Tax is this month's buzz word and can often be daunting if you are not
'in the know' and when you run your own business the last thing you need is
negative financial surprises. Read the following tax tips to help make your
2011 end of financial year as pain-free as possible.
Tax is scary if you are not ‘in the know’ and in business the last thing we
need is negative financial surprises. I’ve learnt through the years that
preparation is everything. Grab the bull by the horns and get organised and know
what your liabilities are — prepare well. Here are my tips for tax time to make
your 2011 end of financial year as pain- free as possible.
Your business — Your Responsibility
Tax and your business is your responsibility. My first tip is to do
your research, meet with your accountant early and know what’s required. Hop on
the internet, contact the Australian Taxation Office ATO, your accountant or
experienced taxpaying business mentors and become comfortable with tax and tax
terms. My mantra is to find honorable people who have done it before and learn
the quickest and best way from them.
From my own experience, one of my biggest tax blunders occurred years ago
when I received a bill for $30,000 worth of unexpected payroll tax after my
payroll headcount moved beyond the payroll tax threshold for the first time. My
accountant and I had not discussed payroll tax before. The business was growing
and I hadn’t heard of payroll tax. To someone as organised as I am and a
budgeter, it was a cash-flow shock and immediately altered my approach to
You can save yourself from similar shocks by regularly speaking to your
accountant. I meet with mine quarterly, occasionally monthly. Keep your
accountant up to date with your business and ask lots of questions about record
keeping and tax planning. Find an accountant who is willing to support you all
year round — not just in June.
Like most things in life, if you know what you are up against it’s much
easier to deal with. The buck stops with me, so I make it my business to
understand reports and statements. Here’s a quick list:
BAS (business activity statement (BAS) is a statement
businesses use to report to the ATO. It includes your GST obligations, and also
includes pay as you go (PAYG) instalments, PAYG withholding and fringe benefits
tax (FBT) instalments. Depending on the size of your business, the BAS and PAYG
will need to be paid monthly or quarterly. Check with your accountant on this.
Penalties apply if lodged late!
FBT is a tax payable for any benefit provided by an employer
to an employee, or their associate. It is paid by the employer at a rate of 46.5
percent, which is the highest marginal income tax rate combined with the
Payroll Tax is a state and territory tax on employing staff,
creating jobs — insane, I know. This tax year the threshold for being eligible
to pay payroll tax is $658,000 in NSW, so if your business is growing towards
the relevant figure in your jurisdiction you need to get prepared to pay an
Tax days come throughout the year, so be prepared. The ATO provides a user-
friendly computer tool that builds a 12-month calendar to help small to medium
enterprises plan and manage tax and therefore cash-flow obligations.
My best tip is to create a separate savings account where you can deposit
your tax money monthly. Your taxes are then accumulated ready to pay, which
makes budgeting — and peace of mind — easier. Come tax time you will be thankful
your taxes are saved and ready to go.
“Building the relationship is what it’s all about,” accountancy firm Lister
Mason’s principal Stephen Mason says.
“Find an advisor who takes a wider interest in your business and maximises
your business and taxation choices.”
Doing business means dealing with paper. My staff and I are continually
trying to cut down the amount of paper stored in the office. Efficient filing
and handling of paper once is important. Being able to find a document —
possibly one or two years later — can be a nightmare without an effective filing
system. Time is money!
Business is tough enough without unexpected surprises. Here are some key
questions you should ask your accountant to prepare yourself for tax time:
Which taxes are applicable to you and your business?
When are they due to be paid?
What is a tax deduction? When and how can they be used?
What should you be recording? And how?
How does the paperwork need to be recorded and filed?
Putting off tax planning until the last minute or not having tax as a
priority can lead to oversights, money shortages and unnecessary panic.
Don’t let taxes become a traumatic experience this year. If concerned ring
the tax office. On the whole they are motivated to keep our businesses going.
I’ve always found them helpful. If you need help, ask