Working Australians believe they miss out on $426 of unclaimed tax each year, equating to a mammoth $1.65 billion nationwide. The results are from a recent survey, conducted by Officeworks of 1,000 working Australians from across the country.
So to make things easier, we’ve spoken to a range of experts, who have revealed some of the most common slip-ups SME clients make around this crucial time.
1. Keep your accountant in the loop all year
Don’t just rock up to the accountant at the end of the financial year and drop a bombshell that will have major ramifications on your business.
Accountants want clients to keep them up to date on any major transactions that have occurred throughout the year as they happen, such as the sale of land or shares, for example.
A recent member survey conducted by the Institute of Public Accountants in partnership with accounting software MYOB found constant contact, rather than dropping a bombshell at the end of financial year to be one of the most important steps business operators can take to be better prepared at the end of financial year.
2. Write off bad debts
In most cases, SMEs aren’t fully across what they can and can’t claim, especially when it comes to debt, according to Prushka fast debt recovery.
Recent Commonwealth Bank research shows 30 per cent of SMEs didn’t take full advantage of the chance to reduce their tax liability last financial year, and another 36 per cent weren’t sufficiently up-to-date with all the available tax minimisation strategies.
Prushka CEO Roger Mendelson says SMEs should write off bad debt before June 30 so that the only genuinely recoverable amount of outstanding debt will be treated as taxable income.
“If bad debts aren’t written off, it will also create a GST credit so that, for most businesses, if they carry bad debt on their books, they are also paying GST on money they haven’t and probably won’t receive,” Mendelson says.
3. Claim your ride
Claims for cars can be a murky area, but it needn’t be.
Those eligible can claim an immediate deduction for the purchase of a vehicle if its cost is less than $6,500 and it was used or ready for use by 31 December, 2013; if used for income-producing purposes. If the vehicle cost $6,500 or more, an immediate deduction of $5,000 plus 15 per cent of the balance of the cost can be claimed in the year of acquisition to the end the car is used for income producing purposes, advises Paul Drum, head of policy, CPA Australia.
4. Claim any education
If you’ve been hitting the books lately, don’t forget to make a claim. Drum reminds business owners that self-education expenses can be claimed if the study is directly related to either maintaining or improving your current occupational skills, or is likely to increase your income from your current employment.
Expenses could include course fees, text books, stationery, student union fees and the depreciation of assets, such as computers or printers, he says.
5. Reduce time spend collating receipts
So many small business owners don’t bother keeping track of all those small amounts, which is a mistake, because they all up over the course of a year.
Matt Goss, managing director of business travel and expense management system, Concur, recommends business owners take steps now to simplify business reporting processes.
“There are a number of ways businesses can reduce the amount of time spent collating receipts and entering expense data into spreadsheets. Simple solutions could be allocating one hour each week to ensure regular reporting occurs across the team, or your company may choose to invest in an automated expense management process to save money and time in the long run,” Goss says.
6. Implement your New Year resolution
It’s a new year, so stop procrastinating and implement a resolution that will help you run a more efficient business, suggests Grant Field, chairman of one of Australia’s leading accounting firms, MGI.
Replacing an outdated accounting package, implementing a cloud solution, or looking at your bank funding are great resolutions, Field says.
“Or, review your financial statements and see if your trust or company owes you money from prior trust distributions. There may be an opportunity to legitimately refinance this amount into a deductible debt and reduce the balance of your home loan,” Field says.