Tips to make tax time a breeze for small business owners
Small Business Owners
Okay, so “a breeze” is probably a little ambitious — tax time is unlikely to ever be a small business owner’s favourite time of the year. And we know you probably feel like you only just did your tax for the previous financial year, but if there is one thing we can count on, it’s that tax time comes around faster than Christmas.
A little organisation goes a long way when it comes to the end of the financial year, and trust us when we tell you that ignoring that urge to procrastinate will be the key to you avoiding that overwhelmed feeling that usually accompanies tax time. And although you’ll probably always curse the government for implementing this whole “having to pay tax” thing, being organised will help keep your rage to a minimum.
So, let’s get you on your way. Here are some expert pieces of information to help you feel stress-free and in control during tax time.
Being aware of the different types of deductions that apply to you and your business will help ensure you aren’t missing the opportunity to lower your tax liability.
Here are the most common things you may be able to claim for:
Make sure you’re across what you can claim
Tax deductions are the government’s gift to us all, provided you have proof of purchase. Being aware of the different types of deductions that apply to you and your business will help ensure you aren’t missing the opportunity to lower your tax liability. Here are the most common things you may be able to claim for:
A home office
If your small business is one you run from home, then there are a whole heap of deductions or partial deductions you may be eligible for, including:
business phone costs
utility costs (electricity, gas, internet, etc.)
the cost of equipment (desks, chairs, computer materials, etc.)
occupancy expenses (mortgage insurance, rates, rent, etc.)
If you travelled in relation to your business, then you are eligible to claim a percentage of the related expenses.
If there is a direct link between any study you undertook and you earning an income, then you can claim for it (but note that HELP payments are not eligible for tax deduction). You can also claim for any magazine subscriptions that you may have that also function as educational resources, as well as any professional association fees.
Don’t forget that the superannuation you pay your employees is also an expense for which you can claim a tax deduction.
Get all of your paperwork organised
When you run your own business, the volume of paperwork required to successfully lodge a tax return can be nothing short of overflowing. Save yourself a lot of time by getting all the relevant paperwork together early — things like receipts, documented business expenses, any tax-related correspondence, bank statements, transaction records, etc.
If there is one thing we can guarantee in life, it’s that a filing system is your friend. So once you have collected all of your paperwork, separate it into logical categories for easy access.
If you aren’t exactly confident in your abilities, get yourself an accountant
Tax time can be super confusing and without relevant expertise or training, you might be missing out on a whole heap of offsets and deductions — or worse, you might be unaware of certain rules and regulations and, therefore, opening yourself up to legal liability and penalties.
If you know what you’re doing, then that’s awesome, but if you don’t, make sure you engage an accountant whom you can trust to make sure you are meeting all your legal requirements while also ensuring you are receiving all the deductions for which you are eligible.
Start thinking about next year
Yes, we know: This financial year hasn’t even ended yet, so why would you start thinking about the next financial year now? Well, the answer to that is simple: Because it will make your life a whole lot easier.
Don’t wait until June of next year to start thinking about getting your tax requirements in order. Instead, become a tax fiend by resolving to keep all of these financial new year’s resolutions.
Make sure you engage an accountant whom you can trust to make sure you are meeting all your legal requirement.
Keep organised records
Basically, document absolutely everything — including receipts, records of transactions and any correspondence from the ATO (in Australia) or the IRD (in New Zealand) — and try to do so in detail.
Set up a calendar of reminders
When you run your own business, having to pay tax isn’t specific to the end of the financial year. As you well know, you have a range of tax payment obligations that occur throughout the year. So, why not set up a calendar of reminders for each of these payments? Doing so will make it much easier for you to keep on top of what you owe and when.
Keep up with changes to tax rules and regulations
We know it’s not what you want to hear, but tax regulations for businesses change all the time. Keeping up with such changes is pretty simple - make sure you visit the ATO or the IRD website periodically, as any new rules and regulations will be covered in further detail there.
Talk to your accountant about a game plan
It’s never too early to set yourself goals and work towards them. Have a chat to your accountant about the milestones you’d like to achieve in your business over the next financial year and see if they have any advice or expertise about tax obligations in relation to those goals. Clueing an accountant into your plans early might go a long way towards helping improve your tax situation come 30 June.