When it comes to tax time, there’s nothing better than being organised. Here’s how to make sure you’re ready to talk to the taxman.
The end of the financial year is often a very stressful time for small business owners. If you’re unprepared, you might even find yourself trying to cram an entire year’s worth of paperwork into a series of increasingly late nights, in a last-minute dash to have everything ready for the taxman.
The good news is that even if you have left it all until the last minute, there’s still some hope that you won’t be pulling all-nighters to get everything set up for the EOFY rush.
Of course, it couldn’t hurt to study up on this info now, in preparation for next year, as well. Getting set into good habits with your finances will see things running a lot smoother for your business, and you won’t be left with the EOFY headache that brings so many small business owners undone.
Shuffling the Shoebox
The days of simply lobbing up to your accountant with a shoebox full of faded receipts are long gone – and even if technology has caught up with us all, and the shoebox has been replaced by a USB drive with a pile of iffy Excel spreadsheets, dropping the mess into your accountant’s lap probably isn’t a good idea, especially at this time of year.
The trick, the experts all say, is to be both organised and vigilant about your business responsibilities throughout the year, so that the month of June doesn’t start looming like a major disaster, and the new financial year isn’t quite as scary as it often can be.
It’s tempting to put the books on the backburner, however lack of preparation is often the reason why June 30 fills business owners and their loved ones with dread.
The statistics tell us 64% of SMEs use an accountant and 13% use a bookkeeper to help them with EOFY compliance. With an accountant or bookkeeper as a trusted business advisor, business owners can draw a line under the previous year, and pinpoint their business pain points and key drivers for success.
But you don’t need to spend big bucks on an accountant every year. It’s possible to stay on top of reporting and compliance using cloud accounting solutions. They act like a virtual assistant by automating many aspects, reducing time wasted on manual data entry.
Paperwork that’s well organised means fewer ongoing tax time tangles for you, your employees and your loved ones. It frees up your time, so you can focus on growing your business and doing what you love.
Getting it right
Every year at tax time, there’s a huge amount of work for small business owners to try to keep up with the changes that have been applied throughout the previous year. That’s why it’s important to double-check that you are applying the right rules to your business tax – not only to ensure that you’re paying enough tax, but also to make sure that you’re not missing out on appropriate deductions.
There are a number of deductions, write-offs and rebates that can be applied to small businesses. However, the specifics of many of these are changed regularly, making it a big ask for already-busy small business owners to stay on top of them all.
And that’s where an accountant or business advisor can come in very handy indeed. You don’t need to shell out huge sums of money – and the small outlay on accountant’s fees can end up saving you thousands on your tax bill.
In the lead-up to June 30th, many small businesses would benefit from performing a thorough stocktake. And while a stocktake can entail a fair amount of work, there are a couple of potentially valuable results at the end of the process. Firstly, a stocktake will allow you to write-off any obsolete stock, which can have a sizeable effect on your accounts at tax time. Secondly, a stocktake can help small businesses to identify and investigate any shrinkage that has occurred.
You can also sit down with your accountant or business advisor and plan your tax payments.
Your business advisor can help you estimate what your tax situation will look like for the April to June quarter before it finishes. Tax planning should be long-term – the decisions you make today may impact your business for years to come. For example, do you want a tax deduction on your superannuation contributions? Or are there any potential deductions, write-offs and rebates that you can take advantage of?
If you’re unsure about something, don’t leave it until tax time to get to the bottom of it. Either call your accountant, or call the Australian Tax Office directly and ask about what you need to know. The ATO has a well-staffed call centre, and they are fully prepared to provide you with precisely the knowledge you need.
Alternatively, the ATO website is a wealth of information. If you are researching taxation responsibilities on the ATO website, take particular notice of any advisories relating to the date of the documentation – tax laws and entitlements change frequently, as new programs and initiatives are announced and enacted by the government.
If you’ve kept your book keeping up to date throughout the year, you can use those figures to budget for tax payments in the future. It can be a bit tricky, so if you’re unsure how to do this for yourself, speak with your accountant. Once you have an idea of what your tax liabilities for the period might be, it’s a wise idea to keep those funds in a separate account.
The best advice for dealing with tax time is, of course, to get all your ducks in a row early, and stay on top of your accounts. Even if you’re only just now beginning to get your business accounts in order, once you have a good system in place, being organised could have a massive impact not only on how well your business is run, but also significantly reduce your stress levels as well.