Tuesday, 11 Jul 2023
It is the tax season again. Most small business owners dread this period because of the reporting and filing obligations. Although the government has made the process streamlined and easy to understand, entrepreneurs with shoddy financial records have much to worry about. Small business owners in Australia must file their tax returns between 1 July 2023 and 31 October 2023.
Failing to meet the tax lodgement deadline leads to penalties from the Australian Taxation Office (ATO). Thus, it is vital to hire a professional bookkeeper for tax planning, accurate calculation, claiming deductions and lodgement.
Here are a few tax preparation tips for small businesses that can help you avoid penalties and hassle. These are insights from bookkeeping experts that should be a part of every entity for reducing tax bills and ensuring correct lodgement.
Small businesses often neglect to hire experts to save costs. However, financial matters cannot be managed by novices. Taxes must be fulfilled according to the law and managed efficiently. Thus, businesses must invest in recruiting BAS agents registered with the Tax Practitioners Board and skilled bookkeepers with experience in the industry.
They advise businesses on various taxes, such as PAYG withholding, GST, fuel tax, FBT, etc. They help calculate these taxes, lodge them, and even deal with the ATO on behalf of the business. Similarly, bookkeeping helps with recordkeeping and reducing tax liabilities.
Every business needs to maintain error-free and systematic financial records and store them in one place for quick access. The storage and access of records becomes easy with accounting software. Most professional bookkeepers Melbourne use this tool to organise income, expenses, liabilities and assets.
Also, the business must preserve historical records for up to five years. The bookkeeper is responsible for ensuring these records are accurate by reconciling them with bank statements. It keeps the business protected from getting audited by the ATO.
It is vital to report all the income generated by the business to the ATO with the help of the BAS agent. The sole traders in the country must submit their BAS, which includes the income, expenses and GST that the business received and paid.
All the company owners must lodge the company tax return every year, which provides details of their income, expenses and taxes. Similarly, trusts are also required to lodge the trust tax return every year with the same details as companies. The bookkeeper must help with the tax calculations and ensure compliance with the regulations in Melbourne.
It is necessary for the business owner to keep their personal and business accounts separated, even if they are sole traders, to help with tax planning. The reported income must include cash transactions as well to ensure correctness.
Business owners in Melbourne can claim deductions for the expenses incurred while operating the business to generate sales and income. The expenses that can be claimed for deduction include daily operations, buying goods and services for the business and capital expenses, which include depreciating assets like machines, vehicles, computers, etc.
The credits that bookkeepers in Melbourne can help businesses claim include the GST credits that are applicable to the GST paid while buying goods and services for the business. They can also help claim R&D credits that are applicable to the expense incurred by businesses to complete their research and development processes. Claiming deductions and credits helps to reduce small business taxes and maintain a positive cash flow.
Small businesses are eligible for concessions that can reduce their tax bills, such as small business income tax offset for entities whose turnover is below $5 million. Similarly, these ventures can defer capital gains with the help of the roll-over concession applicable to purchasing new assets. Also, entrepreneurs can ignore capital gains generated through assets sold at the time of their retirement.
In addition, these businesses can do away with the capital gains received through assets that the business has owned for 15 years. Also, they can bring down the capital gains on active assets by 50%. Bookkeeping helps to use these concessions and manage finances smartly.
If you have employees, you need to make contributions to the superannuation funds for your workforce, which is called a superannuation guarantee.
It must be paid before the due date. Otherwise, the business has to pay a higher super guarantee charge to the ATO, which is not deductible. Currently, the super guarantee rate is 10% of the employee’s ordinary time earnings and has a due date for every quarter of the year.
Tax planning is vital to bookkeeping because it prepares for the lodgement in advance and ensures accuracy. The taxes must be calculated keeping all the obligations and financial records in mind with the help of professionals.
