Traditionally tax time is one of the most stressful times of the year, just ask any business owner. Dealing with tax is a vital part of running a small business in Australia, no matter what industry you are in. Whether you use a tax agent or choose to take care of your own tax in-house, there are a few simple things you can do to make tax time a breeze.
The number one rule – Record keeping
Being a busy business owner, it is easy to overlook or even avoid things like record keeping as it is not a direct revenue generator and can be a tedious task. However, accurate record keeping has the potential to not only save you money at tax time, but a large portion of your time leading up to tax time as well.
Australian tax laws require that you keep tax records such as tax receipts, invoices, bank statements, credit card statements, vehicle and employee records as well as records of asset purchases for a duration of 5 years.
Maximise your returns - know what deductions you can claim
A lot of business owners don’t know where to start when it comes to tax deductions and what they can claim. So we’re going to go back to the basics of tax deduction and start from the beginning.
So what is a tax deduction?
The Australian Taxation Office (ATO) describes deductions as an amount you can claim in relation to most expenses you incur in running your business as long as they are directly related to earning your assessable income.
When can you claim a deduction?
A deduction can usually be claimed for everyday business operating expenses for example office stationary and wages within the same year you incur them.
If you operate as a sole trader, you may purchase something that you use for both business and private purposes in which case the Australian Taxation Office (ATO) still allows you to claim a percentage of use based on how much you use it for business purposes.
You can’t however claim private expenses, for example childcare fees or expenses that are specifically non-deductible such as entertainment and parking fines.
What deductions can be claimed?
There will be different deductions that you will be able to claim depending on your specific business operation and industry.
Some deductions may include:
- Business travel expenses
- Motor vehicle expenses
- Salary, wages and superannuation
- Repairs, maintenance and replacement expenses
- Home office expenses for businesses operating from home
- Other related operating expenses
- Capital assets and expenses
For further information on deductions, visit the Australian Taxation Office website or speak to your accountant or tax agent.
Set reminders – know all the important dates and deadlines
Being a busy business owner, it is very easy to lose track of important tax dates and deadlines. Use a calendar like Google Calendar, or your choice of any of the major services with inbuilt calendars such as Apple, Exchange, Office365 or Live to set reminders for noteworthy or important tax dates and deadlines. Having a calendar to remind you of important tax deadlines may help you to avoid having to pay unnecessary tax penalties for making late payments.
The Due Dates section on the Australian Taxation Office (ATO) website provides a list of key lodgement and payment dates and will assist you to find important tax dates and deadlines to add to your calendar.
Speak to a tax professional – it could save you time and money
Sometimes enlisting the help of a tax professional or accountant can actually save you time and money. They deal with business tax on a daily basis and have intimate knowledge of the laws and legislation that will apply to your business. Not only will it free up your time so you can focus on your business, it may even save you from making potentially costly errors on your tax. Business tax can be a very complex subject and they may even be able to suggest ways you can minimise your tax or suggest deductions you may not have known you were eligible for.
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