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Owning a business comes with challenges, but it’s even more complicated when it comes to tax time. There are many tasks to manage, and the last thing you want is to sit and look through books and records for hours. However, keeping your tax under control is crucial if you want to avoid hefty penalties or tax debts and ensure you aren’t paying too much tax. Here are five common mistakes small business owners make in Australia at tax time.
Not using a tax agent or accountant
Some small business owners believe they can run their business, manage workers and attend to customers all at once. However, no matter your management and bookkeeping skills, it isn’t always easy to handle all these and run a successful business. This is why you need a tax agent or accountant to help you do better and prevent you from making unnecessary mistakes. You can seek help from a Pherrus Financial accountant to avoid any regrettable scenarios.
Failing to get the right employees’ status
Failing to get the engagement status of employees right as a business owner can land you in legal complications. Committing this mistake can cause you to overpay or even underpay your employees, which may get you in trouble, not only with taxes but also with fair work. To avoid this, ensure that you have the correct worker status and always double-check them.
Not keeping track of changes to tax laws
Australia’s tax laws are continuously changing, and with so many things on your to-do list, it isn’t easy to keep track. Some changes can work in your favor, but others could cause a rude awakening if they are overlooked. As an employee, you don’t have to worry about most of these things since someone else is taking care of them on your behalf.
However, if you are a business owner, your employees trust you to do your due diligence. For instance, you are required to update awards twice a year. If you overlook these changes, you might end up underpaying your employees and may not withhold enough money for tax time. This can cost you thousands of dollars at the end of the financial year, or you will lose your employees’ trust.
Failing to keep good records
Good record-keeping means business, and there is no way around it. It’s essential to keep hold of all your business-related receipts so your tax agent can accurately assist you with your deductions. In addition, it’s a necessity to be audited by the Australian Taxation Office (ATO). Accurate and detailed business records allow for better financial reporting, so you should keep records of everything, both outgoing and incoming.
Having incomplete or missing tax invoices
Every business purchase of more than $82.50 must have a tax invoice, and they should be kept for at least five years. Having incomplete or no tax invoices can cause you to claim items you don’t have a record of.
Tax mistakes can be destructive to small businesses, but the good news is that they are avoidable. Avoiding these five common tax mistakes is crucial, but you should also consider investing in a professional tax accountant to help you with your taxes. With a dedicated expert to evaluate your taxes, you will have less to worry about and can focus more on your business growth.
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