For some reason historically, bookkeepers write up a business’s books during the year and an accountant many months after the end of the year prepares a tax return and tries to provide some tax advice. The bookkeeper does not really provide much advice but is effectively a data processor.
Unfortunately, this never really works. Trying to give tax advice after the end of the year is a bit like asking a blacksmith to re-shoe a horse when the horse has already bolted – it is impossible. It might help the following year but most businesses needed that advice many months back.
Since the inception of the Tax Practitioners Board the lines of responsibility are clearly marked and the rules are very clear. A bookkeeper can only advise on matters relating to a business’s Business Activity Statement. That basically means GST and employee tax. They cannot give advice on tax minimisation strategies, Superannuation or answer any questions outside the realm of GST and employee tax.
So how do you know if your bookkeeper is minimising your tax?
1. They Should be Asking Lots of Questions
Generally, your bookkeeper should be asking lots of questions and be in regular contact with your tax agent. If they are not they are just processing your data and not thinking about your business or how they can minimise tax for you.
2. Are they A Registered Tax Agent?
Very few bookkeepers are but if you can find one, they could save you thousands in unnecessary tax. They will have the experience and the knowledge to know where tax savings can be made. They also have to ensure they undertake regular training to ensure they are up to date with the latest tax rules
3. Will They Give You A Tax Saving Guarantee?
Your bookkeeper should be confident in saving you tax. If they are they will be happy to give a guarantee that they can save you tax. If not the chances are they are not confident enough or have the relevant tax knowledge to save you money
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Director at WOW! Advisors & Business Accountants
14 years ago I lost a family member aged 38. I realised then there were important things in life than business and money. This tragic event drives everything I do. I am the founder of WOW! Advisors & Business Accountants, MediSuccess and CrystalClear Bookkeeping. I authored Double Your Profits and Halve Your Working Hours for Medical Practitioners.' I am Australia's leading Strategist & Business Adviser with a passion to bring smiles to the faces of medical professionals. As a result of the work I have done & based on my approach I has been recognised on Fox, NBC, CBS and ABC. Most business owners work long hours & recent surveys show that work life balance, income and wealth creation is the major area of concern. My ethos is to work with business owners improving their accounting and taxes but particularly to improve profits/ personal income and wealth whilst cutting working hours in half so that they can enjoy an awesome lifestyle with plenty of time for family, fun and philanthropy. I specialise in the medical sector. I have worked with over 3,500 businesses in Australia, America, UK, Japan and Europe. I soon realised that over 78% of business owners: - Found understanding figures too hard. - Were never taught how to run a business. - Spent money on areas they did not need to. - Paid more tax than they needed to. So we design strategies to specifically deal with the above but also: - Move business owners from being a business operator to a business owner so the business can run on its own. - Create investments, assets and wealth which generate income so that if you are unable to work or retire income is still generated. I am so passionate about saving tax and improving profit that since March 2019 for every $100 we save/ make for clients I am committed to make 20 impact across the world. Currently over 1,000,000 impacts have been made.
Cassandra Scott, Director at Laurus Bookkeeping
It is not, nor never has been, a bookkeepers responsibility to minimise tax. It is a bookkeepers responsibility to ensure that the records of the entity are maintained in a correct and accurate manner, in accordance with the laws and regulations that bind the services that we can provide (ie BAS Agent) It is not an accountants responsibility to minimise tax. It is an accountant's responsibility to provide advice to an entity that is relevant to that entities circumstances, and provide this advice in the context of the laws and regulations that bind the services they can provide. Minimise tax in the context that it has been written implies that everybody should be able to minimise their tax (and is seeking a "guarantee" by the bookkeeper that they will do that). That is fundamentally flawed - all businesses should be paying the tax that is relevant to their specific circumstances and the tax legislation that applies to their circumstances. It is the role of the bookkeeper to facilitate opportunities for collaboration between the client, the bookkeeper and the accountant, to provide a holistic service that benefits the client in ensuring that they operate their business in the most appropriate financial manner for their circumstances. As professional bookkeepers, we all have and are continuing to increase our knowledge in so many areas that have historically been off limits. This gives us the opportunity to talk to our clients about their circumstances, and provide them with discussion triggers for the meetings that they should be having on a regular basis with their Accountants and Tax Advisors.
Hitesh Mohanlal, Director at WOW! Advisors & Business Accountants
Wendy - yes but tax planning should be an ongoing process. It is not always about paying the least amount of tax - it is paying the least amount of tax based on your circumstances. For example a business wanting to borrow may have to pay business tax to show a profit (otherwise it will not get the finance) even though it would be more tax efficient for the business owner to take the money out as a salary. The trick is working out what the correct level of profit should be to get the finance and pay the least amount of business tax. We recommend at least a quarterly look to plan and look at tax strategies.