By Sean Devenish, Principal Accountant at Collins SBA
There is a lot more to managing your tax affairs than simply paying as little of it as you can. To be well rounded, businesses should also look to avoid lodgement penalties and make it easy to meet the legal requirements.
So, with the 2016 financial year well under way, here are some pointers to keep you on top of your tax game.
- Keep an eye on lodgement dates
As a business in Australia there are lots of forms to lodge. The key forms to stay on top of are:
- Stay on top of BAS
By using an accountant, you can also take advantage of some extended lodgement dates; this is definitely worth it if you need that extra time.
The BAS has been around for 15 years now, but it can still be a daunting exercise for many businesses.
Fortunately, the online accounting software industry has made life significantly easier. In nearly all accounting packages, you can simply press a button to instantly prepare a BAS report with all the relevant labels and amounts worked out for you.
To dispense with paper forms, you can lodge your form using the ATO Portal. Not only is it quick and easy, but you can find out in real time whether the form has been successfully lodged and accepted by the ATO. In the near future, online accounting software will enable you to lodge the BAS directly to the ATO.
However, it’s worth checking your data and your accounting system as there are some common errors to avoid. In particular:
- Make sure you have a taxable invoice for every expense more than $75 in your accounting system
- Reconcile your bank account
- Scan your expenses to make sure you are not accidentally claiming anything that is private in nature
Some cloud based accounting packages can help automate this and make it even easier. For example, MYOB Essentials can integrate your bank account transactions directly into the system and work out how they should be coded for you, while also letting you save copies of tax invoices against transactions.
- Get to know SuperStream
SuperStream is coming! If you have more than 20 employees, compliance with SuperStream is already a requirement. If you have fewer than 19 employees you have fewer than two quarterly payments to be compliant.
What is SuperStream? In simple terms, you must now pay superannuation electronically in a pre-defined format. While it does make things easier, it requires action on your part to make sure you are lodging through the service.
How do you use it? Most current accounting packages come with a superannuation payment service that uses SuperStream. This generally integrates with the payroll system.
- Do you need to file a Taxable Payments Report?
This one can catch many businesses by surprise. Any business in the building and construction industry must supply a summary of payments made to all their contractors in a ‘Taxable payments annual report’. This report is due to be lodged by 28 August each year.
To keep on top of this, keep records as you go. Sifting through 12 months of accounting records to maintain this report is a sad task.
To assist with this, you can use a template provided by the ATO, or maintain a register in Excel. Ideally, you should enter the details into the schedule as you make payments so you can easily summarise this information at the end of the year.
Some accounting packages will also help you keep on top of this. MYOB enables business owners to nominate a supplier invoice as being ‘Reportable’ so you can compile a list in bulk at the end of the year. This takes a lot of the pain out of reporting and makes this exercise a breeze.
- Take small business depreciation into account
Thanks to our last budget, small businesses are eligible to claim a 100 percent deduction for any new assets acquired this year costing less than 2016. This is a temporary measure, and will be phased out in subsequent years so businesses should take advantage of it while they can.
How does this work in practice? Let’s say it’s 1 June 2016 and your company, which runs a small business, needs a second-hand ute to help with the business and has found a suitable one for $19,000 plus GST. By buying the ute before 30 June 2016, the company will get an immediate deduction for the full $19,000 it cost to buy the ute.
The company tax rate for 2016 is 28.5 percent (for a small business), so the effect of buying this asset will reduce the end of year tax bill by $5,415, a handsome ‘discount’ in anyone’s book.
- Work with your accountant
A good accountant can help you manage your tax affairs and make sure you’re not paying more tax than you need to. This can include estimating your tax bill, optimising your year by year income, managing dividends and trust distributions, and a range of other services.
However, there are also some simple strategies you can use each year to help reduce the amount of tax you end up paying. Here are three quick ones to get you started:
- Sell off or write off obsolete stock at year end. This ‘worthless’ stock is normally not deductible while it is included in a stock valuation so get rid of it and claim a deduction.
- Consider making a contribution into superannuation. Superannuation is a tax effective environment and payments to superannuation are deductible in most cases. Consult your tax and financial adviser to see if this is a suitable strategy for you.
- Make sure you get all your expenses invoiced to you before 30 June. For income tax purposes you can claim a deduction when it is incurred, not just when it is paid, so don’t be shy about getting your suppliers to render an account now for services they have provided.
Most importantly, review and prepare your tax planning well before 30 June so you can implement strategies in time for them to be effective. Maybe it’s time to book an appointment with your accountant early next year?