The end of the year is fast approaching; keep more of your money instead of paying it out in taxes.
I often hear accountants recommend spending your money, so you have fewer taxes. I disagreed because the more you spend, the less cash/capital you have.
However, some scenarios would justify spending to avoid taxes; here is one.
Buy assets you are going to need for the upcoming financial year.
Let’s take this example (All prices in JMD).
If your net profit was $1M, you would have to pay $250K (25%) in taxes, leaving you with $750K in value.
But if you were to buy an asset for $500K, your net profit would now be $500K, and your taxes would be $125K, leaving you with $375K in cash.
But remember you bought the asset for $500K, so when combined, the total value (in your books) you have is $875K
$875K > $750K
If you bought the asset next financial year (after paying your taxes), you would have $750K – $500K; you would have $250K in cash.
$375K > $250K
So with some planning ahead, get next year’s assets in this financial year.
Capital allowance also needs to be considered; that’s a discussion for another time.
If you found this useful, please share it with other entrepreneurs.