Tax time has arrived . For many small business owners this also comes with a sense of dread and stress. Law changes, Federal budget announcements and endless paperwork all contribute, but there is a way to navigate this time.
I always advise my clients and others with small businesses to not forget the basics. Stay up to date with your bookkeeping, or get caught up before the end of the financial year. Running your business in an organised efficient way will make the annual tax time less stressful.
Below is a brief list I recommend in order to take the stress out of tax time:
- Stay organised
Keep a record of daily transactions and make it as detailed as possible. Are you an on-the-go, busy entrepreneur? Rely on smartphone apps to track spending, scan receipts and back up files in the cloud. This way, you can verify business expenses are accurate and legitimate.
One of the reasons small businesses have a hard time getting through tax time is the fact that their tax documents are unsystematic. It is important to have an organised system for filing so sorting by expense type is easy. You can also utilise the cloud for creating a storage system and keeping files updated. Accounting software packages such as Xero and Quickbooks allow you to record your expense receipts on the go with a smart phone app. Take advantage of the Cloud technology.
- Understand the Tax Basics
The easiest way to save money for small businesses is to be aware of itemised deductions and offsets you can claim. This is an area subject to regular change by the ATO.
Perhaps the most significant announcement for small business on budget night was the extension of the $20,000 instant asset write-off. This concession is also now available to business with an annual turnover of up to $10 million (up from $2 million). If you have tools/equipment/vehicles that need replacing you can now stage your capital replacement program into next year also.
A simple small business federal budget action list is below:
- Update your accounting software to use the latest tax tables. Many of the Cloud based software packages will update automatically so understand your package.
- Set up your employee details correctly ie. select the correct tax-free threshold in your accounting software. Again, many of the Cloud based software packages will update automatically so understand your package.
- Set up additional superannuation payments correctly (ie. are the contributions meant to be before tax or after tax?)
- Stay SuperStream compliant by using the super portal.
- Be aware of Single Touch Payroll initiatives.
- Be aware of Simpler BAS initiatives.
- Understand the tax concessions announced, such as the Instant Asset write-off outlined above.
- Set reminders
It’s easy to lose track of deadlines in the middle of tax cycles. Having a calendar to remind you of important lodgement schedules (Activity Statements, Superannuation payments, Payroll taxes, annual returns) helps you avoid unnecessary tax penalties. Engaging in year-round tax planning can aid in easing your taxable income for the year. It helps to review your strategies regularly.
- Enlist help from a professional
You don’t need to do everything yourself, nor should you. Small errors have the potential to cost your business time and money. Do not hesitate to seek assistance from your Accountant or Tax professional to discuss areas you do not feel comfortable with. At Liro Accountants and Business Advisors, we provide tailored packages to provide you with the level of support you require.