Tax time: what to watch out for

For many Australians, the end of the financial year is something to look forward to, given that they will be getting their tax refund from the government. However, this time of the year can also spell stress and anxiety for many small businesses, as the amount of paperwork and tax reporting obligations can be overwhelming.

Around ninety-one percent of SMEs have indicated they are not completely aware of their tax obligations, according to a Galaxy Research survey conducted for American Express. Thirty-six percent also found meeting deadlines to be the most stressful part of tax and Business Activity Statement (BAS) reporting.

With this in mind, here are some of the things to watch out for when the tax man comes knocking.

  • Keep good records
  • Know your deadlines
  • Meet small business benchmarks
  • Know your deductions and offsets

Keep good records

Maintaining and keeping a copy of all relevant documents is essential to running a business. Tax and legal paperwork are particularly important in the case of an insurance claim or if your business is involved in a class action or lawsuit. These documents can be kept electronically or in physical form, as long as they are not stuffed into drawers or boxes- this can make it difficult for you to sort them out during tax time.

You should also aim to enter receipts, invoices and other records into your company's reporting database regularly, say once a week, instead of waiting until they accumulate at the end of the year. Think about investing in financial software that can cut down on the amount of time taken to compile receipts and records. The Australian Taxation Office (ATO) has a record keeping evaluation tool  that can help small businesses determine what records to keep and how well these records are kept.

Know your deadlines

As Benjamin Franklin once said, nothing in this world is more certain than death and taxes. But while you never know when to expect the former, at the very least you can be aware of your tax deadlines and their late penalties.

Businesses must lodge their tax return with the ATO before 31 October this year, but if you are using a registered tax agent, the deadline may vary. The ATO recommends that sole traders use their free electronic tax lodgment system, E-tax, which also provides information on capital gains and losses.

As for pay as you go (PAYG) payment summaries, ensure that all your employees receive them by 14 July this year and lodged with the ATO by 14 August.

From 1 July onwards, a host of new tax schemes will be implemented, such as the temporary flood and cyclone reconstruction levy, paid parental leave scheme and the payroll tax rebate scheme (for New South Wales). Find out what these initiatives will mean for your business.

Meet small business benchmarks

The ATO has set benchmarks for small businesses to help them fulfill their tax obligations and assess their performance in relation to the rest of their industry. There are three types of benchmarks: performance, input and cash sales benchmarks for various business categories including construction, education, healthcare, manufacturing, professional and retail industries.

The ATO uses these benchmarks to determine which businesses are not reporting some of all of their income. Small businesses reporting outside of the benchmark should find out if they have accurately recorded and reported their income and tax deductions.

Know your deductions and offsets

If your turnover is less than $50,000 annually, you may be eligible for the entrepreneur's tax offset, which is 25 percent of your payable business income tax. Small businesses are also eligible for an additional general business tax break of 50 percent, as compared to the 30% and 10% tax break for larger-sized businesses. This tax break can be claimed for assets costing over $1000 such as vehicles, machinery or equipment, renovations and alterations, but not for repairs.

In addition, a high court decision in November last year now allows students on Austudy, ABSTUDY and Youth Allowance to claim a deduction for study expenses, although 16 to 20 year olds on Youth Allowance who are seeking employment or in employment-related activities are not included in the new ruling. More information can be found on the ATO's website, and for businesses in the Sunshine Coast, they qualify for free one-on-one information sessions with ATO officers from August onwards.

The last thing to remember during tax time is to review the past financial year and plan for the upcoming 2011-12 financial year.

Connect with us to receive updates throughout the day:

Like us on Facebok Follow us on Twitter

Dun and Bradstreet AustraliaTop of page Dun & Bradstreet Australia Pty Ltd 2015 | D&B Small Business    *About Us    *Sitemap    *Advertise    *Privacy    *Terms & Conditions