What’s that cliché? The two certain things in life are death and taxes.
This distinction is often misunderstood, and that misunderstanding can cost businesses thousands — if not more — in unnecessary tax payments and missed opportunities.
In this article, we’ll explore:
- the difference between tax compliance and tax planning
- why medium-sized businesses often get them wrong and
- how a multi-tiered approach can be game-changing for financial success.
Tax Compliance: The Foundation, Not the Finish Line
Long-story-short:
- Tax COMPLIANCE is what your business must do for the ATO, whereas
- Tax PLANNING is what your business makes smarter decisions to provide a long list of benefits.
Let’s break each down.
Tax compliance is the “must-do” side of taxation. It ensures your business meets its obligations under Australian tax law, avoiding penalties and legal risks.
It involves:
- Lodging tax returns correctly and on time
- Submitting Business Activity Statements (BAS) and ensuring GST compliance
- Meeting payroll tax requirements
- Keeping financial records and reporting obligations in line with Australian Tax Office (ATO) regulations
- Making sure the business stays in good standing with tax authorities
While absolutely necessary, compliance alone is reactive rather than strategic. Think of it as meeting the minimum requirements — important, but hardly the path to financial optimisation.
Tax compliance ensures that businesses avoid legal trouble, but it does little to improve their financial position.
Tax Planning: This is Where Financial Growth Happens
Now, let’s talk about being proactive about your tax planning. It’s worth doing this, but so many businesses just overlook it completely.
Tax planning is a proactive approach designed to optimise a business’ tax position. It goes beyond simply meeting obligations; it helps businesses reduce liabilities, improve cash flow and align financial decisions with long-term goals.
Effective tax planning strategies include:
- Reviewing financial statements throughout the year, not just at tax time
- Structuring income and assets to minimise tax burdens
- Planning major capital expenditures to maximise deductions
- Estimating tax liabilities in advance to avoid cash flow surprises
- Leveraging available tax concessions, offsets and incentives
A well-executed tax planning strategy aligns financial strategies with business objectives, creating a foundation for sustainable growth. Instead of just reacting to tax obligations, businesses can take control of their financial future, making informed decisions that drive profitability.
Why Medium-Sized Businesses Often Get Tax Planning Wrong
Many of our clients began their journey with us feeling the same way — you might believe:
- “Tax planning is only for large corporations.” This common misconception costs medium-sized businesses substantially. In reality, businesses of all sizes benefit from strategic tax planning, sometimes with even more significant percentage savings than larger companies.
- “I’ll think about tax when my accountant reminds me in June.” Unfortunately, by financial year-end, most strategic opportunities have already passed. Tax planning works best as an ongoing conversation, not a last-minute scramble.
- “My accountant handles my taxes.” While technically true, there’s a world of difference between an accountant who just ensures compliance and one who proactively identifies opportunities to optimise your financial position.
Relying solely on compliance means businesses miss out on tax-saving opportunities that could be leveraged throughout the year. Without strategic planning, business owners often find themselves facing unexpected tax bills, missing deductions and failing to optimise their financial structure.
By waiting until tax time, businesses limit their ability to act on tax-saving opportunities. Many deductions, offsets and restructuring options must be planned and executed well in advance.
Without year-round tax planning, businesses operate in a constant state of reaction, rather than control.
How LMS Advisory Approaches Tax Planning Differently
Many accountants offer compliance services, but few take an active role in tax planning. Here’s how LMS Advisory stands out:
Passive Tax Planning
By maintaining regular contact with clients throughout the year, accountants can monitor financial trends and identify potential tax-saving opportunities early. This includes:
- Reviewing BAS lodgements quarterly to spot irregularities
- Tracking revenue and expenses to anticipate tax liabilities
- Identifying opportunities to optimise salary structures and deductions
This continuous oversight ensures businesses remain in control of their tax obligations rather than being caught off guard when the financial year ends.
Active Tax Planning
For businesses that want to be more strategic, a tax planning meeting offers deeper insights. This involves:
- Forecasting tax liabilities and planning for them in advance
- Aligning financial decisions with business goals (e.g., expansion, acquisitions, or asset purchases)
- Scenario planning to assess the impact of different financial strategies
Through this approach, we help businesses make informed decisions rather than reacting to tax obligations after the fact.
The Real Cost of Neglecting Tax Planning
Without strategic tax planning, you’re likely:
- Paying more tax than necessary (potentially thousands each year)
- Missing early warning signs of financial challenges
- Overlooking opportunities for strategic investments
Consider how planning ahead allows informed decisions about:
- Timing equipment purchases to maximise deductions
- Efficiently allocating profits to shareholders and directors
- Managing cash flow to prevent tax obligations from disrupting operations
- Structuring finances to position your business for future growth
By contrast, a business that only focuses on compliance risks making reactive decisions that could harm
long-term financial health.
Take the Next Step Toward Financial Optimisation
If your current approach to taxation is purely compliance-driven, you’re likely leaving money on the table. Effective tax planning helps you:
- Legally reduce tax liabilities
- Improve cash flow management and forecasting
- Align tax strategies with your growth objectives
- Gain greater control over financial outcomes
Our team at LMS Advisory specialises in proactive tax advisory services, helping businesses like yours move beyond compliance. Don’t wait until the end of the financial year — start planning now.
Ready to take control of your tax strategy?
We don’t just file taxes; we partner with you to create a tax strategy designed for your business. With our multi-layered approach, we ensure that tax planning is integrated into your overall financial strategy.
Whether you’re growing your business, preparing for an expansion or simply looking for better financial clarity, we provide the expertise and guidance to help you make smarter decisions.
By working closely with our clients throughout the year — not just at tax time — we keep your tax strategy aligned with your business needs. Our proactive approach means that when tax season arrives, you’re already in the best possible position.
Book a tax planning consultation today and discover how LMS Advisory can help you make informed financial decisions that drive success.
If you’re looking for more personalised budget help, speak to our team at LMS Advisory today.
Here at LMS Advisory, we take a comprehensive approach to accounting and business advisory, because we care about creating a holistic and meaningful financial experience for you — with you.
We take the time to get to know your business to provide you with the financial services you need today and the dependable financial advisory to support your goals tomorrow.
If you’re a proactive business owner looking for a partner who cares about your business and finances as much as you do, LMS Advisory is the firm for you.
For more information, visit our website or contact our team today.
LMS Advisory
There’s incredible knowledge in your numbers.
We help you harness that to make powerful business decisions aimed at your growth goals.
Please note, that this article and the information in it is general and not to be considered as financial advice. However, you can book a meeting with us for personalised financial advice tailored specifically to you.
