer we have to plan and work with a client before 30 June, the better.