• Top 6 Small Business Tax Mistakes

Running a small business has its difficulties, and when it comes to tax time, things may get much more complicated. A large number of businesses fail because they do not adequately prepare for the tax aspects of their operations. Businesses have been caught out by large fines and tax arrears in a variety of areas, including payroll tax, superannuation guarantee payments, and GST because they failed to keep their responsibilities at the forefront of their minds.

Here are the six most frequent tax errors that small businesses make that cause them to fail. Make sure you don’t make any of these errors

1. Failing to stay updated with changes in tax legislation

Australian Tax Laws are always changing and developing, and although some changes may benefit business owners by providing them with more money, other changes can be detrimental if they are not taken into consideration. Did you know that if you are an employer, the majority of employment awards are revised twice each year?

While failing to comply with these changes may result in you underpaying your employees (which would create a whole new set of problems), you should also consider the amount of tax that you must withhold from their PAYG. If you don’t stay on top of the changes, this mistake may cost you thousands of dollars at tax time.

2. Not using a Tax Advisor when you don’t have enough knowledge yourself

If you find yourself falling behind in small business accounting knowledge and don’t get a Tax Advisor, there is a genuine chance that you may lose out on some of the financial assistance that is now being offered by the government as part of its efforts to boost our economy. Many small business owners also fail to recognise deductions that they can take advantage of, or they are too generous in what they are claiming.

Even if you are a small business with a little amount of income, you should consider hiring a tax professional to assist you. Your tax advisor will make sure you are only paying the tax that you are actually liable for by claiming every possible deduction and will keep you informed of any tax changes that may have an impact on your bottom line.

3. Failure to maintain accurate records

Good record-keeping is essential for successful business operations. It is essential that you maintain track of any receipts related to your business so that your tax advisor can help you with your deductions in the proper manner. Business records that are detailed and precise provide for improved financial reporting, so you should be monitoring everything at all times.

4. Failing to accurately determine your staff’s employment status

The new law means that long-term casual workers now have the ability to request permanent contractual employment under several awards, and if you aren’t cautious, a retroactive claim for entitlements may be very expensive for your business. Employees with a lengthy history of casual employment should have their status reviewed by their employers to verify that they are complying with their legal responsibilities under the Fair Work Act.

5. Ensuring that your workers’ superannuation is paid

Employers often fall into the trap of deferring the payment of superannuation until the very end of their to-do list, particularly when cash flow is limited. There are severe penalties for failing to make timely contributions to your employee’s super and you should avoid making late contributions.

6. Managing cash flow in the context of tax responsibilities

Maintaining a strict budget is essential for small business accounting, and whether you pay your taxes and other responsibilities monthly or quarterly, you must keep track of all of your expenditures and income. Take the time to ensure that you are accurately calculating the amount of money you will need to pay for withholding taxes, GST, income tax and superannuation based on your projected earnings and income.

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September 10th, 2021|