It’s no secret that tax time can be one of the most painful times of the year for business owners, with a seemingly ever-changing list of things on the Australian Taxation Office’s (ATO) hitlist and numerous concessions and deductions to keep in mind.
To help out, the ATO has released a short list of tips specifically aimed at business owners who might be fretting over July 1. In a statement, assistant commissioner Mathew Umina said the tax office was committed to helping SMEs “get it right” come tax time.
“Small businesses in Australia contribute more than $380 billion to the economy each year and are an essential driver of economic growth. That is why the ATO is committed to supporting small businesses and making it as easy as possible for them to understand and meet their tax obligations at tax time,” he said.
1. Healthy records, healthy business
Keeping records seems like a no-brainer for many business owners, but if the tax office comes knocking, well-kept and detailed records will quickly put at ease any concerns for both you and the ATO.
“Small businesses need to keep records explaining all transactions that relate to their tax affairs containing enough information to calculate the income, expense and other amounts that must be reported in tax returns,” Umina said.
Speaking to SmartCompany earlier this week, tax agent Lisa Greig warned SME owners against taking the easy way out and mass-claiming “standard” deductions, instead saying business owners should strive to substantiate and justify all claims they make.
2. Keep SME-specific concessions in mind
One of the most popular features of recent federal budgets is the $20,000 instant asset write-off for small business owners, allowing them to claim immediate deductions for asset purchases up to the value of $20,000. However, despite its popularity, it’s likely some SME owners might forget about it.
The ATO is reminding SME owners to keep that write-off in mind, given that the business has bought and installed those assets by 30 June 2018. The tax office is also reminding business owners of simplified trading stock rules, where if the difference between opening and closing trading stock is an estimate of $5,000 or less, small businesses don’t need to do a stocktake.
“There are also concessions that allow new small businesses to claim an immediate deduction for start-up costs like professional, legal and accounting advice,” Umina said.
3. Be deduction savvy
When it comes to tax time, deductions can be a best friend of business owners. But that friend can quickly turn into an enemy if SME owners get a bit too enthusiastic, and Umina advises business owners to remember the three ”golden rules” of business tax deductions.
“When working out what business deductions to claim this tax time – it’s important to remember the three golden rules. One – the money must have been spent for your business not yourself, two – if you use something for business and private purposes, you can only claim the portion that is related to your business, and three – you need a record to prove it,” Umina said.
Some deduction examples the ATO suggests include operating expenses, business travel expenses, home-based business costs and costs of employing people.
Each year, business owners are usually faced with a few changes to keep in mind for the new financial year, and the ATO has reminded SMEs that from July 1, those with 20 or more employees will be required to sign up for Single Touch Payroll, unless they have been granted an exemption from the tax office.
Earlier this year, the ATO warned businesses to do a headcount on April 1, and to spend May and June preparing for the new rule changes; they were also advised to check if their payroll software provider had been granted more time to prepare for the changes.
“Some payroll software providers have asked us for more time to get ready — employers should ask if their provider has been given a deferral which will cover them, and also check when their product will be updated to offer Single Touch Payroll reporting,” assistant commissioner John Shepherd said at the time.
Furthermore, the ATO is warning importing SMEs to prepare for new GST changes.
“If a small business is registered for GST and imports low value goods for business use in Australia, they may not need to pay GST. They simply need to tell their supplier that they are registered for GST, and provide them with their ABN,” it said.
5. Know where to get help
Finally, the ATO says that SME owners should know where they are able to find tax advice if they need it, suggesting you either ask your tax agent, or use some of the tax office’s online resources, including its online live chat, and various SME webinars and seminars.