It’s tax year end and time for the annual client check-in

This article was current at the time of publication.

The end of the financial year is looming, and most tax practitioners will be setting up times to meet with their clients.

What are the most important elements of a good tax planning meeting?

There are always standard conversations that will need to be had around tax strategies that could be implemented before 30 June, but there are also likely to be aspects relating to a client’s individual situation that will need to be covered.

This will equally apply to clients you meet on a regular basis as well as to clients you meet with less frequently, perhaps even just once a year.

Understanding your clients’ needs

Jason Bertalli FCPA, director of BNR Business Accountants, says understanding the needs of your different clients is critical to good tax planning.

“Tax planning is one of three elements that we need to consider when we meet with our clients. There’s also the cash flow element and the profit element,” Bertalli says.

“From a tax perspective, clients may have certain issues that need to be addressed, and this may need to be balanced out against their cash flow and profits.

“We're lucky that we see most [of] our clients either quarterly or monthly, so we can manage the overall process on an ongoing basis. However, if clients only come to us after the year end, a lot of things are already set in concrete.”

Liz Shimmin FCPA, CEO of Bluebird Accounting, says having a level of emotional intelligence about clients is essential.

“We need to be self-aware and mindful of clients' verbal and non-verbal communications so that we can shift and accommodate their needs,” Shimmin says. 

“This helps ensure that we understand them and can deliver the information they need to empower them to move forward with making decisions.”

Shimmin adds that, beyond a client’s business considerations, another key thing for practitioners to understand is the client’s personal habits and needs.

“For example, if we have a director continuously taking a high wage out of the business, we may have to review that. If the business doesn't allow for it, we will have to have that difficult conversation with them. It comes back to having that emotional intelligence.”

Discussion points this financial year

Bertalli says that generic conversations with clients revolve around deferring income until next financial year and bringing forward expenses incurred into the current period.

Another common conversation is the tax benefits of maximising concessional super contributions if they can and, for eligible clients aged 55 and over, considering the government’s home downsizer contribution measure.

Bertalli says another consideration is the government’s instant asset write-off measure where, under simplified depreciation rules, eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.

But he warns there is a potential sting in the tail for some clients intending to sell assets such as cars previously purchased under the measure.

“We are getting to the stage now where some of those clients are looking to sell assets where the depreciation has been written off to zero, so the proceeds will be treated as taxable income,” Bertalli says.

“So that's an element I’m getting most of my clients to consider now. Is it worth buying a new car, for example, because you have a tax penalty that you're carrying forward in the old one?”

Other tax issues to consider

Shimmin says another discussion she’s having with clients is around Division 7A loans.

“We generally look at this very closely throughout the year for ongoing clients, and for our once-a-year clients, we'll still check in on their file. If something raises red flags for us, we'll check in with them.

“Other items we look at include the application of legislation. When the Australian Taxation Office brings out new legislative items, like depreciation limits, we'll look at that and consider our clients' cash flow and tax benefits. We make sure our clients are well aware and extend their understanding of tax deductions versus cash flow.

“It's about balancing short-term and long-term goals and aligning their business and personal goals.”

Lastly, Shimmin says that, for a good tax planning meeting, it’s important to ensure clients have clean and up-to-date data. 

“This means their banking reconciles, and their balance sheet and profit and loss have everything in the right place. Without clean data, we can't help them make decisions.”