Tax Planning
One of the many services we offer our clients at Tax On Chain is “Tax Planning”. Tax Planning is a service where our team of crypto accountants will explore ways in which you can minimise any potential tax liability resulting from your investments or business activities conducted during the financial year.
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Summary
Tax planning is a proactive approach to managing your cryptocurrency tax obligations, particularly if you are a high-income earner, or have made a considerable taxable gain in the year. By working with our crypto accountants and engaging in tax planning, you can:
- Gain a clearer understanding of your tax position.
- Ensure you are financially prepared for your tax obligations.
- Identify opportunities to reduce your tax liability.
- Make informed decisions about your business and investments.
- Avoid last-minute surprises and potential cash flow dilemmas.
- Consider opportunities to restructure your investments or business activities going forward.
Investing in tax planning can yield significant benefits, facilitating improved financial management and offering peace of mind. It is a worthwhile exercise for any investor or business owner looking to optimise their financial strategy and minimise tax liabilities, thereby preserving capital to invest in other opportunities.
What is Tax Planning?
Tax planning is an exercise to estimate your tax position before the end of the financial year and consider strategies to minimise and/or defer your tax liabilities. It is an important exercise that can provide significant benefits for investors and business owners, helping them manage and minimise their tax obligations.
The process involves our cryptocurrency accountants to review your financial data for the year, understanding the income earned, and identifying all deductible expenses. Once an estimated tax position has been calculated, strategies to minimise your tax liability can be considered. A large part of tax planning overlaps with the work needed for preparing your tax return, making it a preparatory step that streamlines the entire process.
Key Outcomes of Tax Planning
Provide a Tax Estimation
The first purpose of tax planning is to understand your expected tax liability for the current financial year. This process typically occurs towards the end of May or early June and involves estimating your income tax position.
Understanding your expected tax liability can assist you with managing your cash flow appropriately, ensuring you are financially prepared to meet your tax obligations when they fall due. Being prepared well ahead of time can help you make more informed decisions regarding your business and investment portfolio, minimising cash flow risks.
Many taxpayers are often unaware or confused about the tax implications of their investment and business activities. Tax planning provides clarity and peace of mind, ensuring you are on top of your crypto tax obligations before it’s too late.
Tax Minimisation
By estimating your tax position before the end of the financial year, your accountant can propose potential strategies to reduce your tax obligations. These strategies may include, but are not limited to:
- Additional super contributions.
- Tax loss harvesting.
- Restructuring investment or business activity.
- Purchase of property, plant, and equipment.
- Prepayment of deductible expenses.
- Evaluation of asset acquisition dates to establish when assets will qualify for the 50% CGT discount.
- Deferral of capital gain events.
- Trust income distribution strategy.
- Declaration of dividends from companies to utilise franking credits.
- Recording director wages or bonuses (for businesses).
Depending on your specific situation, these strategies may help reduce your tax liability for the current financial year. It should be noted that some taxpayers will benefit more from a tax planning exercise than others. Those who benefit the most are generally taxpayers who posses one or more of the following:
- High income earners.
- High net worth individuals.
- Generate significant investment income (e.g. staking rewards).
- Have realised significant capital gains through the year.
- Have an investment structure in place (e.g. trust/company).
Other Tax Advice
If you operate a business or investment portfolio through a company or trust, tax planning may also include additional tax advice, such as:
- Advising on appropriate trust distributions and company dividends to be declared before the end of the financial year.
- Management of Division 7a Loans for companies to ensure compliance.
- Ensuring your superannuation obligations have been met as a business owner.
- Assessing your current business and investment portfolio structures for both tax and asset protection purposes
What is the cost?
The cost of tax planning will vary depending on your individual circumstances and the amount of work involved. However, the base fee for providing this service is $1,800 + GST. This base fee covers:
- Initial consultation (30 minutes).
- Collation and review of information (e.g., prior year tax returns, most recent payslip, crypto transaction data, crypto transactions data, rental property details, superannuation details, etc.)
- Tax estimation.
- Tax minimisation advice.
Tax planning should be viewed not as an expense, but as a strategic investment, where the fees incurred often yield tax savings that far exceed the initial cost of the planning process. Of course, tax savings cannot be guaranteed, and outcomes will differ based on the specific circumstances of each individual.
Part of this fee includes tasks essential for both tax planning and tax return preparation. You can think of it as a partial upfront payment toward your tax return accounting fee as some of the work required for your tax return will be done in advance during the tax planning process.
If you are interested in taking control of your financial future, reach out to the cryptocurrency tax professionals at Tax On Chain.
Take control of your crypto taxes.
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