How can tax planning strategies improve cash flow

Salary sacrifice

There are lots of ways to make tax savings by offering salary sacrifice arrangements for your employees. More commonly this is used for making superannuation contributions where an amount is deducted from the employee’s gross salary for their superannuation contribution and then the employer makes this into an employer contribution. By making the contribution this way the employee pays the contribution out of their gross salary which results in saving some tax, instead of making the contribution out of their net salary.

Salary sacrifice can also be used for other non-cash benefits (for example gym membership, dental plans, workplace nursery fees, parking etc.)  All of which have associated tax savings.

Finally, using salary sacrifice arrangements is also very helpful in attracting new employees as well as retaining your existing team members.

Research & development

Tax relief for eligible Research & Development (R&D) expenditure has been around for many years and still remains an excellent way of reducing tax liabilities for companies. For companies carrying out qualifying R&D activities, this can lead to an additional deduction of qualifying P&L costs, which can be a significant tax saving.

If the R&D claim leads to a tax loss position for the year then this loss can be carried back (under the normal loss carry-back provisions mentioned above). Companies may also be able to carry forward unused offset amounts in to future income years.

If you are carrying out R&D activities and not currently making a claim then please discuss this with us and we will be happy to give you some guidance and support around making a claim.

Payment arrangements

The ATO have in place provisions to allow businesses to delay their tax payments, subject to prior agreement with them. So, if your business is struggling with cash flow and has exhausted all other options (bank funding, cash injection by directors etc) then it is worth giving the ATO a call to discuss setting up a payment plan. In our experience, this has led to payments being spread over a period of up to 2 years, depending on the circumstances of the taxpayer, which is a great help in these difficult times for some businesses.

Applying for a payment arrangement with the ATO also stops unwanted demands/calls from the ATO and also stops penalties from being issued, although general interest charges (GIC) will still accrue on unpaid amounts.

For support with improving your cash flow through implementing tax planning strategies, please contact your usual Forvis Mazars advisor or alternatively our experts via the form below or on:

Author: Janine Levine

Published: 12/08/2024

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