Last week we look at a story of how two different professionals (Jason and Paul) went about managing their tax, specifically the tax issues that came from the employee share scheme (ESS/ESP).
Paul, a client of ours, took a proactive approach to his tax planning.
He has a tax forecast in place which included the shares that were due to vest from his employee share plan.
This allowed him to have a pretty clear idea in May how much tax he would have to pay for the financial year when he went to lodge his tax return,
He then began to provision funds aside for this tax, and working with his adviser, he was able to save these funds and delay the tax return lodgement until March the following year.
But, you might say, how did he find the money to put aside for his tax?
In the same way Paul was proactive with his tax and created a tax forecast, he had also worked with us to create a cash flow forecast.
In fact, this was the first step in our work with Paul.
The cash flow forecast had each of the months of the financial year in columns.
At the top of the column, there was Paul’s bank account balance (his home loan offset account) at the start of the month.
This was followed by the income (net – remember, this is a cash forecast) that Paul, his partner and investments (including any vesting shares) generated.
Below the income was all of the expenses Paul had for the month. How did we have these? Paul was on our full wealth portal powered by My Prosperity (more on that in future videos).
After the expenses, there was either a surplus or a deficit for the month.
And the final line was the bank account balance at the end of the month (if the month was surplus, it went up, if deficit, it went down).
This continued for each month and had a total column for the end of the year.
Using this cash flow forecast, we were able to work out how we could put the funds aside for his share sale, where we could find savings and how to use excess money that came into the house (potential share sales).
This is what you call being proactive with your cash flow.
Stay tuned over the coming weeks to see more on how you can take control of your cash flow and to see a live run through of a cash flow forecast.
In the mean time you can jump on our next monthly lunch and learn webinars here.
