Checklist for Tax Time

According to the Australian Taxation Office (ATO), just over two million companies, partnerships and trusts – from those who operate at a loss to those with an income over $250 million – lodged a tax return in the 2016/17 Financial Year. However, 30% of small businesses don’t pay their tax on time.

Regardless of the number of staff, the value of operations or the state of your financial documents, read on for things to consider that can benefit all businesses and help you get through tax time, on time.

What to Consider for Tax Time

April to June is prime tax planning season and is one of the best times to start preparing for the new Financial Year ahead. To get you started, we’ve included a number of key areas that you should be considering now so you’re not caught out come 1 July.

Review Last Year’s Tax Assessment

It’s a good idea to start by having your accountant check over last year’s tax return. Their eagle eye can pick up anything that should be considered this Financial Year, such as items to be carried forward. Provide all your documentation and records to help make this a thorough process.

Check P&L for Non-Deductible Items

Have an expert review the expenses in your current profit and loss statement for any non-deductible items, such as private expenses and subscriptions, donations that are ineligible for deductions and non-deductible entertainment. Catching these early helps to avoid any issues down the track.

Write Off Bad Debts

If you have outstanding debtors that are unlikely to be paid, then writing off these invoices is something that you might consider before 30 June. Ensure that you document the decision to write off the bad debt and that you update your write-offs in your accounting software before the new Financial Year.

Set Up Pre-Payments

Did you know that if you are a small business, you can claim a tax deduction on prepaid expenses? As long as the prepayment isn’t paid more than 12 months ahead, you may be able to claim a deduction on individual and investment expenses, such as insurances, interest paid on rental properties and even your accounting fees. Put those fees to good use and chat to your accountant about what you might be able to claim if you pay now.

Pay Superannuation

This is simple. You’re required to pay your staff superannuation, so pay their entitlements before 30 June to be eligible for deductions. 

Claim Travel Expenses

Know what travel expenses you can claim on tax for your business, and what your employees are entitled to claim through their personal tax returns. To claim work-related travel expenses, you'll need to provide supporting documentation, such as travel diaries and receipts. Pull these together so you have them on hand.

If you haven't kept records or want to make the process of compiling travel expenses more straight forward in the future, read up on the technology that can help, such as Reporting, below.

Review Your Travel Spend

While you are going through the process of compiling your records, now is a good time to review your travel spend and assess where you can make adjustments. A good place to start is by asking these key questions: ‘what do we currently spend?’ and ‘how can we save?’

An understanding of your expenses and what you and your employees are entitled to claim through tax will assist in determining how you can maximise your budget’s potential. Review your travel policy and hotel policy to ensure you make the most of your travel spend for the next Financial Year.

Undertake Repairs

If you’re holding off on repairs to business assets until after tax time, you might want to reconsider. The cost of any repairs undertaken on your business (or rental properties, for that matter) are tax deductible in the Financial Year they’re paid for. Also consider buying any office supplies, such as spare parts, before the end of the Financial Year, as they fall outside the definition of inventory.

Before you go refurbishing your whole office, have your accountant check the type of repair (general repairs, initial repairs or capital improvements) as this may affect the tax implication for the repair itself.

Set up STPR

Single Touch Payroll Reporting (STPR) is something you need to know about if you don’t already. Introduced from 1 July 2018, when it was compulsory for businesses with more than 20 employees, STPR requires businesses to move to and operate from a cloud-based payroll and accounting platform. From 1 July 2019, all employers regardless of their size will be required to use STPR.

It might seem like extra work initially, but there are a few benefits for your business, as accountancy and advisory organisation BDO Australia describes: “Moving to cloud technology gives you a competitive edge, offering you access to real-time insight into your business' financials. It also creates efficiencies - say goodbye to paper filing, manual data entry and out-of-date legacy desktop accounting systems. Instead, you have software that is seamlessly updating to the latest technology…that embraces automation to keep your operating costs low and have the capacity to scale with you as your business grows.”

Consider a Tax Restructure

Depending on your current structure, it could be worthwhile looking into current tax rates and tax strategies to determine if a restructure is appropriate before heading into the new Financial Year.

