This year, changes in the economy and places of employment provided the opportunity for many to start their own business and work from the comfort of their home. One of the tasks that might be confusing for a new business owner might be how and when to file your taxes. Filing taxes is something that most do not enjoy, and you want to get it finished so that you can get back to doing what you love most, running your business. Here are a few of the basics that you need to know about filing your tax return in Australia.
Your tax return due date primarily depends on your lodgement history and whether you are registered with a Tax Agent. There are some important dates to remember when it comes to lodging your income tax return.
May – June – Contact a Tax Agent prior to financial year end to ensure you understand what tax concessions and business deductions you could claim. According to Dexterous Group, it is crucial for businesses to be proactive and not reactive at tax time specifically when it comes to paying superannuation, writing off bad debts and claiming any instant asset write-offs.
30th June – financial year end and the cut-off date for claiming business deductions, or any instant asset write-offs.
31st October – the due date for lodging your income tax returns (if you’re not registered with a Tax Agent)
15th May* – the general due date granted to Tax Agents to complete your income tax return on your behalf. Please note this may vary depending on a number of factors so please contact a Tax Agent for confirmation of your due date *following year
“Be proactive, not reactive when it comes to tax time.”– Nick Urry from Dexterous Group
What you need for your large or small business tax return depends on the structure of your business.
Sole trader: As a sole trader, your business income counts as your individual income. You may claim deductions for any eligable expenses and must include all income you have made in the financial year in your tax return. As a sole trader, you are required to lodge the following:
Partnership: As a partnership, you are required to submit a partnership tax return to report net income. You may deduct any allowable expenses, which then leaves the assessable income.
As well as this, any individual partner must also file an individual tax return to report:
Note: With a partnership, each partner must pay tax on their individual share of the partnerships net income.
Trusts: In a trust business structure, the trustee lodges a trust tax return to provide the following:
Note: an individual tax return must also be lodged by each beneficiary of the trust
Companies: If your business operated under a company structure, you are required to lodge a company tax return to provide the following:
Note: if you are a company director, you are still required to lodge an individual tax return.
As a business, there are many expenses and deductions that you can claim. This list is a few suggestions of things that your business may be eligible for but it depends on what type of business you operate and your specific circumstances, for example as a tradie you are eligible for deductions like transport costs. If you are in doubt, you should contact your tax professional or the ATO to answer questions about whether your business is eligible. Here are a few things that you may be able to claim on your business:
Note: If you have been working from home during the financial year, your tax return may be different to previous years, you may be eligible for additional deductions. Consult your tax professional to get information for your circumstances.
The best place to find tax rates for filing your ATO business tax return is on the ATO tax table. As a sole trader, you submit an individual tax return and do not have to pay tax on the first $18,200 that you earn, (see table below for individual income tax rates). Different business structures will have different tax rates. This is just a guideline, and you should consult a professional for advice tailored to your business.
It is good to have the following documents available when you lodge your tax return, regardless of whether you plan to do it yourself or by a professional. It is better to have the record and not need it than to need it and not have it. Nicholas recommends storing digital copies of receipts, by simply taking a photo and storing them in a folder on your phone or computer.
The Australian tax code can be complicated, especially if you are a new business. The last thing that you would want to do is to make a costly mistake. Fees and fines can be pretty steep if you make an error or miss a deadline. Hiring an accountant takes the worry off you and is often cheaper than the time it takes to do the research and file the return yourself.
The cost of a small business tax return usually depends on the type of business you have and how complex the return is to file. You should compare rates and service reviews, but the most important thing is that you make sure they are a legitimate accountant and registered agent.
An accountant must be a Registered Tax Agent, BAS agent, or Tax Adviser. Agents must be registered to specialise in individual or company taxes. You need to make sure that the professional you hire knows how to handle the type of taxes you need to file. It is also a good idea to find someone who has many years of experience.