If you’re like many business owners, you’ve made it clear to your accountant that you don’t want to pay
any tax, or at least as little as possible. That has likely become the standing order each year. And here’s
why it’s the wrong decision.
Having a tax bill means you made money; it means you were profitable. Profit is not a swear word, not
ever, not even at tax time. And paying some tax is better than the alternative. It’s like I say to my wife’s
grandmother who, at 90, regularly bemoans the troubles with “growing old.” I reply that it’s better than
the alternative: dying young. Paying tax on a profit is better than no profit at all.
Why would I want to give more money to the government?
I don’t give a rodent’s keister how much you don’t like the way the government spends your money, and
the government cares about as much whether you’re profitable or not. The purpose of your business is
to grow your wealth, and profit is the fuel to do it.
Here’s the list of things you can do when you have such little profit that you pay no tax:
1. Pay no tax
Here’s a PARTIAL list of what is available to you when you show a healthy profit and pay a little tax:
So if a nil tax liability is more important than anything in the second list above, if paying some income
tax still isn’t a good idea, then we definitely need to talk…soon.
Are you sacrificing profit to avoid tax?
Do you make decisions that are detrimental to your cash flow in an effort to minimize tax?
Do you recognize the benefits of profit greatly outweigh the cost of paying a little tax?
From the Home Quarter
I’m not suggesting you pay more tax than necessary, but I am a staunch opponent of minimizing tax at
all costs. The cost of minimizing tax must balance out to the benefit. Banks are often willing to lend up
to 100% of your equity. Consider how much you want to grow your equity which facilitates your ability
to leverage and expand your business versus how slow you end up building your equity because you
don’t want to pay tax. There are many factors that must be considered when making decisions and tax is
but one of them. Do not let tax be the only factor to consider when making financial decisions.
Oh, and one final thought: if you’re smiling because you’ve been taking full advantage of the system to
defer all tax liabilities during your profitable years, hold on to your shorts because that piper needs to be
paid! As I’ve said many times, “You can’t beat the tax man. The best you can do is make him wait until
the day after you die, but he’s still going to get paid.” Is paying some tax today worth saving your family
from heartache in the future?
If you’d like help planning your farm for business and personal success, then call me or send an email.