The end of the financial year can be a tough time for small business owners. It requires time, energy and information that you might not have.
Here are 6 practical tips to help you manage taxes for your small business and be well prepared when tax time arrives.
1. Choose the right business structure
The structure you operate under has a big impact on your tax obligations. Generally, the more complex your structure, the more complex your tax strategies will be.
The best structure depends on your needs and circumstances, such as your family situation, priorities around asset protection, tax minimisation and estate planning.
2. Understand business tax
Learning the basics of your tax obligations helps prevent confusion and costly mistakes. Some common areas to stay across include:
- understanding the difference between your business activity statement (BAS) and your tax return if your business is registered for GST
- meeting payroll obligations such as PAYG withholding and employee superannuation contributions if you have employees
- knowing what expenses you can claim, including deductions for motor vehicles or working from home
- keeping business and personal finances separate
- understanding industry-specific tax implications.
For online tools and learning resources about small business tax, visit the Australian Taxation Office.
3. Master your bookkeeping
Good bookkeeping practices make tax preparation smoother and more accurate. Three key habits to build are:
- Start early. Be proactive about bookkeeping to make your tax preparation run more smoothly.
- Update your books regularly. Aim to update your accounts monthly, or more frequently if your business has many transactions and a lot of paperwork.
- Seek professional expertise. Employ a tax agent to help guide you, ensure accuracy and work through any challenges.
4. Track your finances
Digital tools, such as accounting software, can make tracking your finances easier. When you keep them up to date with all transactions, you can see a clear picture of your profit and loss in real-time.
If you do not have access to accounting software, simple alternatives like downloading your bank statements into a spreadsheet and manually tracking income and expenses can still be effective.
5. Have a support network
A solid support network can help reduce tax-time stress. Consider:
- Surrounding yourself with people in a similar situation, whether through social media groups with other business owners or by listening to entrepreneurial podcasts for tips and support.
- Finding a tax agent you trust and work well with. If the relationship isn’t working, don’t be afraid to change accountants for a fresh perspective.
6. Remember last-minute tax wins
Staying on top of your finances throughout the year is best practice for your cash flow. However, there are some quick wins you can take closer to the end of the financial year, including:
- claiming deductions by purchasing equipment, prepaying expenses such as rent or insurance, or paying your employees’ superannuation contributions before 30 June
- encouraging your clients to pay recent invoices in the next financial year if you're in a position to wait for their payments
- doing a stocktake of your inventory before 30 June, as the lower the value of your stock, the less tax you have to pay.
If you found this article useful, you can search our online resources for practical tools on a range of topics to help you build your skills and make everyday business decisions with confidence.