The end of the financial year is often a time that many small business owners – as well as individual taxpayers – dread. But understanding your obligations and entitlements, being well prepared, and paying attention to the following simple tips, will help simplify what can be an otherwise daunting, complicated process.
Whether you are using a registered tax agent or lodging your own tax return, mark off the items in the following categories and you’ll be better prepared for the forthcoming tax season.
2019 News! From 1 July 2019, the ATO is expanding Single Touch Payroll (STP) to employers with less than 20 employees, which (as long as you are using a software solution that offers STP reporting – we recommend Xero) will send employee tax and super information to the ATO every time you run payroll. While there will be some concessions available for small employers, for example, those with less than 4 employees or related parties like shareholders or family members, it is important that you understand your compliance obligations.
Data matching – what the ATO is targeting in 2019
Data matching programs were introduced by the ATO to “increase community confidence in the integrity of the tax system” by identifying industry trends and patterns, and gaps in the community’s understanding of tax obligations.
If you undertake any of the following activities, the ATO can access your data in order to cross-check and analyse your declared activities:
• Credit and debit cards
• Specialised payment systems
• Online selling
• Ride-sharing (eg Uber) or online rentals (eg Airbnb)
• Motor vehicle registrations
• Cryptocurrency
Fringe Benefits Tax (FBT)
The ATO uses FBT to tax non-salary benefits provided to employees. Eg. provision of a car. The ATO has not previously had the information to check who should be lodging these and therefore enforcement among small businesses has been minimal.
However, with the vehicle registration details it received this year, it will be one of the areas they will be focusing on as essentially any company that owns a car is likely to be providing a fringe benefit and should therefore be lodging an FBT return.
Many small businesses have not previously lodged the FBT returns they perhaps should have, so If you have any doubts about your outstanding liabilities, please get in touch so that we can look into it for you.
Your income
Income is the big-ticket item when it comes to tax; it covers a lot of ground. To make sure your tax affairs are assessed accurately, it’s important that you approach tax time knowing what your income is, and from where it originates.
Documents you’ll need to be thoroughly prepared include:
• Your Pay as You Go (PAYG) summaries from any employers
• Lump sum payments, such as payments made as part of a termination, and
• Any trust or partnership distributions you may have received
Additionally, you need to have access to:
• Managed fund annual tax statements
• Capital gains tax statements (if applicable)
• Details of interest and dividend income
• Any foreign income you may have received, such as employment income, or foreign dividends
Any locally earned income should also be documented, in such forms as dividend statements, bank statements showing earned interest from savings accounts or term deposit statements, as well as buy/sell contract notes for shares (if any were traded).
For property owners
If you’re the owner of a rental property (or properties), you’ll need to make sure you have the annual tax statement from your property’s managing agent as well as details for any expenses you have paid personally such as council & water rates, land tax, strata, insurance or mortgage interest.
Make sure you have invoices for any depreciable items or renovations that you have done and If you have bought or sold a property during the past financial year. Please provide copies of the sales contract, settlement sheet and any other associated costs.
Finally, make sure you have details about the time in which the property was rented out – either for the full financial year, or any time within it.
Offsets and rebates
There are several factors which can impact on your eventual tax return (or debt), including the details of your dependents or children, including their age/s, occupation/s and any taxable income they may have.
Your private health insurance statement is also an important consideration, as it may have an impact on whether you are subject to the Medicare levy surcharge. If you have insurance with your partner, remember to state who the primary holder is, and provide your partner’s age.
Your deductions
Don’t forget to include any deductions you may be entitled to. There’s no reason not to claim these deductions if they are legitimate – why not make the most of the opportunities to lessen your tax burden?
These can include:
• Keeping the receipts for any donations you make to registered charities of $2 or more
• Expenses you incurred in managing your tax affairs (including the cost of hiring an accountant or tax advisor)
• Expenses you paid in earning investment income, such as margin loans, financial advisor fees and the like, and
• Any income protection insurance premiums you paid
They’re all deductible!
Work-related deductions can also include:
• Details of depreciable assets bought during the year (such as laptops)
• Professional journals, magazines or websites to which you subscribe
• The cost of memberships or subscriptions to professional groups
• The cost of courses and seminars
• Communications expenses such as mobile phone usage, internet access and home office expenses
Keep any receipts you have for self-education expenses, or any other work-related deductions such as protective clothing, uniform expenses and travel.
If you use a vehicle as part of your work, keep a record of the expenses incurred, as well as the distances travelled for these work trips, and the associated logbooks for servicing and upkeep of the vehicle.
For small business owners
If you’re operating as a sole trader or are a small business with employees and/or contractors, be sure to have thoroughly prepared your cashbook, which includes records of drawings taken before the business takings were banked.
Also, ensure you have copies of all your lodged quarterly Business Activity Statements (BAS) as well as copies of PAYG summaries for employees.
Your employees’ superannuation contributions will need to be detailed, as will the details of purchased assets, including date they were purchased, and for how much.
If you use accounting software, make sure all transactions and accounts have been reconciled and anything paid for personally has been included. Make sure your accountant has been given access so they can review your file and prepare your returns.
Don’t forget notice of intent to claim a deduction form for superannuation contributions if you’re self-employed.
Timing is everything – use it to your advantage
With the immediate write-off threshold increased to $30,000, if you have plans for any large purchases, you should consider making the purchase before 30 June to bring the tax deduction into this year.
Similarly, paying your employees super for the June quarter before 30 June will make it deductible in the 2019 financial year.
The end of a financial year can be stressful, but it is necessary, and it can be a great deal less of a burden if you approach tax time fully prepared, or engage an adviser to help you keep on top of your affairs throughout the year so that you’re not left flailing come June 30!
To arrange to have your 2019 tax return prepared, give us a call on 02 8239 8200 or send an email.