Completing your annual tax return can seem like a stressful and daunting task when running a small business, and many business owners find themselves at a loss knowing where to start when it comes to getting prepared. At Focus Bookkeeping, we thought we’d look at a few ways to help you get ready to confidently sit with your accountant or tax agent to prepare this year’s tax return. After all, great financial health in your business helps to ensure not only a smoothly-running business, but the freedom to feel secure in your personal life also.
It’s not too late to get your records in order!
The best way to get prepared for tax time is by having your records up-to-date and in order. Of course, this is one area of running a business that can get overlooked if we keep putting it off. So now is a great time to not only organise your receipts and invoices, but also gather any other relevant paperwork in preparation for your accountant. Also check that you’ve kept logs for any vehicles, your travel itineraries are recorded, and you’ve reconciled your books. Having access to all your records means you can get the most out of your bookkeeping, and therefore be able to claim where and when is best for your business. If you’re struggling with keeping your business records up to date, give us a call or drop us a note here at Focus Bookkeeping. We’d love to help you streamline your business by keeping your books accurate and reliable. Besides supporting and informing great business decisions, trustworthy records are also a must for legal compliance.
Australian tax law requires that records be kept for five years, and should include:
- sales receipts
- expense invoices and asset purchases
- bank statements and credit card statements
- vehicle records
- lists of debtors and creditors
- employee records (wages, super, tax declarations, contracts).
The Australian Tax Office (ATO) also has specific information for various industries when it comes to items you can claim as deductions when completing your tax returns. For example, did you know that if you operate in the Building & Construction industry, you can claim a deduction for the cost of buying, hiring, mending, or cleaning certain uniforms that are unique and distinctive to your job or the environment you work in, or protective clothing that you are required to wear (eg. steel-capped boots, high-vis vests, fire-resistant and sun protection clothing)? You can’t claim a deduction for the cost of buying or cleaning plain clothing worn at work, even if you only wear it to work (eg. standard jeans, drill shirts and trousers). You can find out more about the ATO’s allowed deductions in the ATO’s Occupation and Industry Specific Guides Page.
The Golden Rules of Work-Related Expenses
Remember to meet all three of these golden rules when claiming work-related expenses on your tax return:
- You must have spent the money yourself (and have not been reimbursed)
- The expenses must be directly related to earning your income
- You must have a record to prove it (this is where good record keeping is so important!).
Tax Concessions for Small Business Owners
It should be noted that there are some concessions in place for small business owners. For those of you starting up a small business, you can immediately deduct certain professional expenses incurred in establishing your new businesses. This can include the costs for professional, legal and accounting advice. Sole traders or small business owners that have a share of net small business income from a partnership or trust, with the business having an aggregated turnover of less than $5 million, can claim the small business tax offset (up to $1,000).
$30,000 Instant Asset Write-Off Now for Medium Businesses Too
The small business $20,000 instant asset write-off scheme was recently increased and extended for small business. From the ATO:
The instant asset write-off threshold has been increased to $30,000 and extended to 30 June 2020.
If you purchase an asset (new or second hand) costing less than $30,000 and it is used or installed ready for use from 7:30pm AEDT on 2 April 2019, you can claim a deduction for the business portion.
Different thresholds apply for assets purchased before that date:
- from 29 January 2019 until before 7.30pm AEDT on 2 April 2019, the threshold is $25,000
- before 29 January 2019, the threshold is $20,000.
You may purchase and claim a deduction for multiple assets provided each asset is under the relevant threshold.
Assets that cost $30,000 each or more can’t be immediately deducted. You can continue to deduct them over time using the small business pool.
From 2 April 2019, the instant asset write-off has also been expanded to include businesses with a turnover from $10 million to less than $50 million.
This means if you purchased an asset very recently and your business’s annual total turnover is less than $50 million, you can instantly claim back the cost of most business assets up to $30,000. You can also read more about other tax concessions that may apply to your business here.
Get Ready for Single Touch Payroll, and Other News
There are also a few more changes that come into effect from 1 July 2019 that affect business owners:
- If your business employs 20 or more employees, you are required to start reporting via ‘Single Touch Payroll’ (unless your business or your payroll software provider has been granted a deferral or an exemption by the ATO).
- There are also GST exclusions for some GST-registered businesses that import low-value goods for business use in Australia. If this applies, you simply need to tell their supplier that you’re registered for GST and provide them with your ABN (you can find out more about business purchasing on the ATO website).
Do Not Despair, We Can Help You!
If you’re overwhelmed by the thought of your business records or they’re out of control, get in touch with us at Focus Bookkeeping. We can help you get your business financial records in order, even if you don’t know where to start. Our primary goal is to help you, as business owners, save money, by offering solid business advice to ensure you understand your business from a financial and obligatory perspective.
Our expert team of bookkeepers and accountants can help you set up a business system that keeps you organised and running efficiently so tax time (and Business Activity Statements!) seems less daunting each time it comes around. Engaging our skilful and meticulous bookkeeping service also means you can focus more on your own family time and let us take care of keeping your business financially healthy. So consider working with us, as we can assess your bookkeeping system, make sure the process is working smoothly, and then investigate what improvements we can implement to help improve your bottom line.
Together, we can work as a productive team and free up your time to do the things you love!
Until next time,