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Finance

Small business tax advice

Running a small business isn’t always smooth sailing, especially at the end of the financial year. With these few tax return tips, you’ll have your tax return done quick, so you can get back to business.

Prepare your tax return early

Avoid the rush in July by getting your documents together early. For some businesses, this involves manually collecting an inventory of receipts, expense records, invoices or employee details to review your company’s spend. Keeping records helps you understand your business’ financial situation and for tax purposes, receipts should be kept for up to five years. Starting as early as possible is the best way to minimise stress towards the end of the financial year and will help you lodge correct statements. As you go, confirm your business records are up to date and in line with current legislation.

Get ahead of the game and plan ahead by keeping copies of previous years records.

Get in touch with your accountant before June 30 to ensure you’re organised / Source: Stock image.

Tax advice for small business owners – what can you claim?

Being a small business there are plenty of things you’re able to claim tax on. Here’s a brief overview below.

  • If you or your employees travel for business you can claim:
    • airfares, train, bus or taxi fares, accommodation costs, meals and overnight business travel.
  • If you run your business at your home, or your business is based from home, you can claim:
    • the business portion of some expenses, including mortgage interest and electricity.

Match all accounts

Reconciling your accounts ensures bank statements are consistent with your own records, helping you spot any discrepancies in spend and find duplicate transactions. Start by chasing up outstanding payments, pending invoices or unpaid refunds. When all payments are up to date, match your receipts to your bank transactions, asking for copies of receipts where necessary. When you reconcile your accounts, you will also need to consider investment accounts, unpaid or outstanding debts and any leases.

Send payment summaries to employees well before July to ensure your business’ accounts are reconciled before PAYG summaries are provided for employees. Use this chance to update employees’ current financial details and superannuation payments, also checking any termination dates and leave entitlements.

A meeting with a bookkeeper or accountant can be useful as the new financial year approaches.

Contact local tax accountants

Shop for what you need

Some business owners use this opportunity to pre-purchase service and supplies to claim a deduction but fall for the trap of spending for unnecessary items, simply for a tax deduction. You can make a tax deduction on any important businesses purchases.

Claim the right deductions for the best refund

Keep accurate and detailed records to help you make the right deductions and concessions for your business. While it may take you some time to delve into the details of what deductions are available, a little effort from the experts will help your business pocket extra savings this financial year.

You can claim expenses related to the running of your business -mostly for day-to-day costs or for expenses that depreciate over time but are used to improve the structure of your business. To see what can and can’t be claimed, Check the ATO website.

Registered businesses with an ABN and a turnover under $2 mil may take advantage of recent tax concessions. This means they can claim any assets (less than $20,000) if an ongoing activity is adequately demonstrated. According to the ATO, your business may be eligible to claim up to $300 on home office equipment, electrical costs, cleaning expenses or repairs although documentation is required to claim deductions that exceed $300.

Plan ahead for maximal tax return savings

The end of the financial year is also an opportunity to compare your business’ performance to last financial year. You can then set realistic business goals for the upcoming year.

Lauren suggests that businesses should consider investing time and money in the right accounting software. This will minimise the risk of tax audits and penalties.

“Be organised. If you have adequate accounting software and bookkeeping procedures, you can do the work as you go,” she says.

The pressure of running a small business is already a lot to handle. When the end of financial year comes around, why not leave it to the experts? From tax accountants to bookkeepers, request a free service and make the right expert connection.

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News & updates

A guide to submitting your business tax return

We’ve talked to our best accountants to bring you this business tax guide for FY2021/22

This year, changes in the economy and places of employment provided the opportunity for many to start their own business and work from the comfort of their home. One of the tasks that might be confusing for a new business owner might be how and when to file your taxes. Filing taxes is something that most do not enjoy, and you want to get it finished so that you can get back to doing what you love most, running your business. Here are a few of the basics that you need to know about filing your tax return in Australia. 

Important Dates

Your tax return due date primarily depends on your lodgement history and whether you are registered with a Tax Agent. There are some important dates to remember when it comes to lodging your income tax return.

May – June – Contact a Tax Agent prior to financial year end to ensure you understand what tax concessions and business deductions you could claim. According to Dexterous Group, it is crucial for businesses to be proactive and not reactive at tax time specifically when it comes to paying superannuation, writing off bad debts and claiming any instant asset write-offs.

30th June – financial year end and the cut-off date for claiming business deductions, or any instant asset write-offs.

31st October – the due date for lodging your income tax returns (if you’re not registered with a Tax Agent)

15th May* – the general due date granted to Tax Agents to complete your income tax return on your behalf. Please note this may vary depending on a number of factors so please contact a Tax Agent for confirmation of your due date *following year

“Be proactive, not reactive when it comes to tax time.”

