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Right Time of Starting the Tax Planning

Introduction

Tax is a mandatory charge levied by the government on the individual that is utilized for the general welfare of the public. There are different types of tax that are levied, like tax on income or, sometimes, tax on goods and services. Tax planning is a systematic approach to managing the tax liabilities by claiming deductions and exceptions. If you’d like to know more about accountants in Melbourne check out Liston Newton Advisory.

 It is important to note that the government wants the individual to pay taxes on time but, at the same time, also has certain deductions and exemptions that an individual can claim in order to reduce its tax liability. It is important for an individual to manage the tax effectively by hiring a tax planner. This article provides a general overview of what is the right time for tax planning.

Why there is a need for effective tax planning

Tax planning is the right of the individual, just like paying tax is the obligation of the individual. Tax planning helps an individual to lower its tax liability by following all the compliances. The government has added the deductions and exemptions in the laws to claim benefit of those deductions in order to reduce their financial liability. There are various advantages of effective tax planning, as it reduces the chances of penalty and litigation as the individual is duly compliant with all the applicable laws and regulations. Tax planning also increases productivity as the tax planners identify suitable tax-saving schemes and divert the income of the individual into these tax-saving schemes by following legal methods. Tax planning also helps in minimizing the risks, like audits, etc.

Right time to start for tax planning

It is to be noted that tax planning is the process of assessing the financial implications of the business during a financial year and helps in reducing the tax implications by investing in tax-saving schemes. There is no exact time to start for tax planning, but it is recommended to start as early as possible for tax planning. After that, an individual should determine the tax liability and assess the financial condition. After identifying the tax liability, an individual identifies the areas where he can reduce his tax burden. Hiring a tax planner will ease the tax planning process as they are specialized in tax laws and updated on the judgments of the court of law. After identifying the tax liability and tax saving opportunities, there is a need to develop the tax planning plan and implement the scheme. Implementing the tax planning scheme usually includes investing in provident funds, savings schemes, etc. After implementing the scheme, there is a need to monitor the tax planning structure as it can change from time to time.

Conclusion 

Tax planning is a strategic approach that helps an individual reduce its tax liability by investing in saving certificates, donations, etc. There is no right time to start tax planning; it should be done as early as possible. Effective tax planning saves the individual from minimal litigation, hefty fines, and penalties.

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