How to get the most out of tax time
Tax time doesn't have to be overwhelming. Whether you're a small business operator, a sole trader, or an employee, there's a few key things you should do now to get ready.
It's that time of year again. The financial year draws to a close on June 30 and workers across Australia - from small business owners to freelancers and regular employees - are being urged to make the most of their return and avoid tax-time stress.
Whether it's book-keeping, tax returns or planning for the year ahead, here's an easy-to-understand checklist of chores.
Small business owners
Buy any new tech you need now
Small businesses can claim an instant tax write off for new technology they purchase for their business for less than $30,000 before June 30. Whether you need a new laptop, printer, or security system, it's important to do your research and purchase now.
Sort out your bookkeeping
Start by summarising your income and expenses. This will help you develop new targets and sales prices, as well as tell you how much profit you're making. Then carry out a stocktake, which is also necessary for claiming deductions. It's a good idea to list your debtors and creditors to give you better control of your cash flow and help you chase up unpaid accounts.
Also get on top of the record of your assets, and lodge your income tax return, yearly reports or returns for PAYG withholding as well as fringe benefits tax, GST and taxable payments reporting system.
Find out what tax deductions you can claim
Some may surprise you, so it's a good idea to keep a list. They include any costs you may have incurred from creating a business website or running costs such as phone and internet. You can also claim for things like machinery, tools and computers.
Use an agent
Agents can smooth the process of filing your return, but before you book an appointment, be sure they are registered with the Tax Practitioners Board.
Get across any changes in the tax lawIt's your responsibility to keep up to-date with them as they can have a significant impact on your business.
Be on the look-out for scammers
Scammers love tax time, hassling thousands of Australians via phone and email every year. Some will claim that you've overpaid your taxes and are eligible for a refund but need to first pay an administration fee. Or you could be told that you've underpaid your tax and need to repay the amount you owe immediately. Don't take the bait.
Set goals for the year ahead.
Planning is an essential part of running a small business and reviewing and updating your plans will allow you to assess what strategies are working. Get on board with new technology and developments in hardware so you can work smarter and not harder!
Review business structure
Your business may grow from a partnership to a company, or it may downsize. Either way you need to look at your changing business structure as it can affect compliance and taxation regulations.
Are you covered by your insurance?
Check your business has the right level of cover and consider getting an insurance broker to ensure you get the best deal.
Backup and secure your filesYou need to make sure your business can stay up and running during events such as natural disasters or a cyber breach.
For freelancers, the end of the financial year can be a busy and stressful time but it's important to understand how your responsibilities differ from the average employee.
Bring forward expenditure
Get onto buying that new computer or hardware before June 30 so you can see its impact on your tax bill sooner. Depending on your purchases, and your income levels, there's a lot you'll be able to claim if you purchase before the end of the financial year. Look out for the cracker deals this June.
Work out whether or not to defer your income.
If you defer your income you also defer paying the tax on it. This works in your favour if you will be paying tax at a lower rate next year. If you're expecting next year to more profitable, it may be worth maximizing this year's profit. In which case get onto those invoices!Donations and superannuation
Unless it's more important to reduce next year's income, make your tax-deductible donations before June 30. Make sure you keep on top of your superannuation contributions, too - it's up to you to squirrel away the bucks for your retirement. Super contributions are classed as a sole-trader tax deduction which means the deposited funds will be deducted from your income at the end of the financial year - and that means paying less income tax!
Get your records into the best possible state before visiting your accountant or tax agent to reduce the amount of time they spend on your books.
Know your obligations
This covers your Tax File Number, Australian Business Number, GST, Personal Services Income and PAYG instalments.
Structure your personal finances for success
As a sole-trader you'll have good months and bad months, so consider depositing all of your earnings into an offset bank account and then paying yourself a weekly or monthly wage.
This will be critical if you get sick and can't work. Such premiums are usually tax deductible.
For most Australians, this is the time of the year when they lodge their tax return, expect a bill and hope for a refund. It's the best time of year to get on top of your finances.
Like small business owners, any employees who work at all from home on their own equipment can claim part of the cost. So, if you're looking to purchase a new laptop, do it before June 30, and you'll be able to claim a deduction.
At a bare minimum, here's the four key things you need to think about at this time of year:
- Lodging your tax return by October 31
- Creating a budget
- Reviewing all of your borrowings
- Topping up your super.