How to make next tax season less painful
By Irene Chong
Where was that receipt? How much did that equipment end up costing? Why is my accountant telling me I might have to pay more tax?
If you've recently sat down to think about your taxes for last year you may be feeling a little overwhelmed. How can you make it less painful next year? In five simple words, it's all in the planning.
Plan tax payments and lodgment obligations for the next 12 months
Throughout the year you will have payment and lodgment obligations for various types of taxes such as payroll tax, superannuation, GST and income tax. These obligations all have set due dates. Put these dates in your diary with a reminder before the due date to allow enough time to prepare the documents and ensure you have sufficient funds to make the payments. Not only are there cash penalties for not paying and lodging on time, it's always harder to catch up when you've fallen behind.
Know what you can claim
Ordinary running costs of the business should be deductible this year. Others might depreciate over the next few years and some costs might not be deductible at all. If you know what you can claim a deduction for and over what time frame, allocate your costs into these categories as you incur them - the bulk of the work will be done long before your tax return is due.
Keep good records
Set aside some time each week to keep your records up to date. Keeping good records is as important as signing on a new customer or delivering on your promise. When it gets to the end of the year, you should have a clear record of your income and expenses, substantiated by invoices and receipts.
If you make capital investments in things such as equipment, furniture or motor vehicles, make sure you keep a record of the associated costs (including legal fees, transport, installation costs, taxes and duties) so that you can accurately determine your tax deduction for each capital item.
An accounting software package that maintains your financial records will help, but if you don't have one, check out the ATO's record keeping guide for small businesses for some helpful hints.
Let's face it - shuffling papers to deal with your tax affairs is a bit of a chore. So start planning now. Keep on top of your records and receipts during the year, and sit back and relax next tax season as all the hard work will be done!
Read on to learn more about tax deductions for home offices.
*This article contains general information and commentary only, and is not financial, financial product or legal advice, and you agree not to rely upon this article in any way.