At our accounting firm, we have seen it all. If you’re worried because you haven’t lodged your taxes in a while or because your bookkeeping isn’t up to scratch, you can rest assured we have definitely seen worse!
One of the areas we specialise in is helping small businesses to get back on track when it comes to accounting and tax. Once we have everything up to date, we make it our goal to show SMEs how to avoid the common pitfalls of tax time.
Take a look at some of the big tax mistakes that most business owners make at some stage during their entrepreneurial journey.
#1 Avoiding tax talk till July 1st
That financial new year rolls around darn fast. It is really overwhelming if you wake up on July 1st wondering how you’re going to answer all the questions your accountant will have.
A much better approach is to always be aware of how your spending decisions will affect your tax. As an example, you may be looking to invest in some new equipment. Buy before June 30 and you can potentially write the expense off as tax-deductible for that year. Wait till July and it will be another 12 months before you can write it off as a business expense.
#2 Inaccurate record-keeping
Having your personal and business accounts mixed up, failing to track expenses or accepting payments without noting where they came from will give you a headache at tax time.
The larger your business becomes, the more important it is to have systems in place that keep track of your financial progress. If you haven’t already, switch to a cloud-based accounting system like Xero or MYOB and connect it to your business bank accounts, credit card and PayPal accounts. This will save you from manually entering expenses and losing track of receipts.
Something you may have to track manually is the distance you drive for work. If this is significant and is something you can claim, try keeping a logbook in the car or use a tracking app. Your accountant should be able to extrapolate from a few months’ worth of data. According to the ATO, you can claim up to 5,000 kilometres per car, per year.
#3 Not paying superannuation
You owe your employees superannuation but leaving payments until its too late could result in a penalty, even if you do end up paying the amounts owed in full. Stay on top of this responsibility to avoid losing money.
#4 Not being aware of changes to legislation
The Australian Government’s annual budget often results in changes to tax and superannuation laws. This can affect your business and result in you paying either more or less tax. If you’re not aware of the changes, you may miss out on something you can claim.
As a business owner, reading through the federal budget in detail may not be something you have time for. This is why it makes sense to seek out a reliable tax accountant who can stay on top of things for you.
#5 Attempting tax-time DIY
Yes you can lodge your tax with myTax but if you’re running a small business, for one thing this will take hours of your time. It’s also more than likely you are missing some of the knowledge you need to make sure your tax return has all the right details.
There may be penalties if you get your tax wrong. If you’re in Brisbane, the best thing you can do is reach out to a tax accountant from Mobbs & Company. We specialise in tax accounting and will be able to identify every dollar you can claim so your tax bill is as low as possible.
#6 Burying your head in the sand
Scared to file your tax return? Worried because you don’t have the money to pay a tax bill?
The longer you leave it, the worse the problem will become so you may as well get it over with. When you work with the best tax accountant you can find, they will guide you through the process to file overdue tax returns. If you do have a big bill, your tax accountant will also support you to set up a payment plan with the ATO.