Article by Brant Jansen Byfields Director
With the end of the financial year approaching, now is the time to get proactive about tax planning—if you haven’t already! It’s important every year to have a clear picture of how much tax you’ll owe, when it's due, and what you can do to reduce it. A key part of planning is understanding the difference between tax reduction and tax deferral strategies.
Tax Reduction vs. Tax Deferral
- Tax reduction strategies permanently lower your tax payable.
- Tax deferral strategies delay tax to a future year.
Both have their place but knowing when and how to use them is critical.
Start with Tax Reduction
Always begin with strategies that provide long-term savings, such as:
- Making superannuation contributions
- Spreading income across multiple beneficiaries to access lower tax brackets
- Allocating profits to a corporate beneficiary, capping tax at 25%
These approaches rely on having the right business structure, which should also support asset protection and succession planning.
When to Consider Deferral
If your current tax rate is already low, strategies like FMDs, deferring income, or prepaying expenses may not be worthwhile. In some cases, it’s smarter to pay tax now at a lower rate and use the cash flow benefit to pay down debt—strengthening your long-term financial position.
Deferral strategies still have a role when your future tax rate is likely to be lower, or when you're managing large fluctuations in profit.
Plan for Change
Think ahead: Are new beneficiaries joining the structure (e.g., children turning 18)? Are others leaving (e.g., retirements or children finishing study or starting work)? Will your five-year primary production income averaging go up or down? These factors can all affect your future tax rate.
Don’t Leave It Too Late
Effective tax planning should be well underway before June. The last few weeks should be for reviewing and fine-tuning—not starting from scratch.
Get tailored advice early to avoid costly surprises. A smart tax plan could save you thousands—and keep your business in a strong financial position.
Contact the specialist team at Byfields to discuss further www.byfields.com.au