How Much Tax Should I Be Paying?

Over the last year as a tax accountant in Brisbane, we have had many new clients join our practice. I am surprised by how many clients were paying more tax than they needed to. Simple things were being missed and in one case a client in the previous financial year overpaid tax in excess of $50,000. He felt like suing his previous accountant for being slack. We got it back, but the lesson is that it pays to look. If you have a feeling that things are not right you are probably right. You should trust your gut feeling.

“It is not how much money you make that is important, it is how much you keep.” – Robert Kiyosaki

The lead up to the end of financial year is a time when you can really start to plan. Now is the time to look at your interim results to ensure the unexpected is not around the corner. If you have a decent view on paying tax and wish to contribute to consolidated revenue then read no further.

However, if you want to plan for your own retirement, be in control of your finances then take action to obtain an independent review. If you don’t feel like your current tax accountant is working in your best interests, give us a call.

Why do the wealthy pay less tax?

 

Why does it seem that the wealthy pay little or no tax? How do they get away with it? Is there a magic formula that I can use?

It is true that wealthy people can manipulate their income and hence their tax payable. They do tend to pay what seems to be less tax than others, however, picture is more complicated. Yes, the wealthy can afford to pay the best tax accountant in Brisbane (and legal advisors) to minimise their tax, but often it is the simple things that make the difference.

Firstly you need to be in business. If you are an employee then there is not much you can do. By not much, I mean, there are some things but not as many as those with a business. In regard to the wealthy, the reason they pay less tax is that they can spend big sums on their business. This reduces their income tax payable and increases their tax deductions. I’ll explain this a little better.

A business owner can afford to borrow large sums to buy another entity, buy equipment or employ more marketing and staff. This grows their business base and in most cases, if you are clever, you can get a tax deduction. That is to some extent why the wealthy become wealthier and the poor become poorer. Our tax system and our economy promotes this, as this is how we, as a country, increase employment. Sometimes this reason alone can be a catalyst to go into business.

Who helps the rich save tax?

 

Tax accountants are close to their clients and their needs. Generally most businesses engage an accountant to do 2 things:

1. Maintain their compliance with both ASIC and Income Tax Laws
2. Assist the business make (and keep) more profit for the owner.

Part of point 2 is tax minimisation. Of course this must be within the law, otherwise a free holiday at His Majesty’s pleasure will follow. But tax accountants who have experience in minimising tax know what can be done in a lawful way. This can include simply structuring the business correctly or it could involve more complex strategies. Taxation for individuals tops out at 47%. For a company the tax rate is 27.5%. So even at the lowest tax rate, it is still a large cost to a business. So it pays, of course, to be mindful of ways to handle this. It pays to engage a professional to help you.

As a tax accountant in Brisbane, Encore Accounting have provided countless businesses with tax minimisation strategies. We were even able to get one of our clients a million dollars back. How much are you giving to the tax office? Give us a call for a free, no obligation review. Let us see if we can save you.