Accountants are prudent people.
We worry today about things that will only happen tomorrow.
That is why deferred tax exists.

When I explain deferred tax to non-accountant-clients,
I never start with accounting terms.
I start with a simple business story.

You buy a machine for RM100,000.

In your accounts,
the cost is spread over five years.
Every year, RM20,000 goes into the profit and loss account.
That is depreciation.

But tax rules work differently.

LHDN allows a bigger deduction upfront.
Maybe RM60,000 in the first year.

So in year one, something interesting happens.

Your accounting profit looks higher.
Your taxable profit looks lower.
Your tax bill goes down.
Your cash flow feels better.

You smile.

That is when accountants become quiet.

Because we know this is not free tax saving.
It is only a “timing difference” (OMG! Big words).

You saved tax today because you used the deduction early.
In future years, there will be less deduction left.

Pay less now.
Pay more later.

Deferred tax is simply a reminder in the accounts.
It tells business owners,
“This tax was not avoided. It was postponed.”

It reminds prudent accountants and SME owners that tax savings today often come with tax payments tomorrow.

Buying assets to save tax is normal.
Just make sure you understand the full journey, not only the first year.

Some people understand immediately.
Some are still confused, completely blur.
Some nod quietly, just to give me face.

But the moment I say this one sentence
“Deferred tax has nothing to do with paying money to LHDN today.”

Everyone relaxes.
And suddenly, we are all at peace.

Care to share how you explain deferred tax to normal people!👋