It’s nearing that time of year that all business owners dread, as the June 30th deadline approaches, SMEs are forced to get their last year of financials in order and prepare for tax time. As we close in on the end of the financial year, here are some top tips and expert advice for Australian small business owners, to help alleviate the stress and confusion associated with the end of the financial year and tax time.
Get organised and keep detailed records
Not only does being organised help you manage your day to day business, it also makes tax time go a whole lot smoother. If you have an organised system, you use in your business daily to track and file records, documents, expenses and income, it will make tax time so much easier.
Additionally, tax law requires records to be kept for five years and there are penalties that can be imposed on businesses that are unable to supply accurate records for this timeframe. Records include documents such as sales receipts, expense invoices, credit card statements, bank statements, employee records, vehicle records, lists of all debtors and creditors and asset purchases.
There is no right or wrong way to file records. You can choose to keep records in either hard or soft copy but the key is to file them, make a detailed record of them and make sure they are easy to retrieve at a future date. Ensuring this is done regularly throughout the year makes it much less of a hassle than facing a mountain of paper work at the end of each financial year. Alternatively, consider going paperless and storing your records on a cloud-based system as it won’t only save space in the office but the files are then accessible from almost anywhere and are often quicker to retrieve.
Know the rules
It pays to do your research, make sure you double check what you can include as income or deductions and what is exempt here https://www.ato.gov.au/Business/Income-and-deductions-for-business/.
You can claim deductions for most of the costs associated with the running your business. Operating costs such as stationary and wages are claimed in the year you incur them and capital expenses, which include things such as buildings, machinery and equipment, are claimed over a longer time period.
Small business tax concessions are another thing worth reading up on. For small businesses that have a turnover of less than $2m annually there are a number of tax concessions such as the $20,000 instant asset write off and simplified trading stock rules that can be used to your advantage.
If you are unsure about what you can claim and what is exempt, check with a tax specialist or you can always refer back to the ATO website https://www.ato.gov.au/Business/Income-and-deductions-for-business/.
Don’t be late
This might be the most important and most obvious tax tip – make sure you don’t miss any deadlines with lodgments and payments of your tax returns as you may incur penalties for doing so. For assistance, the ATP Small Business Newsroom provides you with a detailed calendar of what is due and when.
Ask for help
Small business owners wear many hats and are often short on time, so don’t always have the time to be up to date on the latest changes to taxes that affect their business. Therefore, it can be worth seeking the help of an expert and working with an accountant who specialises in working with small businesses. Not only will it save you time, it can often save you money at tax time. The ATO website has a wealth of information to help small businesses navigate through submitting their tax return.
Start thinking about next year now
Now is the time to also start thinking about getting ready for next year’s tax returns and setting up your business for success for the next 12 months. Review your income and expenses for the year and plan how you can maximise growth and profits for next year. Ask your accountant about what you can do to reduce your tax payable income for the next financial year. If you haven’t got an organised filing system in place for records don’t put yourself in this position for next year. Take the time and set these up for the year to come, you will thank yourself in 12 months’ time. Learn from your past.
Mark Hearl, is a leading business finance expert with over 16 years’ experience in the industry. He is the founder of Sprout Funding, a finance company specialising in small to medium business lending.