For small business owners, tax demands year-long consideration. If you wait until the last minute, there’s a strong chance you’ll end up missing the tax return due date, costing you heavily in penalties and fees.
From filing your BAS and organising your expense reports to lodging your Pay as You Go (PAYG) reports, it’s essential that you accurately manage your taxes. Fortunately, several useful tools will help you handle your taxes with ease.
In this article, we’ll cover a few of the tools that you can use to ensure you take proper tax deductions, file on time, and receive your refund.
One of the easiest apps that every Australian resident — and working non-residents, for that matter — should have is the Australian Taxation Office (ATO) app.
The ATO app will make sure you never miss an important date thanks to its key date tool. The app also offers other features such as:
- ABN look-up
- Business performance check
- Payment plan estimator
If you’re looking for a simple, all-in-one tool that contains basic information, then this is the tool for you. Whether you need to look up tax rates in a pinch or want to see how much in income tax you paid last financial year, this app has you covered.
ATO simple tax calculator
If you’re a self-employed individual looking for something simple and straightforward to help you determine the tax you owe, the ATO’s simple tax calculator is a good option. The calculator allows you to determine precisely how much you owe in taxable income. You can use this tool to run tax calculations for the past six income years.
The ATO simple tax calculator is best-suited for those working as sole traders. That’s because it only calculates taxes based on individual income tax rates. Sole traders pass their business income through to their personal tax returns, so this is not an issue. Your amount of tax payable depends on the income year you select and your residency status for that year.
The simple tax calculator also works for foreign residents. For tax purposes, foreign residents have a higher rate. They’re also eligible for the tax-free threshold. There are a few things that the simple tax calculator won’t consider, including:
- Medicare levy
- Medicare levy surcharges, payable by those without private health insurance
- Working holiday makers’ tax obligations
- Temporary budget repair levy
- Study and training support loans compulsory repayments
- First home super saver schemes
But, if you’re looking to know the maximum amount you’ll owe in income taxes then the ATO simple tax calculator is a worthwhile tool.
ATO income tax estimator
One of the other ATO tools to consider is the income tax estimator. This tool is a bit more thorough, making up for the deficiencies seen in the simple tax calculator.
Although this income tax calculator only works for the past four years, as opposed to the six years of the simple tax calculator, it helps you determine your tax refund and any debt owed. The calculator also accounts for the aforementioned bulleted items, such as the Medicare levy, the Higher Education Loan Program, and any other applicable tax offsets.
Because the income tax calculator is so much more extensive, you’ll need to provide more information than you would with the simple tax calculator. The income tax estimator asks you to provide:
- Total gross income payments
- Your total amount of claimed deductions
- The total amount of tax withheld
- Residency status
- Details regarding the tax credits and offsets you’re permitted to claim
Note that there is a tax offset designated explicitly for low-income earners. This offset, which was newly introduced for the 2018-2019 tax year, could be useful for sole traders and small business owners who are just getting started and have not yet made a lot of profit. The offset could potentially reduce the income tax you’re required to pay down to zero.
Remember that you are required to declare your assessable income when you lodge taxes each year. Determining your assessable income can be a lot more challenging than you think, which is one of the reasons why tools like the income tax calculator can help.
For example, assessable income includes things such as investment income, which accounts for earnings you make from dividends or on savings account investments. Assessable income also includes things like super pensions and annuities. You’ll want to make sure that you account for all possible earnings sources when calculating how much you’ll need to pay in taxes at the end of the year.
ATO tax withheld calculators
For business owners who employ staff, the ATO’s tax withheld calculators will help you figure out the tax you should be withholding from employment income.
The ATO recommends that you refer to its tax tables before using this calculator. It says that federal budget changes continually impact these tables, thereby potentially changing withholding rates. Understanding these tables will allow you to make more sense of the results that you receive from the tax withheld calculator.
The ATO offers two different types of tax withheld calculators. The first is the tax withheld for individuals calculator, designed specifically for employees. The other is the voluntary agreement calculator, which is meant for subcontractors subject to the voluntary agreement.
The relevant information needed to use this calculator should be included in the paperwork your employees provided when they first began working for you. The information includes the employees’:
- Medicare levy variation declaration
- Tax file number declaration
- Withholding declaration
Note that you should only include the calculators as estimations. The calculators are only as reliable as the information you provide. To ensure you’re running payroll correctly, you’ll want to use trusted accounting software, an accountant, or a registered tax agent.
QuickBooks Time (formerly TSheets)
Wage reporting is crucial when it comes to your taxes, and QuickBooks Time will help ensure accurate payroll. This app allows you to track your employees in real-time and access their timesheets instantly on any device. This app can help from a management perspective, allowing you to generate various reports.
For instance, you can download time card reports with detailed information on all your labour expenses and easily find the information you need with useful filters. You can also use this information with your accounting software so that you can track your payroll expenses in one place. By tracking and maintaining your employee expenses in one place, you’ll make life a bit easier when it comes to claiming tax deductions.
The goods and service tax is relevant to business owners, which is why you should reference the calculator offered by the government’s Moneysmart website. The calculator walks business owners through how to calculate the GST tax and the total amount that owners can expect to pay.
The calculator also displays the price of goods with and without the GST included so owners can determine how much they are going to need to charge customers. This calculator should be useful to business owners who are not input-taxed or GST-free. It applies to those making taxable sales and assumes that the sale is:
- For payment
- Associated with Australia in some way
- Made for business operations
Be sure to check out the ATO website to determine whether you’re required to pay GST taxes.
Salary packaging calculators
One of the little-known facts about owning a business comes in the form of salary packaging. Salary packaging occurs when you take less in income but pay for your benefits out of your pre-tax income. This package is known as a ‘superannuation’.
When you make super contributions, your taxable income is reduced directly. Additionally, the use of super funds allows you to maximise benefits. You’ll need to pay a fringe benefits tax on these earnings, but it’s less than the income tax. Using the salary packaging calculator can help you determine how much money you can save by packaging payment plans.
As the name implies, Expensify focuses on your business expenses. The app scans and transcribes receipts for effortless expense reporting, and auto merges each credit card transaction to the corresponding receipts for efficient reconciliation.
As is the case with QuickBooks Time, you can connect Expensify to your accounting software so that all of your expenses are in one easy-to-find location. This reduces the likelihood that you’ll miss a deduction, thereby maximising your potential rebate.
One of the other useful tools that we like for business owners is Hubdoc. Hubdoc helps cut down on your data entry efforts by automatically retrieving and accurately coding your statements, bills, and receipts.
As you can imagine, this is a tremendous benefit come tax season. When you know that tax season is approaching, you can find information, ranging from income statements to last year’s tax returns within Hubdoc. From there, you can either lodge taxes or send the information over to your registered tax agent. Either way, you’ll cut down on the hassle of having to tear through filing cabinets to find old forms.
Accounting software helps you organise your business finances, so you’re always prepared for tax time. Reliable accounting software not only syncs seamlessly with other apps, it will also do things like run payroll automatically so you don’t have to worry about it each week.
The best accounting software will also sync with your credit card and bank accounts to automatically track transactions. It’s an easy way to keep track of financial statements and gain an in-depth look at the health of your business.
Allow tax tools to work for you
As a business owner, you have enough on your plate trying to grow your business. You shouldn’t have to worry about wasting time trying to run extensive tax calculations. Fortunately, in today’s modern, technology-driven world, there are countless tools available to help.
Take time to research a few of the tools we mentioned today to see if they can work for your business. Even if you don’t use all of the tools, just using a few could help streamline your business efforts, creating more time for you to focus on your business endeavors.