Finance: Tax Planning Explained

Finance:

Tax Planning Explained

by Dr Edgar Paltzer

T

ax planning refers to the process of analysing a financial plan or situation from the perspective of taxation. The primary goal of tax planning is to reduce tax liability and to make the financial plan of an investor more tax efficient.

Considerations The main considerations of tax planning include the size and timing of purchases, the timing of income, and planning for expenditures. A successful tax planning strategy will maximise the retirement portfolio of the investor by reducing their overall tax liability. The selection of investments and the types of retirement plans chosen are then determined by tax deductions and filing status to deliver the best financial outcomes for the investor.

Strategies There are several main types of tax planning strategies. These may include engaging in harvesting tax gain-loss in a company or private individuals saving money in a special pension plan for retirement.

2

Taxes can be efficiently reduced when money is transferred into a retirement plan, which results in a larger pension fund for the private individual once they reach the age of retirement.

International tax planning considers the various regulations of different international jurisdictions. A good place to start to deal with this topic is the International Tax Planning Association, whose object is to disseminate and exchange information about international tax planning.

3

You can learn more about the International Tax Planning Association by visiting the blog of Dr Edgar Paltzer.