For many small business owners, ensuring your tax obligations have been met can be a frantic time. The stress can be alleviated if you do a little planning – before you sit down with your accountant, it’s worth making sure you’ve got all the information in place that he or she will need in order to make sure your business meets its tax obligations. Here’s our guide for small business on maximising tax benefits.
What information do I need to provide?
The Australian Tax Office (ATO) requires various information from small business owners. It’s important to know what all these documents are so you can have the relevant information ready for your accountant.
- Profit and Loss Statement – this is a summary of your business’s income and expenditure for this financial year.
- A summary of your debtors and creditors.
- Records of any assets you’ve purchased or improvements you’ve made to existing assets – this will enable you to calculate depreciation expense claims and work out how much Capital Gains Tax you owe.
- Conduct a stocktake – this is an ATO requirement. The value of stock that you record in your accounts by the end of June will be included in your profit figure, and will therefore affect the amount of tax that you have to pay. However, you are exempt from conducting a stocktake if you believe there is less than $5,000 difference from your stock value last year.
- Lodge your yearly reports for PAYG, Fringe Benefits Tax, Goods and Services Tax, and the taxable benefits reporting system.
- Lodge your income tax returns.
- Make sure you meet the requirements of SuperStream, the data and payment standard that you have to use to make superannuation contributions for your employees. All your employees’ details and payments must be up-to-date.
Essential information to prepare
This process can be made much easier if you make sure your records are up-to-date in advance. Before you meet with your accountant, check that all the information in your Business Activity Statement (BAS) is current and correct, as well as completing your PAYG reconciliations. If you have a Self Managed Superannuation Fund (SMSF), you’ll also have to make sure all your earnings and tax obligations are worked out correctly.
Ensure that your invoices are all in good order, as this will make life easier for you and your accountant when putting your financial statements together.
As tax laws can change quite dramatically from year to year, it’s important to stay up-to-date with current legislation. Discuss any change with your accountant to find out how you can best make it work for you.
Potential areas for savings
In order to complete your profit and loss statement, you will need to chase any outstanding payments from your customers. However, it may not be possible for you to recover them all – if this is the case, you may be able to write them off as bad debts. This will enable you to claim a tax deduction.
It’s also important to work out whether it’s worth spending out at this time of year on items you need for your business, or making extra superannuation payments. This year in particular, it’s worth purchasing as much essential equipment as possible, due to the $20,000 instant asset write-off scheme being in place for another year. If any of the equipment you need to run your business requires an upgrade, now is the time to replace it. You will only be able to claim for $1,000 of assets next financial year.
Another way to reduce your taxable income for the coming year is to consider pre-paying for services up front, such as paying in advance for 12 months’ worth of rent or insurance. You’ll always need these services, so it’s a good idea to use them to reduce the amount of tax you have to pay.
Questions to ask your accountant
It’s important to make sure you’re getting the best deals from your service providers. Have a look at how much your business is spending on banking, broadband provision and insurance, and check if savings could be made in any of these areas by switching to another provider.
This is also a good time to have a look at the overall financial health of your business with your accountant. Looking at the figures for this financial year will enable you to see which areas of your business have grown and where improvements need to be made. This way you will be able to make accurate financial projections and budget more efficiently for the year ahead so you can set realistic goals for where you want your business to be in 12 months’ time.