As we quickly near the end of June, we’re not only exposed to the huge number of end of financial year discounts on our favourite brands, but to what can be a stressful and daunting time for many small business owners – tax time.
While consumers are flocking to make the most of last-minute deals, the tax season can cause headaches for small business owners, even without the added pressure the ongoing pandemic may have had on their finances.
For many, the next couple of weeks may be a scramble to find and gather faded, crumpled receipts, while they chase outstanding payments and read tax regulations.
To help take some of the pressure off, no matter whether you own a small retail store, run a boutique pilates studio or operate your own cleaning business, here are a couple of tax tips for the last few days of the financial year to help you get your affairs in order and your claims perfected before it’s too late.
Identify the deductions you can claim
Tax deductible expenses related to the running of a business are like little pots of gold for small business owners, so it’s important to understand what you’re entitled to.
While there are a number of regular deductions – like travel – that small business owners might be entitled to, it’s first important to recognise those which have been recently introduced or updated to help businesses battle the coronavirus pandemic.
The first is the shortcut method of calculating additional running expenses incurred while working from home. Over the past few months, many small business owners found themselves working from home more than usual.
In response to this trend, business owners can now claim 80 cents per hour for the additional running expenses incurred, including electricity, phone and internet expenses, stationary and home office equipment, from 1 March 2020 until at least 30 June 2020.
In addition, the government increased the instant asset write-off threshold from $30,000 to $150,000 for eligible businesses from 12 March 2020 until 30 June 2020.
Eligibility has also been expanded to cover businesses with an aggregated turnover of up to $500 million, allowing for immediate deductions on the business portion of the cost of an asset in the year the asset is first used, or installed ready for use.
So, if you own a coffee shop, for instance, and bought a shiny new barista-style coffee machine, ensure it’s included in your tax deduction.
Make good habits stick
Pulling information together into accurate reports and statements are the key to good accounting habits, so start early to ensure you’re ready for tax time. A little time in the short-term can save a lot of time in the long-run.
So use digital reporting tools, such as accounting or invoicing systems like Invoice2go, to help to streamline the process and do the hard work for you.
These habits will help you not only complete and lodge your tax returns in the short-term, but will also help you manage cash flow and better understand how your small business is performing financially during any given time and from one year to the next.
Ditch the paper trail
With the help of digital tools, everything from customer details to financial statements can now exist digitally. So, if you’re still reliant on physical receipts and paperwork, it’s time to ditch the rolodex, throw out the calculator and put the diaries away in the new financial year.
Switching to digital invoices, estimates and reports helps to speed up the admin process, so you can spend more time doing what you do best – running a business and providing essential, memorable services for your clients.
No matter your industry, time is money for a small business, so take digital control in the new financial year with online tools. They’re not the future, they’re the present, and your business could stand to benefit.
Digitally track expenses on-the-go
Over half (55%) of Australian small business owners run their business entirely from their smartphone, so it’s likely you’ll have your phone handy when you’re out and about.
If this is the case, get into the habit of digitally storing expenses the moment they’re incurred, to save you time and stress down the track.
Take a photo of each receipt on your phone while you’re out, and save it alongside important details such as the client, the date, and any other important information.
Digitally storing receipts is a good habit to get into now, so you’re not digging through boxes of old crumpled receipts this time next year.
For those new to the small business game and veteran business owners alike, the tax season can be full of headaches and stress.
However, by getting into good reporting habits with the help of online tools now, you might find yourself feeling a lot more organised by the time the new financial year rolls around.
Disclaimer: Invoice2go does not provide tax, legal or accounting advice. This article has been prepared for informational purposes only, and is not intended to be relied on for tax, legal or accounting purposes.
You are strongly encouraged to consult your own tax, legal and accounting advisors to determine how the information may relate to you or the specifics of your business.