Many business owners are too dedicated to focusing on their day-to-day operations of running their business successfully that they often leave their end-of-financial-year tax planning to the last minute. This can make it difficult for them to meet compliance regulations when their to-do list is already messed up. However, it doesn’t need to be this way – to make things easier, we’ve compiled some EOFY tax tips and tax planning strategies for small business owners to help reduce the burden and ensure you are well prepared in advance for tax season.
What does a business need to do for tax planning?
There are many things that you need to be doing or strategies to follow to make your end-of-financial-year tax planning as easy as possible. They can be things such as:
- Year-round record-keeping
- Investing in software
- Writing off expenses and business tax deductions
- Year-end planning.
For tax planning, you can also reach out to the best accounting firm Port Melbourne to ensure a smooth tax season.
Ensure accurate record-keeping
Recordkeeping is not just required for recording financial transactions; it is an activity that is required to be performed throughout the year to track business income and expenses, and other financial aspects that can affect business growth and can make all the difference during tax time.
From submitting each financial transaction into your accounting software and separating personal from business items, the more you keep on top of things throughout the year, the less effort you will need to spend preparing for the end-of-year. In the same way, if you opt for accurate and consistent record-keeping, you will find it becomes easy each year.
Using the right accounting software like Xero will increase workflow and operational efficiencies, freeing up time to enhance your service or product, strategise and consult with customers. These steps also allow document sharing with your accountants and other parties so that changes can be made in real-time.
Write off expenses to increase tax deductions
Business tax deductions are an important part of the tax process for small businesses. Consistent recordkeeping makes you less likely to miss any deductions that could reduce your tax liability. Start by reviewing your inventories, debtors, and fixed assets to write off any:
- Debts that are not recoverable
- Assets no longer able to produce revenue
- Stocks that have become obsolete
Many expenses can be written off if they have a legal purpose within the business. Expenses such as equipment and business travel can be written off to boost your small business tax returns.
Year-end planning
Make sure you take the time to predict your likely taxes applicable and profits for the year ending. Ensure that you put aside cash to pay any remaining taxes and consider any deductions you incur before year-end to keep the income down where possible. Consider if you can vary your June PAYG instalment down if you are expecting a refund. It would be better to have cash in your hands than to overpay the ATO.
Common small business tax planning mistakes to avoid
While there are various things you need to do either before the end of the financial year or when you are planning the upcoming one, there are many things you should not do. You can avoid common tax mistakes by ensuring that you:
- Don’t forget key tax due dates
Due to competing priorities, heavy workloads, or confusion from working across several tax jurisdictions, small business owners find it difficult to prioritise their tax obligations.
- Don’t forget to maintain your financial records
Make sure to maintain your financial records daily. You can also seek help from professional bookkeepers.
- Don’t avoid the significance of engaging a professional tax accountant for tax planning, and never overdraw. You can also find a tax accountant near your area by searching online for the ‘best accountant near me Melbourne’
These are a few mistakes that you need to avoid when preparing for tax season.
Conclusion
The blog shares information on things that you need to keep in mind to stay tax-ready all year round and what mistakes you should avoid. To avoid tax penalties for late or missed tax returns, you can reach out to Reliable Melbourne Accountants.