– Nick Urry from Dexterous Group

Handy apps to have at tax time

  • ATO: The Australian Taxation Office has its own smartphone app which is free to download and use,  here you can access relevant tax and super information for small businesses
  • E-sign apps for digital signatures e.g. Docusign, HelloSign – the ability to sign remotely is very helpful in the tax return process according to Dexterous Group
  • Oneflare: an app that connects you with the best accountants in your local area by providing personalised quotes from businesses
  • Etax: an app with third-party tax service providers
The Dexterous Group, bringing you the best business tax advice / Source: Dexterous Group

What information do I need to provide in my business tax return?

What you need for your large or small business tax return depends on the structure of your business.

Sole trader: As a sole trader, your business income counts as your individual income. You may claim deductions for any eligable expenses and must include all income you have made in the financial year in your tax return. As a sole trader, you are required to lodge the following:

  • The business and professional items schedule for individuals
  • A tax return for individuals, including the supplementary section

Partnership: As a partnership, you are required to submit a partnership tax return to report net income. You may deduct any allowable expenses, which then leaves the assessable income. 

As well as this, any individual partner must also file an individual tax return to report:

  • Your share of any partnership net income or loss
  • Any other assessable income you have earned, such as wages and salary, dividends and rental income

Note: With a partnership, each partner must pay tax on their individual share of the partnerships net income.

Trusts: In a trust business structure, the trustee lodges a trust tax return to provide the following:

  • The trust’s net income or loss for the financial period

Note: an individual tax return must also be lodged by each beneficiary of the trust

Companies: If your business operated under a company structure, you are required to lodge a company tax return to provide the following: 

  • Taxable income
  • Tax offsets and credits
  • PAYG instalments
  • Tax payable amounts or refund receivable amounts

Note: if you are a company director, you are still required to lodge an individual tax return. 

Contact local accountants

What can my business claim as tax deductions?

As a business, there are many expenses and deductions that you can claim. This list is a few suggestions of things that your business may be eligible for but it depends on what type of business you operate and your specific circumstances, for example as a tradie you are eligible for deductions like transport costs. If you are in doubt, you should contact your tax professional or the ATO to answer questions about whether your business is eligible. Here are a few things that you may be able to claim on your business:

  • Advertising costs
  • Interest paid on business loans
  • Travel expenses for business
  • Renting or leasing your place of business
  • Electricity related to business operations
  • Internet and phone expenses
  • Cost of starting and operating a website
  • Wages to employees
  • Super contributions for employees
  • Vehicle Expenses
  • Office costs, such as computer, printer supplies

Note: If you have been working from home during the financial year, your tax return may be different to previous years, you may be eligible for additional deductions. Consult your tax professional to get information for your circumstances.

What are the business tax rates?

The best place to find tax rates for filing your ATO business tax return is on the ATO tax table. As a sole trader, you submit an individual tax return and do not have to pay tax on the first $18,200 that you earn, (see table below for individual income tax rates). Different business structures will have different tax rates. This is just a guideline, and you should consult a professional for advice tailored to your business.

Methods for lodging

  • Online through the myTax portal: You can file your small business tax return online if you meet certain requirements. This is only allowed for simple returns. 
  • With a registered tax agent: Any person or business can file with a registered tax agent. The cost of hiring a tax accountant can be between $75-220, but there are many advantages of doing so. It saves you time, ensures all the right deductions are made, and extends the time you have to file. The biggest mistakes that are made by businesses, according to Dexterous Group is incorrectly claiming deductions. Some businesses aren’t fully aware of all the deductions they are eligible for based on their industry, business type and related deduction thresholds, which can lead to; mistakes, an increased tax bill or even penalties.
  • As a hard copy:  You can fill out the tax return yourself and send it through the mail. You might have extended processing time if you choose this method. 
  • Using SBR enabled software: Certain third-party applications are available that allow you to file online yourself. One of the most important things to consider if you use this method is to verify the registration of the software with the ATO.
Hard copy tax return / Source: Shutterstock

Other important documents to consider at tax time

It is good to have the following documents available when you lodge your tax return, regardless of whether you plan to do it yourself or by a professional. It is better to have the record and not need it than to need it and not have it. Nicholas recommends storing digital copies of receipts, by simply taking a photo and storing them in a folder on your phone or computer.

