Tax time. Words that can strike a mix of fear and dread into the heart of any small business owner. But they don’t have to.
As the end of the 2016/17 financial year fast approaches, small business owners should set aside time to assess their financial situation and lay down plans for the future. And rather than sinking into a state of overwhelm, think of tax time as the ideal opportunity to get your business in shape.
Here are 5 ways you can prepare
1. Manage receipts
You can reduce your taxable income by claiming tax deductions for most costs incurred in running your business. But being able to show proof of purchase is a must.
By being diligent about managing your receipts throughout the year, this can help make tax time a breeze. Start the process of organising your receipts early, so you don’t miss deduction opportunities later on.
Gather sales records such as invoices, receipts, and credit card statements, employee records like wages and superannuation details and end of year tax records. However, what classifies as a tax deduction will depend on your business type and business activities over the past year, so make sure you check with your accountant to be sure you don’t miss out on deductions.
While you’re at it, replace the shoe-box of paper receipts, with a simple accounting program. After all, small businesses are required to keep financial records for at least five years in either electronic or paper form, so it pays to get organised.
You might also be eligible for a range of concessions, offsets and rebates, so make sure you take a look at the Australian Taxation Office website.
2. Assess deductions and write-offs early
Are you a small business owner with an aggregated turnover of up to $10 million? If you’re thinking of purchasing a piece of equipment before 30 June 2018, keep in mind that you can immediately deduct the cost of eligible assets of up to $20,000. Also, take the time to see if you’re eligible for any tax concessions.
“Just make sure you finalise your purchase soon if you want to take advantage of the write-off this financial year,” Sam Allert, managing director of Reckon ANZ says.
Businesses can bring forward deductions on expenses for the next financial year, known as pre-paid expenses.
Deductible expenses would normally include items such as office supplies, stationery, insurance and rent, he says.
“Certain expenditures are excluded from pre-payment rules, including amounts of less than $1,000 and payments of salary and wages,” Allert says.
3. Reassess your insurance covers
Many insurances are due for renewal around this time of year. And whilst it may be tempting to simply renew your current insurance policies, it pays to set aside time to review your insurances with a broker.
By analysing your business to see what new risks your business may be exposed to, you can help ensure your business is appropriately covered. If you’ve added a new product, hired more staff, or purchased new machinery during the year, it is important to make sure you’re still adequately covered to protect your business in the event of a setback.
When it comes to renewing or taking out a new policy, speak to a Steadfast insurance broker, who is well equipped to assess where your insurance cover might fall short and recommend the most appropriate insurance for your business.
Steadfast is the largest network of general insurance brokers in Australia and New Zealand, and has strategic partnerships with over 150 insurance providers locally and internationally. This means they can source and recommend tailored product(s) for you, from business insurance to the most niche insurances.
4. Make a call to your lawyer
EOFY is also a good time to review client agreements with your lawyer, advises Courtney Bowie, founder of virtual law firm for SMEs, Her Lawyer.
“The budget failed to rein in late payment times from bigger businesses, so SMEs need to find ways to ensure they’re paid on time and with minimal effort,” Bowie says.
You should also review your finance options (loans, overdraft and leasing) to make sure they still meet your current needs.
5. Avoid manual processes next year
Look for opportunities to streamline your business technology. For example, by implementing a cloud solution you can streamline cash flow, payroll, invoices, compliance and reporting, advises Adam Griffiths, DMCA Business Advisory. Many of these cloud solutions also come with their own phone app, to help you to manage your receipts as you go.
Real-time access to your business is paramount in this day and age, he says. “Cloud services ultimately provide better efficiencies and enhanced productivity, which makes a business far more agile and adaptable as it grows. Plus, clients are more tech savvy, meaning it’s becoming an expectation.”
Need more help? Take a look through the tools provided by the Australian Tax Office specifically created for SMEs.
By following these five simple steps, you can help prepare your business for tax time.