Ok, so the clocks ticking, and before you know it, it’s tax time again, and your accountant is hassling you for so many things you don’t even know where to start.
Before you go into a frenzy, read our top 5 tips to get yourself and your business ready for tax time.
1. Make sure superannuation is all paid for the year.
Ok, if you are a small business and paying yourself (sometimes), this is an easy one to miss as it’s not part of your BAS, and you need to do this yourself. Be diligent with your Super as this is an investment into your future. Plus, you can have tax benefits if you pay your superannuation on time.
The best way to find out what you need to pay is to go to the balance sheet report and check the superannuation payable account. Another important note, if you are cashed up (lucky you), you may have the urge to put extra into your super, which is fine. You can add an extra 25k into your super.
What happens if you pay more than $25,000 into super?
Suppose you are over your concessional contributions cap. In that case, the extra superannuation amount will be included in the amount of assessable income in your tax return, and you pay tax on it at your marginal tax rate.
2. Run a Profit and loss report and check it’s correct.
So this is the statement that tells you how your business is tracking, and no one knows your business better than you. The areas you want to note are your cost of sales; are they accurate, are all of your invoices in? Is everything reconciled? Check your profit figure. If it doesn’t feel right, make sure you specifically chat about it with your tax accountant before your tax return is processed.
3. Check your Directors loan
Depending on what business structure you have but if you are set up as a Company, you may have a directors loan.
If you are not keeping tabs on your loan balance to the company, make sure you go and check the balance of that account right now. If it’s in a negative, make sure you pay back the company before June 30; otherwise, there will be tax consequences (plus interest).
It’s essential to know how this account works, so make sure you speak to your accountant if you need some help understanding this one.
4. The Shoebox full of Receipts
Make sure all your receipts are in order – either in a shoebox (eep!) or in Xero (ESPECIALLY things you want to claim as many deductions as you can to reduce the tax you pay. If the receipts are big ones, make sure you find them). The more you claim, the less tax you will have to pay, OR you may be lucky to receive a tax refund.
**Just a side note. Did you know that you need to keep your receipts for five years? And even worse, did you know that receipts fade over time? The best way to reduce shoeboxes full of receipts in your wardrobe and keep them legible is to use Hubdoc. First, you use the app on your phone. Then, hook up Hubdoc to Xero (free), take a photo of your receipt, and it’s logged. So simple!
Most important question: What can I claim on my tax return, you ask? At Bloom Money, we get asked this question a lot! So, we’ve listed the basics. However, there are claimable expenses based on the industry that you work in.
To claim a work-related deduction:
- You must have spent the money yourself and have not been reimbursed for this
- It must be directly related to earning your income
- You must have a record to prove that you have spent this money
You may be able to claim a deduction for expenses that directly relate to your work, including:
- Vehicle and travel expenses
- Clothing, laundry and dry-cleaning expenses
- Home office expenses – for those working from home due to COVID-19 (there are more claimable options available)
- Self-education expenses
- Tools, equipment and other assets
Click the link here to check what you can claim in your industry.
5. Director’s fees
You need to check your Director’s fees to make sure you know the following:
- How much you’ve paid yourself (especially if you haven’t paid PAYG on it yet)
- How much profit you’ve made (and any tax applicable on this),
- GST for the quarter – so you can plan cashflow and your final tax position
Essentially you need all the above sorted to reduce the amount of tax your pay!
Need a little extra support? Book in for a Tax Planning Session with Bloom Money.
Spend an hour with Liv, our tax expert and make sure you have all your tax ducks in a row before the end of the Financial Year and beyond.
Click here to book now.