  • Copies of any payments received
  • Invoices for any business expenses
  • A list of debtors
  • A list of creditors
  • Bank records
  • Employee and contractor details
  • Any capital gains events (e.g. buying or selling business assets)
Invoice documents / Source: Business Finance Townsville

How to hire an accountant

The Australian tax code can be complicated, especially if you are a new business. The last thing that you would want to do is to make a costly mistake. Fees and fines can be pretty steep if you make an error or miss a deadline. Hiring an accountant takes the worry off you and is often cheaper than the time it takes to do the research and file the return yourself. 

The cost of a small business tax return usually depends on the type of business you have and how complex the return is to file. You should compare rates and service reviews, but the most important thing is that you make sure they are a legitimate accountant and registered agent.

Licencing and qualifications

An accountant must be a Registered Tax Agent, BAS agent, or Tax Adviser. Agents must be registered to specialise in individual or company taxes. You need to make sure that the professional you hire knows how to handle the type of taxes you need to file. It is also a good idea to find someone who has many years of experience.

Categories
Automotive

How to finance a car loan when you’re self-employed

Purchasing a new car isn’t something everyone manages outright. Throw self-employment into the mix, and the challenge can be harder.

Variable income and unpredictability often make securing finance feel out of reach. But that’s not the case. If you’re self-employed or an owner of a micro-business, there are options to secure a car loan that doesn’t break your bank.

Now with times more uncertain than before, it pays to invest and choose wisely. Here’s how you can increase your chances of successful car financing. 

Interior of a red ferrari with white leather seats and black steering wheel.
Source: Creative Car Care

Prioritise loan type

One of the most common financing mistakes is falling in love with the car before the loan.

You wouldn’t buy a house without sorting the paperwork, and your vehicle buying strategy should follow the same rule.

If you want to save money, seek pre-approval first and understand how different types of car loans work. This helps you budget, compare and approach the right lender for your needs and is the smartest way to determine what you can afford. Apply this strategy whether you’re shopping new, used or private.

Make sure you:

●  Review interest rates, fees, charges and repayment frequency to work costs into your budget

●  Prioritise your credit score to confirm your current financial position

●  Shop for car financing before you visit car dealerships

Tip:  Be careful not to apply for too many loans in a short period of time as this impacts your credit report and may decrease chances of approval. 

Research, compare and negotiate

Will you be leasing or buying your car?

The type of loan you choose depends on your business needs. Consider the purpose of your car, budget and whether you need to keep its ownership. Research and compare at least three loans from various lenders before you decide.

If buying outright isn’t for you, leasing enables you to get a new car with low monthly repayments. But it still pays to do your research first to compare and strengthen negotiating power.

Pre-approval of car finance also improves your negotiating influence.

Consider potential tax benefits

Buying a vehicle for business is a great tax advantage.

You may claim your car against business tax with a registered ABN. Generally, leasing means you won’t pay GST.

If you’re GST registered, the tax is charged on the purchase price which you can claim back when you lodge your statements. Depending on the type of car you’re after, see if you’re eligible for the Australian Government’s instant asset write-off. This only applies to new and second-hand cars under $20,000.

Minimise lender risk

There are a few ways to minimise the lender’s risk, which could improve your chances of approval.

  1. Have a substantial deposit
  2. Get your credit score up to scratch
  3. Keep balance sheet to prove business growth, profit and equity 

Weigh up features and restrictions

Every contract will have its own set of benefits and loan restrictions.

Before you sign, review the fine print. Sometimes, there are features to fuel savings like additional warranties and Guaranteed Auto Protection (GAP) insurance. Optional extras such as maintenance plans, GPS navigation and car alarm installation may sound good, but verify they’re meeting your needs and not adding to the total costs unnecessarily.

If there’s a chance you’ll pay your loan out early, look for flexible payment options and smaller payout fees like a chattel mortgage. These are favourable for self-employed individuals or tradies.

Buyer Beware: Not all features are what they seem. For example; some extended warranties are only valid if you return to the same dealership for servicing, which could end up costing you more. Remember it’s a car salesman’s job to upsell features, so it’s important to know what you’re really getting and if it’s worth your money.

Partner with a financial advisor

Partnering with an accountant or financial advisor is a wise move to determine all options and tax benefits.

Whilst it’s always vital to do your own research, a financial advisor provides knowledgeable guidance, so you find the best loan, lender and deal for your industry. These professionals have access to a network of financiers to save you the hassle of negotiating with each. Such savings in time and energy are valuable when you’re self-employed or a small business owner.

Flexibility, simplicity and clarity are the essential ingredients for anyone who is self-employed and looking to apply for car finance. The right loan will assist in the growth of your business, by ensuring access to the transportation you need.