Plan­ning the key to ef­fec­tively man­ag­ing in­come at tax time

Matamata Chronicle - - Rural Delivery -

As the old say­ing goes, ‘‘cash is king’’.

There’s an­other say­ing in the busi­ness world, ‘‘what you can mea­sure, you can man­age’’.

At Coop­erAitken we be­lieve our role is to not only take care of clients’ com­pli­ance and re­lated tax­a­tion needs but to also chal­lenge clients’ think­ing to pro­vide tools and strate­gies to as­sist with man­ag­ing their busi­ness and cash flow.

Cur­rently, of par­tic­u­lar im­por­tance for dairy farm­ers is the tim­ing of tax­able in­come and man­ag­ing the re­sult­ing tax pay­ments.

With dairy pay­out hav­ing sig­nif­i­cant swings be­tween the tax years, care­ful plan­ning can re­sult in both sig­nif­i­cant de­lays of tax pay­ments and per­ma­nent tax sav­ings.

For many farm­ers, cur­rent pay­out fore­casts could lead to an ap­prox­i­mate drop in tax­able in­come of $1.85 per kilo­gram of milk­solids be­tween the May 2014 and May 2015 in­come years.

This drop in tax­able in­come could con­tinue into the 2016 tax year depend­ing on the ad­vance pay­ments made to May 2016.

Although farm­ers are ad­just­ing cost struc­tures to as­sist with man­ag­ing the drop in pay­out, a sig­nif­i­cant drop in tax­able in­come will still re­sult for many.

For decades there have been sim­ple mech­a­nisms for farm­ers to man­age the tim­ing of their in­come, and there­fore tax pay­ments through ei­ther the in­come equal­i­sa­tion scheme or the abil­ity to de­fer fer­tiliser. Plan­ning is es­sen­tial in de­ter­min­ing the cor­rect ba­sis of pay­ing pro­vi­sional tax.

Plan­ning is also needed

for the fu­ture with the in­crease of in­come when the pay­out re­cov­ers.

Con­sid­er­a­tion on the ap­pro­pri­ate­ness of your pro­vi­sional tax pay­ments is needed.

For many farm­ers your Fe­bru­ary 28, 2015 and June 28, 2015 tax pay­ments should not be based on your 2014 in­come.

In­stead, th­ese pay­ments should ei­ther be based on your 2013 year, or es­ti­mated 2015 in­come; oth­er­wise you will be pay­ing too much tax and wait­ing for a re­fund.

We con­sider you need th­ese funds in your busi­ness to man­age your cash flow.

Over­all there are sim­ple and ef­fec­tive mech­a­nisms to as­sist in man­ag­ing your tax af­fairs in chang­ing in­come years.

Grant Eddy

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