The South Australian Business Chamber member Barossa Accounting and Tax shares with us their valuable tips and tricks for tax time …
Keeping your records together will take the stress out of tax time and save you money in the long run on accountant fees. The more organised you are with your records, the more you will benefit. Something as simple as a binder with a monthly section can be beneficial. All the expenses for the month will go inside the binder into a respective section. You might want separate sections for any investments into assets or significant expenses during this time period, cash transactions, and other documents.
Of course, this can be done electronically with separate folders for different items on your computer. The growing popularity of cloud-based services simplifies paying taxes for small business owners and accountants alike. Throughout the year, transactions are exported from bank and PayPal accounts, payroll can be automatically calculated and integrated, all invoicing elements are captured, and debtors and creditors are tracked. All of this means you know where you stand financially – not just at year-end but at any time – saving you time when it comes to doing your taxes and giving you the ability to spend more time on building your business.
Getting in early gives you time to review your business results before the rush of 30 June
If you have maintained good record keeping or use cloud accounting software, your transactions will be up to date. Then you and your accountant can estimate your likely tax position, develop strategies that make sense for your business, and give you time to implement them.
It is not too early to begin thinking about next year. If you expect your tax pay will be higher this year than next year, you may benefit from deferring income to next year and accelerating deductions into this year. Being organised and planning ahead will save you time and money in the long run.
Some other quick tips for tax time
* You should always consult with a qualified accountant or the Australian Tax Office if you have questions.
1. Super deductions. Even though superannuation does not have to be paid until 28 July, paying employee and personal contributions by 30 June will allow time for processing delays and getting valuable deductions this year.
Note: According to the Australian Tax Office (ATO), superannuation is only deductible when paid. That means that it must be cleared through your bank account, received and recorded by the employee’s superannuation fund prior to that date. Be prepared; pay early.
2. Pay expenses in advance. If your cash flow allows it, consider paying recurring expenditures in advance. Insurance, interest, rent, conference fees, subscriptions or travel costs can mean an immediate deduction.
Note: The expense may not be eligible if it covers more than 12 months.
3. Spend up, but only if you need to. If you need to replace equipment or purchase new tools, computers or other equipment soon, consider purchasing them before 30 June to get the full tax benefit now.
Note: Your tax benefit will depend on your taxable income. Always check the ATO website for the latest updates.
4. Write off bad debts. To deduct a bad debt, the ATO requires you to write it off while it still exists, before 30 June. Review your accounts receivable with your accountant or bookkeeper to determine whether a deduction qualifies before the deadline.
5. Repay any borrowings. If you, a family member or an associate have borrowed money from your business, you should ensure that the company charges the appropriate interest. Also, consider making the minimum required repayments before the end of the financial year.
Note: Failure to do so may result in the entire amount of the loan being treated as taxable income, causing you to be taxed personally at rates of up to 46.5%
6. Pay on time; do not overclaim. It is critical to submit accurate returns and pay on time.
Note: ATO interest is calculated at a higher rate than a loan.
