The value of an experienced accountant
With two businesses and a thriving career as a photographer, Zac White relies on this accountant Parlad Bhabra, manager of accounting firm Kirby Hawke, for strategic tax and accounting advice. It gives Perth-based Zac peace of mind he’s meeting his tax and compliance obligations and the ‘business’ side of his business is totally under control.
“Zac came to us as a sole trader and we've worked with him as his business has grown, especially around asset protection, structuring and tax planning,” Parlad explained.
When Zac moved into a company structure after partnering with a graphic designer to target corporate clients, Parlad was able to help the pair work out a profit-sharing arrangement that worked for both parties. They have subsequently decided to work separately, and Parlad has also helped Zac through this transition.
How to protect your assets
Setting his business up as a company delivers Zac multiple benefits. Asset protection is an important one.
Parlad said: “If you have cash, property or anything else in your name, you need a structure to ensure your personal assets are protected from potential threats to your business. A company structure achieves that to a certain extent.”
A company also assists with tax preparation. “As we approach the end of the financial year,
we are able to use allowable tax incentives to minimise any income tax. At the moment, small businesses can immediately write off any business expenses that cost $150,000 or less. Items can be fully expensed with no upper threshold. Bringing forward any allowable expenses into the current tax year allows businesses like Zac’s to claim an immediate tax deduction and reduce their tax bill,” Parlad explained.
Making concessional contributions to the superannuation system is another way to reduce tax. Under current rules, individuals can contribute up to $25,000 to their super fund each year on a concessional basis, with this figure rising to $27,500 from 1 July 2021. However, clients need to be aware a tax of 15 per cent is applied to these contributions. Although with the company tax rate at 26 per cent (dropping to 25 per cent from 1 July 2021), so there is an 11 per cent tax saving.
“We have also explored the potential to prepay insurance premiums and other expenses this financial year, which are also tax deductible, to help reduce Zac’s tax,” he added.
As Parlad noted, the business does have to have cash available to pay for these expenses for this strategy to work and cash flow management is essential.
Running an effective accounting practice
The end of the tax year is one of the most demanding times for accounting practices like Parlad’s.
“It’s essential we deliver a high-quality product that’s affordable for our clients. This requires skilful planning,” he explained.
Parlad oversees all the work his team do during tax time, delegating day-to-day accounting and tax work to his staff.
“We like to be very efficient, which involves lots of communication within the business. We’re always focused on adding value for our clients,” he added.
Key to this is a comprehensive training program for his staff, which delivers rewards for all clients at tax time.
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