Small Australian businesses have been warned about the risks involved in the start of a new financial year. There is no denying that the end of one financial year and the start of another are stressful and hectic periods for many businesses.
Two Sides Accounting founder Natalie Lennon said: Yahoo Finance While it is important to file tax returns, Australians also need to keep an eye on the future. He said failing to plan ahead can be disastrous.
“With a little preparation and advance planning, small businesses can try to avoid the mistakes made in FY24 and start the new financial year on the right foot,” he added.
Lennon has listed three major mistakes that business owners “cannot afford to make” in the next 12 months.
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Leaving tax returns to the last minute
While there are many Australians who rushed to file their tax returns the moment the calendar struck July 1, there are many others who are waiting weeks or even months to file theirs.
Lennon said Yahoo Finance This is all very well for individuals, but companies need to be a little smarter.
“Leaving it to the last minute will only increase stress,” she said. “Filing your tax return well in advance of the Oct. 31 deadline will give you enough time to plan your payment.
“The ATO is much more lenient if you file your return on time and ask for help with a payment plan, and they also charge interest and penalties for late filing and paying tax.”
October 31 is the deadline for taxpayers to file their own tax returns for the 2023-24 tax year or contact a registered tax agent.
If you miss the filing deadline, you will be assessed a penalty of $330. This penalty increases by another $330 for every 28 days you are late filing, up to a maximum of $1,650.
Lennon said businesses can get an extension until May 15 of next year, but that’s only if they contact a tax agent before the Oct. 31 deadline.
Don’t run your business blindly
Lennon explained that failing to map out cash flow for the full 12 months can cause businesses to focus too much on day-to-day operations.
“If you don’t have a cash flow forecast for the next 12 months that details your expected income and expenses, as well as your estimated tax liability, you’re running your business blind,” he said.
He said the two mistakes he often sees with this topic are:
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Business owners pay themselves too much money and not enough to pay their tax and GST obligations and employee entitlements such as superannuation.
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Owners don’t pay themselves enough money and leave too much working capital in the bank.
“It’s generally not a good idea to leave too much money in the company’s bank account, as it could be put to better use, such as paying off the mortgage or reinvesting in the business,” he added.
Knowing how much money you plan to bring into the business can help you determine whether you can hire another staff member or raise or lower your prices.
Understand the tax deductions available to you
There are many tax deductions that individuals and business owners can take advantage of (here are some that you may or may not have heard of).
While individually they might not amount to much, Lennon said they could represent a big economic boost for some Australians.
Below is a list of some of the deductions that the founder of Two Sides Accounting believes every business owner should be aware of:
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Your car expenses if the vehicle is used for business purposes
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You can claim a percentage of your rent and electricity bill if you run a business from home.
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There is a tax deduction for retirement payments made on time to your employees
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You can also claim a deduction (on your personal tax return) for your personal retirement contributions.
Lennon added that there are several deductions for working from home that can be made, but the rules on what can and cannot be claimed changed last year. You can learn more here.
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