Tax time is coming up again; are you ready? Find out how to be prepared for tax time in 2021 and about the benefits of using a specialist tax account.
The financial new year seems to roll around faster every year.
And just as we do on January 1st, every July 1st sees us resolving to be more organised and do better when it comes to our business and personal finance management.
With a few months until tax time in 2021, now is your chance to start organising so you can side-step the late-June/early July panic surrounding your tax return.
The best things about being organised are that you will be less stressed and have the clarity to claim every possible dollar. Here are some tips to get you started from a specialist tax accountant:
Talk to a tax specialist
Unless you are a trained accountant yourself (and have the time and effort to devote to dealing with the details of Australia’s ever-changing tax regulations), speaking to a professional is the way to go.
This year, change things up by calling them early.
Your tax accounting specialist will be able to give you a heads up ahead of time about what you should spend ahead of the end of the financial year so you can maximise your claim. For example, if you have been thinking for months about purchasing some new equipment, you may as well do it before EOFY so you can write it off as a business expense sooner. A specialist tax accountant can explain if this strategy will work for you.
A shoebox of disorganised receipts will make you and your specialist tax accountant feel very stressed at tax time.
If you want to be really prepared for July 1st, spend some time each month, or even each week ensuring you have a record of your purchases. A receipt-keeping app is a great place to start, or you can connect your bank account to a cloud-based accounting system and have every purchase tracked automatically.
It may not feel like a big deal to spend $10 here and $200 there on business expenses on your personal card or without keeping a record, however, if you make this a habit it will all add up. And every $100 you don’t have evidence of will lead to a higher tax bill.
Put money aside all year
They say there’s nothing certain in life except death and taxes.
If you earn a living, unless it is less than around $19,000, you will have to give a percentage of your income to the Government.
The amount of tax you pay will change based on what you earn but as a rule of thumb, you should remember that $30 of every $100 you make doesn’t technically belong to you. Because of this, the best thing you can do is put this money aside as soon as you receive it.
Keep it in a separate account and don’t be tempted to dip into it. This way, come tax time, you won’t feel stressed about your tax bill. You may even be pleasantly surprised to find you have some cash leftover to either invest in your business or spend on yourself.
If you want to be really on top of your tax payments, ask your accountant to arrange quarterly tax payments. This will be based on your previous year’s income. Make a lump-sum payment every three months and you won’t be in as much danger of falling behind on your tax bill.
A specialist tax accountant shouldn’t be the only professional in your financial arsenal.
If you have been doing your own bookkeeping, i.e. paying your staff, paying supplies, sending invoices, and reconciling accounts, consider how much time this takes you and whether you could spend that time in a more productive way.
Nowadays there are plenty of independent bookkeepers who can bill you for just a few hours a week, depending on your needs. For a small price, you are free from the stress of sending invoice reminders, figuring out how much holiday pay your staff owe, and ensuring you aren’t behind on your own bills.
When you have a good bookkeeper, you will be far more organised and ready for tax time. They can work with your specialist tax accountant to make this EOFY your easiest ever.
Start early this year and you’ll thank yourself when your specialist tax accountant files your taxes without needing to ask you hours worth of questions.