Getting ready for tax time as a small business owner can be stressful, especially if you don’t have much previous experience in finance.
The good news is that tax time doesn’t need to be stressful. So long as you’re organised and well-prepared, getting ready for June 30th will be a breeze.
Common mistakes made by small businesses when filing tax
The Australian Taxation Office (ATO) says that the most common problems small businesses seem to run into are:
- Failing to report all of their income
- Not having the necessary records to prove small business expenses claims
- Claiming private expenses as business expenses
It’s not difficult to avoid these common pitfalls.
You can avoid failing to report your entire income by making sure all your financial records are in order, and have been filed throughout the year correctly. These is the same if you’re trying to claim an expense. And to avoid getting into trouble by claiming a private expense as a business expense, just make sure that you don’t mix business with pleasure and always file your personal and business document separately.
Your small business tax time checklist
Read through our tax time checklist for small business owners to make sure you’re on track for July 1st.
1. Make sure everything is in order
First and foremost – you need to get your financial records organised. This includes, among other things, your accounts receivable, accounts payable, bank accounts, and goods and services tax (GST) withholding accounts.
2. Prepare your statements
You will need to lodge a business activity statement (BAS) which enables you to pay GST, fringe benefits tax (FBT) and other things. Some accounting tools, like?QuickBooks, can? generate reports to help you complete this part of the checklist.
You will also need to complete a stocktake of your inventory, equipment, and assets.
4. Review your assets and prepare your expense reports
You will need to list the assets you’ve purchased, as well as any money invested on improving assets, as this will help you work out your depreciation credits. Make sure that you log all your business expenses through the year, too.
5. Know what small business tax deductions you can claim
Your Tax Professional should be able to help you determine exactly what tax deductions you will be eligible for, but it never hurts to do your own research.
You will need to prove that your purchases were for business purposes, so don’t forget to hang onto those important papers and receipts. For example, if you undertake a further education course throughout the year, you could potentially claim this on tax if it was to further improve your skills related to your work. And remember – always keep your personal and business documents separate!
Read up on any tax changes that might affect you
Again, while your Tax Professional will be able to assist you here, you should always try to stay up to date and informed on tax changes that could affect you. These might include changes in tax law and changes to deductions or concessions for small business.
You can find information about tax changes on the ATO website.
Review your finances with a Finance Professional
After you have filed your tax return and all the other relevant information with it, you should make time to go through your finances with your Accountant or Bookkeeper. You should make it a priority to look at whether or not you are meeting your targets, and whether you need to make any changes to the way you are doing business for the next financial year.
Are you a small business owner? How have you prepared for tax time in the past? Do you have any helpful tips to share with people who may be doing this for the first time? Let us know in the comments below.