With end of financial year approaching quickly, now is the time for all small business owners to get organised.
We spoke with Jo Elliot, business owner and accounting professional at Joco Accounting, to find out everything you need to know coming into tax time this year.
In this guide, you’ll learn how to stay financially organised, along with Jo’s top tips for small businesses during tax season.
Before we get into it, please note any information or advice provided in this article is for educational and informational purposes only. This article should not be construed as financial or investment advice. Please contact your accountant for further information on anything discussed.
What is the deadline for small businesses to lodge their tax?
There are two main lodgement dates to remember as a small business owner.
If you don’t have an accountant your tax return is due to be lodged on 31 October 2023. On the other hand, if you do have an accountant, your tax return is not due to be lodged until 15 May 2024.
“However, if you were late the previous year, then you will have to lodge your tax return with everyone else on 31 October 2023,” Jo shared.
How to Stay Financially Organised Throughout the Year
1. Have a separate business bank account.
As a small business owner, it’s important to ensure you have a separate business bank account from your personal expenses. If not, your personal and business expenses will be combined making it very difficult to separate the two, especially around tax time.
Jo said, “Try not to mesh your expenses, keep your business bank account focused on business as much as possible.”
If you struggle to stay on top of your finances, Jo recommends setting up two business bank accounts – one for trading and one for savings.
Every month check your trading account profit and put 30% aside into your business savings account to help pay your tax commitments like GST and income tax.
2. Choose suitable cloud-based accounting software.
Due to Single Touch Payroll (STP) requirements, each time you pay an employee you need to report their payroll information to the Tax Office. You can do this through STP-compliant cloud-based accounting software.
Most small businesses in Australia use either Intuit QuickBooks, Xero, MYOB or Reckon.
“I personally prefer Xero, because it was built for small businesses who have no previous accounting knowledge and can be used to easily manage business finances,” Jo shared.
In comparison, Intuit QuickBooks and MYOB were originally accounting-based software before changing to adapt to Cloud Payroll.
Jo recommends running a comparison to work out which one is best for you, as it will depend on several factors. To ensure you stay up to date, it’s important to regularly look at your software.
“Don’t leave it any longer than a week,” Jo said.
3. Look out for tax incentives and grants.
Small business owners should regularly check the Australian Taxation Office (ATO) and government websites for new tax incentives and grants.
“There are two measures that aren’t officially law yet but are expected to be soon, called the Small Business Technology Boost and the Small Business Skills Training Boost,” Jo shared.
Both measures will allow small businesses (with an aggregated annual turnover of less than $50 million) to deduct an additional 20 per cent on expenditure incurred.
The Small Business Technology Boost will include technology platforms that underpin your business, such as cyber security and subscriptions to cloud-based services.
The Small Business Skills Training Boost will include the provision of eligible external training courses to employees by registered providers in Australia.
Jo also recommends regularly using the government grants and programs finder to see what is currently available to help support your business.
Top 3 Tips for Small Business Owners around Tax Time
1. Check your accounts receivable.
It’s worth looking at your accounts receivable around tax time to avoid paying income tax on income you haven’t yet received and are very unlikely to receive in the future.
“If you have customers that aren’t paying you and haven’t for a long period of time, write it off before 30 June 2023,” Jo said.
If you end up receiving the money later, simply add it back in as income.
Jo also mentioned a significant change in the ATO’s tone that small businesses should take note of.
Over the past few years, the ATO has accepted poor excuses for late tax lodgement. This is no longer the case, unless you have a good reason for lodging late, they will decline.
2. Do a good stocktake.
Small businesses should do an in-depth stocktake every year to find out what stock and inventory they have available on hand, to achieve a better tax deduction.
Jo shared, “If you have damaged or lost goods that aren’t being accounted for, you should get it all deducted instead of having it held as an asset.”
Petty cash is another overlooked area to focus on, as it can add up to thousands of dollars in small payments.
3. Get your tax in early.
As a GST-registered business, your Business Activity Statement (BAS) is due for lodgement in August.
If you are up to date, you will have most of the information needed for your income tax. So, why not get it done early?
Jo said, “Once you’ve done your BAS, I encourage you to get your tax in early. I think August is the key time to do this.”
She confirmed September is the busiest time for accountants because organised business owners have lodged their taxes by then.
Overlooked Tax Deductions
We asked Jo one final question about overlooked tax deductions to help you get the most out of your tax return this year.
Jo said, “The biggest one which blows my mind is actually accounting fees.”
Additionally, anything you are required to be a member of as part of your industry often gets forgotten, such as union or professional fees. Jo also revealed income protection insurance and sun protection equipment are deductible, even though they are commonly missed by small businesses.
Looking for an accounting professional near you?
If you are looking for an accounting professional near you this tax time, check out Localsearch.com.au, where 8+ million people in regional Australia go each year to find local businesses.
Feel free to contact Localsearch at 1300 905 157 or send us an enquiry if you would like more information.