Original content provided by BDO Australia.

Avoid the unwanted surprise by looking ahead rather than back with respect to your tax obligations.

By now you have cleaned up your Chart of Accounts from Part 1 of our Financial Health series (13 May 2024) and are using up-to-date and accurate information to review the performance of your business from Part 2 (8 August 2024). The next step is Tax planning, which provides the opportunity to assess business and operational considerations before seeing out the financial year, including:

Taxes paid year to date (including PAYG instalments)

Many practice owners and associated family entities will use the PAYG instalment system. PAYG instalments are a tax prepayment and will always be based on the most recently lodged tax return. As a result, tax planning is the perfect opportunity to forecast an estimated tax position, which can assist with cash flow planning for any pending residual tax liability – or, alternatively, assess whether variations to instalments are appropriate for the next quarter.

Concessional superannuation contributions

Superannuation contributions are an effective way to maximise deductions for high-income earnings (i.e. medical practitioners), whilst at the same time facilitating future earnings in a low-tax environment (earnings in superannuation funds are generally taxed at a lower rate).

Dividend payments

Consideration should be given to the payment of dividends to the shareholders. This will vary according to territory, but the strategic importance of contemplating dividend payments is very important.

Business operations and structure

Tax planning provides the perfect opportunity to not only focus on profitability and tax positions, but also to conduct a health check on the operations and structure of your business. For example:

• Is your structure still appropriate?
• Have you considered your pricing structure for patient fees?
• Have you reviewed your cost structure or considered alternative suppliers?
• Have you conducted performance conversations / reviews with your staff?

Further practical considerations

There are also further practical items to consider and, if possible, quantify through the tax planning process. These include but not limited to:

• Application of professional profits tests, as per the relevant local practical compliance guidelines
• Service facility agreements – how do these impact the above, in addition to other matters (i.e. payroll tax) ?
• Preparation of trustee resolution for the distribution of net income
• Business / wealth strategy – the tax planning conversation can serve as another check-in regarding your broader personal and family strategy, as well as long-term aspirations and goals.

Next steps?

Please reach out to your local firm’s healthcare specialists if you wish to discuss the above, in light of your circumstances.