Running a small business in Australia is a rewarding experience, but tax can be complex. At Achieve, we understand how it feels to be a small business operator trying to handle tax and we're here to help you navigate avoiding some of the most prevalent pitfalls that cost time, money and even fines.
1. Merging Business and Personal Expenses:
This is an outdated mistake. Most small business owners, especially sole traders, confuse their personal and business finances. This makes it extremely difficult to accurately record income and expenses and therefore, make mistakes in deductions and potentially attract the ATO's attention.
The Solution: Open a separate bank account for your business. Use business credit cards to pay for business expenses. Keep accurate records of all transactions and reconcile your accounts on a regular basis. Keep your business a separate entity with money.
2. Claiming Deductions Inaccurately
It might be tricky to figure out what you are eligible to claim (or not) as a business expense. Charging home and private costs as business deductions is an alarm signal to the ATO. Similarly, a lack of familiarity with rules about claiming a deduction on a car or home office is going to trouble you.
The Solution: Learn about the ATO's guidelines on allowable expenses. Keep strict records of all business-related expenditures and transactions. If in doubt about making a specific claim for a deduction, seek the opinion or expertise of a tax accountant or financial advisor like ourselves at Achieve. We will make certain you make the most of your entitled deductions within the confines of the law.
3. Insufficient Record Keeping
Good record-keeping is the secret to honest tax reporting. Without proper records, you can't substantiate your income, expenses, or deductions. Shoebox files of receipts are a recipe for disaster!
The Fix: Have a good record-keeping system. This could be cloud accounting software, spreadsheets, or even a traditional filing system. Keep all invoices, receipts, bank statements and other supporting documents in an organised and accessible format. Cloud-based systems often allow you to scan and upload receipts directly into the system, making record-keeping simple.
4. Missing Tax Deadlines:
Past due tax payments may result in interest and penalty charges. This can be a strain on your cash flow and be an added source of unnecessary stress.
The Fix: Mark every major tax deadline in your calendar, for example, BAS lodgements, income tax returns, and superannuation payments. Get reminders and consider utilising accounting software that provides automated reminders. If you're facing challenges meeting a deadline, call the ATO before the deadline runs out to discuss your options.
5. Ignoring Superannuation Obligations
As an owner of a small business, you have superannuation obligations for your employees (and yourself as well!). Failing to adhere to these obligations can end up costing you big time.
The Solution: Understand your superannuation obligations. Ensure you're paying superannuation contributions on time and into the correct funds. Purchase a payroll package that will calculate and pay superannuation for you.
6. Not Getting Professional Advice:
Tax law is complex and dynamic. Trying to decipher the system on your own is intimidating and will increase the likelihood of mistakes.
The Solution: Engage a qualified tax accountant or financial advisor. At Achieve, we can help you with all aspects of your business tax, from organising your business formation to doing your tax returns. We can help you achieve potential tax savings, stay compliant, and give you more time to run your business.
Achieve: Your Small Business Success Partner
We understand that running a small business is difficult. Make tax time easy with Achieve. Schedule an appointment with us today and let us point you in the direction of fiscal success. We can help you avoid making these tax mistakes and make your business thrive. Don't wait for tax season to arrive – proactive planning is the path to take!