Tax time can be daunting for small business owners. After a year like no other, SMEs have to juggle end of financial year numbers, navigate new government grants and reconcile potential losses. It’s a lot of ground to cover.
According to a panel of experts on SmartCompany and MYOB’s recent webinar, regaining control of your finances doesn’t have to be so hard.
Stacy Price, founder of Healthy Business Finances, outlined best practices for SMEs to stay on top of their accounting. Sarah Rudd explained how she navigates tax time as her business Caye Life scales and matures, and Caroline Rawlinson, chief financial officer at MYOB, outlined the government grants and incentives available to small business owners.
Numbers are “generally something that scare a lot of people,” admits Price.
So how can small business owners reclaim their power come tax time? Read on for four tax time tips.
Navigating new waters
Across all industries and business types, cashflow is the word on everyone’s lips.
“There’s a lot of money moving around from different sources that business owners haven’t had to deal with before,” says Price.
Businesses are handling complex accounting scenarios for the first time: from JobKeeper payments, to an array of state and federal grants, and even personal cash flow.
Business owners should code and split these transactions out individually, Price advises.
Think of it as “individual pieces of a puzzle” that together form a cohesive picture of your yearly cash flow.
Keeping good habits
Running sustainable lifestyle brand Caye Life has shown Sarah Rudd the importance of tracking and reporting on her finances year-round.
“I’ve got to have good financial habits throughout the year so this time of year doesn’t become a mad panic,” she says.
After a tumultuous year of retail shutdowns and business pivots, Rudd sat down with her accountant and had her first tax planning session.
“This was incredibly helpful to understand the position I was sitting in coming to the end of the financial year,” Rudd says.
The session helped Rudd understand Caye Life’s profit and loss, potential tax offsets, outstanding and owing invoices – everything that would set the business up for success in the coming year.
Price agrees that consulting an accountant can help you pick up on areas for attention and improvement – before they become a problem.
“Everyone can learn something, whether it’s how to use the software better or how to understand reports, to asking ‘Is my BAS accurate?’” Price says, giving the example of one client who unknowingly owed the ATO $10,000 from incorrect BAS reports.
“Those planning sessions give you peace of mind in terms of your business and knowing what you need. You’re never too small [to have one].”
But for early-stage business owners, hiring accountants and future forecasting can seem intimidating.
When Rudd first started Caye Life, she relied heavily on manual processes, spreadsheets and Microsoft Word documents.
As her business grew, she turned to online accounting tools like MYOB because they are affordable, easy to use, automate tedious processes, and provide a central place to track and record finances.
“I’m in a much better place right now, and that has taken a lot off my plate in terms of administrative tasks,” Rudd says.
Must-know government initiatives and incentives
The 2021 Federal Budget outlined a range of incentives and policies aimed at helping business owners get back on their feet.
One of the most exciting is the extension of the instant asset write-off scheme. This allows business owners to deduct the full cost of assets come tax time – removing the prior claim limit of $30,000.
“If you are eligible and you’ve purchased your equipment, you can immediately deduct the entire cost of that asset in its first year of use,” says Caroline Rawlinson, chief financial officer at MYOB.
“What this means is you have higher expenses and so you pay less tax.”
The loss carry-back scheme is another important initiative. The scheme allows eligible businesses to carry back current losses to previous years when the business was making a profit.
The carried back losses offset the tax paid in these previous years, allowing business owners to boost their cashflow by claiming a tax refund from the ATO.
“This is the ATO and the government’s way of trying to get cash back in the hands of small businesses around Australia,” Rawlinson says.
“Don’t hide from numbers”
The businesses that are on top of their finances are best placed to take advantage of these incentives – and speed up their post-COVID recovery.
For Rudd, good accounting means Caye Life is poised for future success.
“My advice is don’t hide from numbers,” she says.
“When you use an accounting tool, it’s really easy to pull reports and stay across what’s happening within your business.”
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MYOB is a leading business platform with a core purpose of helping more businesses in Australia and New Zealand start, survive and succeed. At the heart of MYOB is a customer base of 1.2 million businesses and a network of more than 40,000 accountants, bookkeepers and consultants, for whom MYOB delivers end-to-end business and accounting solutions. MYOB operates across four key segments: Small and Medium Enterprises (SME), Enterprise, Financial Services and Practice.