“I love tax time!” – said no business owner, ever.
But doing your taxes doesn’t have to be all examining expenditures and racing for receipts.
Together with chartered accountant James Howlin from Cake Accounting, and Partner at Carbon Group Michelle Maynard, we provide some small business tax tips to help make your EOFY a little less taxing.
Keep Receipts Organised
It may sound simple, but according to the ATO, forgetting to keep receipts and invoices is one of the 5 most common tax-time mistakes. If you want the best possible tax refund, you need proof of purchases and records of your expenses.
“Keep your records up to date,” James advises.
“Reconcile or allocate transactions at least weekly while you still remember what the payment was for.”
Michelle agrees that record keeping is essential.
“Do you have a system in place? If not, get advice about how to make record keeping easier so you can claim more at tax time,” she says.
“Keep diaries and logbooks to support your claims. Motor vehicles, home office expenses, etc. all depend on it.”
If you’re still sticking to the old shoebox-full-of-invoices trick, it might be time to advance your record-keeping system to something a little more sophisticated.
There’s nothing like a good old filing cabinet or clear file folders to keep your receipts and invoices organised. Consider arranging them in chronological or alphabetical order to make them easier to find when making claims or answering any questions from the ATO.
It’s never too early to start organising your receipts and invoices for tax time. Future you will thank us.
Check out these 10 techniques for storing office documents to keep on top of your paperwork.
Use The Income Tax Offset
If you’re a small business owner and your company is yet to be incorporated, you’re probably eligible for the small business income tax offset.
Good news? You bet! This’ll get you up to $1,000 off your tax bill if your revenue is under $5 million. The offset in Australia is currently sitting at 8% of tax payable on your business income, and it’s set to increase to 16% by 2027.
Not sure if you’re eligible for the small business income tax offset? Find out here.
Review Your Finances Throughout the Year
Don’t wait until tax time to check up on the progress of your financial objectives.
“Think about tax time all year round, rather than scrambling at the end of the year,” Michelle advises.
James recommends taking advantage of your quarterly BAS lodgements to get a good idea of your cash flow.
“Use the quarterly BAS lodgements as a chance to review the progress of the business towards its goals – both financial and otherwise,” he says.
Staying on top of your finances year-round can help you better prepare for the EOFY.
Know What You Can Claim
Tax write-offs can really help with many of the costs of running your business. It’s important to know what business tax deductions you could be eligible for to make sure you’re getting your fair piece of the pie come tax time.
“Get advice about what you can and can’t claim early in the year so you know what to keep receipts for,” Michelle recommends.
If you work from home in a separate home office space, you may be eligible to claim a deduction for your work furniture, air conditioning, and any computers, electronics and supplies used in that workspace. You may also be able to claim vehicle and/or travel expenses for the cost of travelling from your workplace to client meetings and project worksites.
And a little tip from us to you: Your business storage unit may also be tax deductible.
Learn more about claiming a deduction for your business with this info from the ATO.
Don’t Forget to Claim Employee Supers
If your one-man or one-woman show turns into a larger operation with staff, don’t forget to claim a deduction for your employees’ super payments by June 30th.
Supers have to be completed and paid by the end of the financial year if you want your deduction, so it’s worth setting a reminder just to be safe.
Ask the Experts
If you feel out of your depths when it comes to tax time, consider turning to the pros for some help – and don’t wait until the last minute to reach for that life raft.
“Schedule a tax-planning session with your accountant in May/June and get advice on opportunities to manage the tax position of the business prior to the end of the financial year,” suggests James.
He also recommends getting the experts involved before entering large transactions.
“Throughout the year, get advice prior to entering transactions (for example, buying a new car) rather than once the transaction is complete,” he says.
Being proactive rather than reactive could save you a whole lot of stress come June 30th.
For more tips to run your business like a boss, check out our article Small Business Advice From Successful Entrepreneurs.