By Nick Fitzgerald, Business Advisory Director, Accounting Professionals
Benjamin Franklin, one of the founding fathers of the United States, once infamously said, “Nothing can be said to be certain, except death and taxes.” While the first is inevitable, I believe the second should not be avoided. Here’s why I think paying tax is a good thing.
I was taken aback early on in my career when a client said to me, “the year I pay a million dollars in tax, I’ll be a happy man”. It really stuck with me and I repeat it ad nauseam to anyone who cares to listen.
Nobody likes paying tax, and certainly not more than their fair share…but what is your fair share?
If you’re paying tax, you must be making money, right? Now, obviously there is a lot more to it than that, but the concept holds true in so many ways.
Declaring a business is making money is a difficult concept for many, and not something they want to do, especially to the tax man!
But what they fail to realise is how this impacts on their future wealth creation opportunities. If you’re in this mindset too, it’s time to change your outlook.
- Do you know how much your business is really making each month/quarter/year?
- If not, why not?
- And how is your cash flow?
While ever we are focused on the negatives, we are limiting ourselves and our businesses, cutting corners to make ends meet. I see this all too often in our local area.
It’s a simple equation. Tax is only a proportion of what we earn…we get to keep the rest!
More importantly, if your business is a facilitator for your financial freedom, making sure you know what makes money should be your number one goal, not the associated tax issues.
Download our free eBook to learn the strategies implemented by the best performing businesses
Focus on what matters
If your sole focus is minimising tax, you probably don’t know what creates your profit, who your most profitable customers are or your best performing staff.
Paying tax means making money. Making money should mean creating cash flow. Creating cash flow creates opportunities for investment, but without proof of income, banks won’t lend (especially now).
So don’t worry about hiding profit. Don’t worry about getting payment by ‘cash’. Focus on making money and creating opportunities.
Once you’re over that hurdle, the next step is tax planning. But just because paying tax is a good thing, doesn’t mean you should pay more than necessary.
Real tax planning is a long game, not just year-to-year. It’s an ongoing focus of understanding your goals, what you want to achieve, and balancing that against the most effective tax positions.
3 secrets to building a better business
- Focus on making money first, avoiding tax second.
- Understand what makes a difference in your business – how do you make money, and how do track if you’re making money?
- Tax planning is a long-game; find someone who understands your personal and business goals.
If you are struggling to make the money you believe your business should be or implementing effective strategies, come along to our ‘Accelerate Your Business’ workshop on Thursday 18th October, or just give one of our business advisors a call on 02 4297 0066 – to click to register for the workshop.