Payroll tax, income tax, GST, fringe benefits tax, capital gains tax and PAYG. These are the main taxes small businesses and employees in Queensland need to understand and plan for as the end of the financial year approaches.
One of the impacts from Covid-19 this financial year is the large increase in staff now working from home. This may impact the deductions that employees are eligible for and also may result in unexpected fringe benefits tax implications.
Below is a summary of some of the common mistakes business owners and employees make that may result in problems with or a debt owing to the tax office.
The ATO is looking for businesses who under-report income, exaggerate business expenses or operate outside the tax system..GET THE SUPPORT YOU NEED TO GET YOUR TAX RIGHT
1. Under-reporting income
This shows up differently for different tax reporting entities but the problems it can cause are the same – A big tax bill with interest owing if audited and caught out.
For small businesses, this may be due to having poor record keeping or using the ‘cash economy’ whereas for employees they may be forgetting temporary work or not reporting money earned. The ATO is consistently improving its data matching tools to identify transactions that will red flag an audit.
2. Over-claiming or claiming non-business expenses
For small businesses, keeping good records is essential for being able to claim expenses against your revenue. Without evidence and a reason why the expense is a business expense, the ATO could disallow the expense claims resulting in tax debt.
Employees also need to keep receipts and evidence of the reason an expense is a business expense in order to claim. A lack of clear connection between the expense and the earning of the income related may result in the expense being disallowed.
3. Missing out on claims you are eligible for
The criteria for expense claims for small businesses change often. One of the changes for the 2020/21 financial year is a change to how small businesses can claim pre-paid and business start-up expenses.
Professional tax practitioners (like us here at Entire Bookkeepers) can check if your business is eligible for new concessions that you may not be aware of.
4. Claiming for expenses that have not been paid for
This is a mistake more typically made on personal tax returns. Sometimes people mistakenly assume that they are entitled to a ‘standard deduction’ that they have not actually incurred the expense of and have no supporting evidence like tax receipts to verify the expense.
5. Incorrectly claiming expenses on capital purchases/investments
Landlords and business owners alike can easily mistake an asset purchase that should be depreciated for an expense. Sometimes business owners and people holding investments may try to claim or mistakenly claim personal expenses as business or investment expenses. The rules around capital purchases, capital gains tax, and depreciation can be very confusing.
To make your tax time stress-free, get the support of a registered, trained tax practitioner (like us here at Entire Bookkeepers) or contact the ATO
If you need support, the team at Entire is here to help. Call to book our free 30 min discovery session with our team here
The information provided on this website is general in nature only and does not constitute personal financial advice. The information has been prepared without taking into account your personal objectives, financial situation or needs. Before acting on any information on this website you should consider the appropriateness of the information having regard to your objectives, financial situation and needs.