Nick Hill, Managing Director of Walker Hill Chartered Accountants, helps his clients identify restructure opportunities that will save them come tax time. “For example, setting up a Company Beneficiary could be one strategy that could be implemented, in conjunction with a trust. This is an alternative to distributing income to someone on the maximum individual income tax rate. Another alternative to this is distributing income (for a trust) or dividends (for a company) to close family members. Keeping in mind any Government benefits or other income streams, distributing to family members in lower marginal tax rates could also be implemented as part of a tax minimisation strategy.”

For a comprehensive guide of things to consider while preparing your tax assessment, take CPA Australia’s checklist to your accountant or financial advisor.

Streamline Your Tax with Technology

According to research by the ATO, only 28% of small businesses think their tax systems are efficient and effective, while a further 44% think their systems work but there’s room for improvement.

With the world of tax regulations and requirements constantly changing, and transparency and cooperation with the ATO a must, why wouldn’t you make use of available technology and systems to improve and streamline your processes?

Accounting Systems

Even the best accountant can only work with what they’re given. Make life easier, and your professional services bill smaller, by using the right accounting system for your business. There are a few to choose from, such as QuickBooks, Xero and MYOB. Find out what accounting system or software your accountant uses and recommends and if there is an option suitable for your needs.

Record, Track and Reconcile

Regardless of how much your staff travel for work, you’ll need to provide details for your tax assessment. Having a system in place that can record, track and reconcile all your travel expenses into your expense management system can save you time and money. 

Simplify Reporting

When it comes to generating reports, being able to access the information you need at the click of a button is the ultimate goal. Our Reporting system will get your business running more efficiently by producing regular and on-demand travel activity and expenditure reports. Generate the reports you need at tax time, such as travel expenditure and credit card reports, and access the interactive dashboard to help identify your staff’s travel trends and opportunities for cost-saving all year round.

Tapping into available technology and software programs can support your processes and make your administration more efficient, says professional services firm Deloitte: “Increasingly, tax teams are looking to software and technology solutions to capture and manage their data for tax purposes, and to streamline their tax reporting and compliance requirements.”

Engage the Experts

There is no need to go through tax time alone. In fact, there is an entire industry there to support you. Make the most of the resources available online and leave it to the experts.

Make the ATO Your Friend

The ATO is an obvious place to turn to for information and a great one at that. They have a newsroom dedicated to small businesses and a great resource on LinkedIn for medium and large businesses. Subscribe to their Business Bulletin and receive regular updates in your inbox.

Bring on a Professional

Having an accountant or financial advisor on your side can really benefit your business. Even if you have in-house resources, an expert who is external to your business can help identify new opportunities and ensure you stay up-to-date with changing regulations. If you don’t yet have a trusted accountant, search CPA Australia’s database for one near you.

Professional services organisation EY Australia explains why businesses need support to navigate the tax scene: "The business and tax landscapes have changed dramatically, and the pace and complexity of change continue to increase…Companies are balancing competing priorities, ensuring they maintain compliance while adding value.”

Year-Round Financial Planning

Now that you know what you should be looking at to prepare this year’s tax assessment and some resources to help you along the way, take a moment to consider how a year-round approach to financial planning can help to ensure that this time next year is a cinch.

Walker Hill Chartered Accountants recommend this quarterly-based approach to understanding and working through your financial goals and obligations:

• April to June is tax planning season
• July to September is tax preparation time
• October to December is the time to get into your business planning
• January to March is the best time to set your financial goals and KPIs

While you still need to be managing your accounting requirements all year, having a specific focus during each quarter can help you to stay on track and meet your financial goals, while making tax time less overwhelming.

Tick Off Tax Time

So, how does your business stack up: Are you able to tick off the checklist? Or has it given you a prompt to get into gear? Either way, take the stress out of the process by making use of technology and engaging a professional to support you every step of the way. Let the countdown to 30 June begin!

The above information is provided as a guide to get you thinking about ways your business can prepare for tax time. We recommend that you consult your accountant, financial advisor or a tax professional to see how this information can apply to your situation.
 

Article written by Kylie Hatfield

Kylie is a writer with over 14 years’ experience in PR and communications in the travel, tourism, corporate and not-for-profit sectors. Drawing on her professional and personal experiences, Kylie writes on the topics of business, travel, health and parenting. Kylie has lived in the south of France, been a tourist in 10 countries, and dreams of one day seeing the Northern Lights in all their glory.