With tax time just around the corner, you might want to start thinking about how to ensure your tax return process goes smoothly. Here are 10 common mistakes made by small business owners at the end of financial year, and how to avoid them.
Mistake 1: Being disorganised
Disorganisation not only creates stress, it can result in you overlooking a critical tax deduction. The key to being organised when it comes to your tax is to make it an everyday habit, rather than leaving it to the EOFY. Keep tabs of receipts and expenses by creating a filing system. Invest in cloud based technology to help you keep tabs of everything that is going on.
Mistake 2: Throwing away receipts
When it comes to proving tax deductions, a paper trail is not only important, it’s a legal requirement. So be sure to retain original receipts that are directly related to earning your assessable income.
Mistake 3: Going it alone
A bookkeeper or accountant can be an invaluable asset to help your business stay on top of its tax obligations throughout the year. Keeping in regular and open contact with your accountant can help you avoid surprises around EOFY, such as legislation changes and further obligations that could affect the amount you pay.
Mistake 4: Not providing enough detail or supporting information
The more accurate and detailed the information that you supply your accountant or bookkeeper, the better. Detailed and accurate information related to your business finance makes your accountant’s life easier, and your tax return more promising.
Mistake 5: Claiming false deductions
Make sure you know whether an expense should be treated as a deduction. Collecting receipts for things such as parking fines and private car fuel might seem relevant at the time, but they are not tax deductible for your business and can inevitably cause you more headaches, as you sift through the fodder to find the genuine deductibles.
Mistake 6: Holding on to bad debts
Sometimes you just have to let go and if a bad debt has been hanging over your head with no prospects of recovery, it’s probably time to write it off. Doing so can enable you to account for any GST credits on that bad debt, but remember that you need to write off the debt before the financial year is up, in order to claim.
Mistake 7: Ignoring superannuation changes
If you’re a small business employer, ignoring government changes to superannuation can result in having to pay an extra lump sum towards your employee’s super at the EOFY. Keep across changes in superannuation and employer obligations throughout the year to avoid issues at tax time.
Mistake 8: Incorrect payment summaries
If you are an employer, be sure to issue payment summaries on time and with correct details. Common mistakes include stating reportable superannuation contributions where it need not be stated and failing to issue payment summaries where no tax is withheld.
Mistake 9: Forgetting capital gains/losses
Where you make a capital gain or loss relating to the business, be sure to use it for offsetting or carrying over in accordance with the tax rules. Capital gains and losses may relate to property, furniture, computers, and other things used to improve or maintain the business.
Mistake 10: Future planning
Okay, so another EOFY down what next? Learn from any past mistakes and ensure that next year’s tax time is simpler and smoother by getting organised, getting professional help or software, and keeping abreast of legislative developments, so you can properly meet your obligations.
With these simple tips you can ensure your tax process will run smoothly, giving you more time to focus on what’s important your business.