With another financial year drawing to a close, the ATO has issued a number of clarifications to help SME leaders claim the right level of deductions and avoid missing legitimate means for reimbursement.
Given that SMEs make up the vast majority of Australian businesses and contribute hundreds of billions of dollars annually to the economy, assistant commissioner Mathew Umina said it is important for all business leaders to get their returns rights.
It comes as the tax office repeated its warning from last year to all taxpayers to not claim uniform allowances and related deductions unless such claims legitimately apply.
Of particular concern are the following key points:
Get your records ready
“Businesses need to keep records explaining all transactions that relate to their tax affairs containing enough information to calculate the income, expense and other amounts that must be reported in tax returns,” Mr Umina said.
He said that in addition to remaining complaint with tax rules, keeping proper financial records is also good practice, enabling SMEs to manage cash flow and understand the firm’s growth trajectory.
Consider small business concessions
While there a range of tax concessions available at tax time, many businesses that qualify never make a claim for them.
For example, Mr Umina noted that simplified trading stock rules means if the estimate of the difference between opening and closing trading stock is $5,000 or less, the small business doesn't need to do a stocktake.
“There are also concessions that allow new small businesses to claim an immediate deduction for start-up costs like professional, legal and accounting advice,” he said.
Small businesses who use simplified depreciation rules can take advantage of the $20,000 instant asset write-off. Remember, to be able to write off the business portion in a 2018 tax return, the small business has to buy and install assets that cost less than $20,000 by 30 June 2018.
Check out the ATO website for more details.
Check your deductions
The vast majority of business costs can be claimed as a tax deduction for business owners, including operating expenses, business travel expenses, home-based business costs and costs of employing people.
“When working out what business deductions to claim this tax time — it's important to remember the three golden rules. One: the money must have been spent for your business not yourself; two: if you use something for business and private purposes, you can only claim the portion that is related to your business; and three: you need a record to prove it,” Mr Umina said.
Visit the ATO website for more detailed information about what can be claimed.
Find out if changes apply to you
There are a few changes that apply from 1 July, for example employers with 20 or more employees are required to start reporting through Single Touch Payroll (STP), unless they or their payroll software provider have been granted a deferral or they have been granted an exemption by the ATO.
Also, if a small business is registered for GST and imports low-value goods for business use in Australia, they may not need to pay GST. They simply need to tell their supplier that they are registered for GST, and provide them with their ABN.
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.