Don’t run around like a headless chook come tax time! Start preparing now for the transition to a new financial year, with this tax checklist for business owners and the self-employed. Tax season is almost upon us again. The more prepared you are, the better the outcome will be – both for you and your business.
This tax checklist will help you break down the task into manageable portions:
Your tax position is only as good as the records you keep.
Lots of business owners still do their tax and recordkeeping on paper. Yes, it saves you paying for and learning to use digital software. But at what cost? It’s so easy to lose paper records. And printed receipts on that glossy paper quickly fade.
No record means you’re not able to accurately track your GST, your deductions, even your depreciation. Those losses in unclaimed credits and refunds could wind up costing you far more than the price of the software.
The federal Budget unveiled a number of measures for small businesses. Be sure you know the latest measures and what you are entitled to, as your tax situation could have changed significantly.
Also consider your own position under the low- and middle-income tax offset – depending on how much you earn, it may be wise to postpone or bring forward your own pay to a different tax year to meet the eligibility requirements.
This sounds self-explanatory – but you’d be surprised just how many deductions go unclaimed. Many of these fall into two types: small expenses and depreciation.
People often think small expenses – e.g., a coffee meeting with customers, a few stationery items here and there – aren’t worth bothering about. But they quickly add up! If it’s a legitimate business expense, it can be claimed. Would you rather you keep those funds or the tax office?
Meanwhile depreciation is complex and often gets overlooked because busy business people aren’t sure what they’re entitled to claim. Company vehicles, computers and other electronics are the most obvious. But think more widely about your business assets – office furniture, airconditioning, the fit-out of your business premises and so on.
And if you obtain professional financial advice, you may be able to claim that too!
The hustle and bustle of everyday life in business may mean you have some employee entitlements to catch up on.
Superannuation Guarantee (GS) contributions is the first point of order – you may accrue penalties if this goes unpaid. Things get messy if they are overdue once we cross into a new financial year. And tax time is also when employees are most likely to look at their super and notice missed payments. So be sure this is up to date.
Check in too on other entitlements while you’re at it – annual leave and long service etc. – to ensure you have those covered.
EOFY sales can be an unnecessary money pit.
Firstly, are the items really discounted? Shop around to ensure you’re getting a real saving.
But more importantly, consider whether you actually need it.
Buying stuff you don’t need just for the tax deduction is like buying a car because it looks good – it’s an unnecessary expense, depreciates in value, and you have to find somewhere to store it. Eventually, you may need to sell it (likely at a loss) to get that all-important space back.
Don’t forget to look after yourself too.
Are you paying yourself properly? Do you have outstanding director loans? Have your expenses been divided between business and personal?
Remember to claim your home-based work expenses – such as a dedicated home office from where you do your accounting/strategy/social media/other work activities.
And have you paid yourself superannuation? Other employees receive 10 per cent in super on top of their salaries… you are entitled to this as well.
The old line “the business is my retirement fund” is a huge personal risk, so consider diversifying your retirement assets and extracting your superannuation out of the business. It’s far easier to manage in smaller, regular amounts with the pay cycle than a big lump sum. Plus, you’ll have longer to benefit from the compound growth!