The end of the financial year isn’t a fun time for all small business owners – but it can be a fruitful. With a deeper understanding of what you need to prepare and what kind of benefits are on offer, you can walk into July with a smile on your face and your affairs in order.
There isn’t a lot of time before the end of June, when much of the work is due – so let’s get started.
1. Define your claimable business expenses
Many of your small business costs can turn into tax deductions when you file your return. This could be anything from staff wages to capital investment in equipment, and can reduce your final tax bill considerably. However, the Australian Taxation Office (ATO) has established three key rules for determining if you can claim an expense as a deduction:
- The expense must be for business spending
- If there is a combination of business and personal use (for example, with a company vehicle), only the business-related expenses are tax deductible
- You must have the paperwork to prove each and every expense.
Keep those receipts and be clear about what you can claim, and you’ll be ready for a positive tax time.
2. Be careful with the car claims
Every year, the ATO has specific focal points that it scrutinises closely. For the 2017-18 financial year, one such area is vehicle-related expense claims.
The ATO notes that 3.5 million Australians claim some $8.8 million in car-related expenses every year, with 800,000 of these stating they drove exactly 5,000km under the cents-per-kilometre claims system. Through the use of complex data analytics, the ATO will be using benchmarks for similar companies and identifying claims that don’t stack up.
Once again, the key to a successful small business deduction is ensuring that everything can be backed up in your paperwork.
3. Check your company tax rate
Under changes to company tax in recent years, there has been a massive broadening of who can qualify for the lowest rate. In the 2016-17 financial year, businesses with a turnover of less than $10 million per year qualified for the bottom bracket of 27.5 per cent. This year, that turnover limit expands to $25 million.
That’s going to introduce a whole lot of businesses to a new tax rate, potentially including yours. Make sure you’re paying the right amount of tax before you file.
This is just a sample of what to look out for at tax time. We recommend visiting a qualified business tax accountant to get the big picture on your claims and how you can get the most out of the end of the financial year. For your business banking needs, visit your local BOQ branch.