The tax time countdown is on and if you are hurrying to prepare all your receipts and paperwork before the lodgement period is up, why not also take the time to make next year a hassle-free experience.
Business Insider reached out to some financial gurus to find out tips they suggest to get organised for the next tax season.
With advice from senior tax agent at Etax.com.au, Australia’s number one online tax return service, Liz Russell, and tips from Tim Howard, a finance specialist in Advice at BT Financial Group, here are 13 tips for small businesses preparing to lodge their own tax returns next year.
1. Sweat the small stuff.
Everything counts, according to Russell.
“If you pay for anything related to your business or work, track it. Even if it’s only worth $2, snap a photo of the receipt. Then come tax time you’ll have a year’s worth of receipts ready to go.”
2. Keep track of receipts by using online tools and apps.
“Paper receipts can fade, get lost or end up in the bin. Take advantage of mobile apps that not only create permanent copies of your receipts, but also let you add categories and notes if needed,” says Russell.
“The Etax Mobile App lets you snap photos of receipts and documents and upload them straight to your account, where they’ll be waiting next time you do a tax return.”
3. If you are still using a spreadsheet and a shoebox, it’s time to upgrade.
This is a point both financial gurus made.
Howard said: “This may sound simple enough but by getting into a good habit of keeping a summary of all of your income, expenses and deductions that related to your tax return last financial year you have effectively made yourself a personal ‘tax checklist’ to help guide you through next financial year! This will help make the whole end-of-financial-year process a lot less painful in the future.”
“It’ll save time and money,” agreed Russell.
“The latest small business bookkeeping and accounting software from Xero, MYOB live, and others makes small business easier and more professional.”
4. Be aware: car claims are changing.
“In 2016 the ATO will only allow the cents/km or logbook method. And the cents/km method is dropping to a max of 66 cents. So if you use your car a lot for business, the time to start tracking with a logbook is now! Keeping a logbook might seem like a lot of work, but if it’s done right can save you big $$$ at tax time. The best part is, you only need to keep your logbook for three continuous months and if your car use is consistent, your logbook will be valid for 5 years,” says Russell.
5. Track your training.
She also says: “Any study, training or courses you attend (that directly relate to your current work) can usually be claimed so ensure all purchases are accounted for when managing your receipts and invoices. Talk to a tax agent about what is eligible. Thinking about some expensive training? Talk to a tax agent first.”
6. Track your phone calls.
“If you make work related calls using your personal phone keep track of them and you can claim a percentage of your monthly phone bill back as a deduction on your return,” says Russell.
7. Track your dividend statements.
“With the level of direct share ownership in Australia currently sitting around 34% of the adult population (nearly 6 million people) it’s becoming even more important for many Australians to keep track of any dividends they receive,” says Howard.
“Most blue chip companies listed on the ASX will pay dividends to their shareholders twice a year and in profitable years companies will sometimes pay an additional ‘special dividend’. This means for each company you hold shares in you could potentially receive up to three dividend statements which, amongst other things, hold important information relevant to your tax return.
“One of the best ways to keep track of all these statements is to set-up online access with the share registry of companies you hold shares in. This allows you to simply log-in and download any dividend statements you have received throughout the year. No more paper filing system needed!”
8. Know your property deductions.
He continues: “According to ATO statistics around 1.9 million individuals in Australia declare rental income or rental losses in their income tax return each year as a result of owning an investment property. It’s important that property investors keep accurate records of all of the costs and expenses they incur in relation to their investment property as many of these such as rates, agent fees, interest costs and repairs and maintenance can be claimed in your tax return each year, over a number of years or used in the future to reduce any capital gains tax you might pay when you sell your property. Keep a record of all of the expenses you incur in relation to your investment property as your tax agent will be able to account for them in the correct way.”
9. Know your work related deductions
“Just because you are an employee doesn’t mean there aren’t work related deductions you may be able to claim in your tax return each year. For example if you work from home a day or two per week you may be entitled to claim a partial deduction for some of your at-home expenses such as your internet or mobile phone. Have a conversation with your tax agent at the beginning of the new financial year to identify what records you should keep which might allow you to get a deduction for these types of expenses,” says Howard.
10. Know the small business taxpayer specifics.
“If you are a small business you are now able to claim an immediate tax deduction for each asset you purchase that cost less than $20,000 if purchased and installed ready for use between Budget night and 30 June 2017,” said Howard. “This is an increase from previous years where a capital asset which was acquired for less than $1,000 could be fully written off in the year it was is purchased. If you are a small business tax payer and are looking at making some bigger asset purchases this financial year talk your tax agent around qualifying for this concession and the purchase records you should keep to ensure you get the upfront deduction.”
11. Do you have employees?
“You need to register for the ATO’s SuperStream,” explains Russell. “If you are an employer with fewer than 20 staff, you need to register on Super Stream. This new system has been introduced to improve the superannuation system. Best to get started this July.”
12. Do you have any inventory?
“If yes, Add a calendar item for yourself: Stocktake on June 30. Not a day before, not a day after. Easy,” says Russell.
13. Ask Questions!
“Don’t be afraid to talk to your adviser or tax agent before 30 June 2016,” says Howard. “Don’t just look to them as someone who completes your tax return each year, it’s their job to help you understand your obligations and the tax implications of any investments you make or deductions you are looking to claim. Plus, the better records you keep the easier a job you are going to make for them meaning you might just get your tax return that little bit faster next year!”