Last year was tumultuous for the world of SME taxation, from the implementation of Single Touch Payroll (STP) for firms with more than 20 workers to worrying revelations about ATO conduct surfacing.
But with a federal election on the cards, a suite of SME tax policies from both parties, and even more STP compliance to come, 2019 is shaping up to be just as disruptive, if not more so.
That’s the view of Pat Mannix, partner at accounting firm Paris Financial, who tells SmartCompany the coming 12 months will be “huge” for SMEs.
“It’s shaping up to be one of the biggest years for tax in almost 20 years,” he says.
Lance Cunningham, national tax director at BDO, also thinks 2019 will be an important year for small business accounting.
“It will be an interesting time over the next few months with the budget coming and then the election, there’s a lot of uncertainty around that,” he tells SmartCompany.
With that in mind, here are five tax-related boxes to check before end-of-financial-year madness in July.
1. Single Touch Payroll
Mannix says the biggest thing small business owners, particularly micro businesses, have to worry about in 2019 is the extension of STP to employers with less than 20 workers.
As SmartCompany reported late last year, an extension of STP passed the Senate in December, which means it is just one uncontroversial step in the lower house away from becoming law.
That means all Australian businesses will be required to comply with STP reporting from July 1, 2019, bringing over 700,000 businesses into the regime.
We have a handy explainer covering everything you need to know about the STP extension, but in terms of planning out the next six months, Mannix says taking time to do things right is important.
That includes spending time trialling different cloud-accounting software if your business isn’t already using it.
However, the ATO has a tender out for a low-cost cloud accounting solution for STP compliance among micro business owners, so before making a final decision, it may be worth waiting for the completion of that process.
Stacey Price, owner of Healthy Business Finance, advises business owners to set aside at least two months for learning how to use a new piece of accounting software.
“Implementing a payroll software overnight is never going to be a good result,” she tells SmartCompany.
For those a bit concerned about going digital in the first place, Cunningham explains that’s just the direction things are going.
“STP is really just the start, you have to look at last year’s budget announcement with cash payment limits,” he says.
“You won’t be able to transact legally for more than $10,000 in cash.”
2. Have you thought about EOFY?
Mannix says the start of the year is a good opportunity for small business owners to think about their tax position for 2019 to avoid any hidden surprises in July.
“You should have all your 2018 taxes done and completed. If you haven’t, you need to get that done now,” he says.
“As an SME owner, you should be in about February or March looking at your 2019 tax and knowing where it’s heading for the financial year.”
Price agrees, saying she sees too many business owners getting nasty surprises on June 29.
“It’s nice to think about it now because you’ve still got six months to action everything.”
3. Have you taken advantage of the instant asset write-off?
Price says the start of the year is a good opportunity to assess which asset purchases may have good tax implications for the 2019 financial year.
Businesses are able to access the government’s instant asset write-off this year, which can deliver some serious savings if approached correctly.
But leaving it too late can lead to making decisions in a rush, and purchasing an asset that doesn’t have any positive tax implications.
“A lot of people leave that to the 30th of June and say: ‘What piece of equipment can I buy?’
“You still have to have the money to spend the money so we really encourage people who may need to buy an asset to really look at those numbers and see if it provides a tax benefit,” Price explains.
The data indicates many SMEs don’t take full advantage of the $20,000 write-off or even forget to utilise it all together, so get ahead of the curve and start planning.
4. Human resources planning
Mannix, citing the Fair Work Ombudsman’s focus on underpayment, says business owners need to be having a close look to ensure they are paying their employees correctly.
There were plenty of examples last year of businesses being fined considerable amounts for making employment law mistakes. Last week alone an FWO blitz recovered over $84,000 from clothing and footwear businesses.
Price says many businesses also get into trouble because they fail to properly plan out their staffing needs, leading to poor hires that do more harm than good.
“If you have to spend money on unproductive staff, or paying staff out for the wrong reasons, it’s just throwing money down the drain.
“Look at your numbers, if April is going to be a big month, plan for hiring now,” she says.
5. Dot your i’s and cross your t’s
With tax time approaching in the next six months, there are some important things to keep in mind right now.
Price says claiming expenses will again be on the ATO’s radar in 2019.
“At the end of the day, it doesn’t matter what the deduction is, there still needs to be some type of proof or verification,” she says.
“Just because your friends claim something doesn’t mean its okay for you too.”
Cunningham explains the stakes are getting higher for businesses trying to get away with claiming dodgy expenses or operating on the edge of the black economy.
“The data sharing capabilities the tax office now has it’s getting information from a lot more places, a lot more accurately and a lot quicker than it used to,” he explains.
Cunningham says the ATO can increasingly detect automatically if a business has been cooking its books.
“They’re relying on the benchmarking of businesses and it’s getting more accurate.
“If your business is not within the benchmark for your industry you have to be able to explain why not.”