Tax Return Tips for Australian Businesses
Business owners are frequently engulfed in paperwork, and tax season adds to the pressure. There’s always a lot to think about, such as what you’re eligible for and how to maximise your company’s end-of-year revenues. Nexia Court & Co, a major Chartered Accountancy firm, is warning businesses with offshore accounts or assets to be especially alert in light of Project Wickenby’s recent assault on tax evasion and fraud. Companies who are unsure if any of their business practices are illegal should obtain assistance from the Australian Tax Office (ATO) right away.
When it comes to the end of the fiscal year, it pays to be prepared so that you can maximise the amount of money you get back from your tax claim.
There are a few strategies you may use to get the most out of your Australian Taxation Office return. These include both year-round activity and particular strategies for dealing with your tax claim.
So, whether you’re intending on using your tax refund for a vacation, paying bills, or putting it in your savings account, let’s look at some simple ways to increase your tax refund at the end of the year (EOFY).
Certain information will be required before we get down with you to review your tax return.
Pre-filling takes care of a lot of the “paperwork” these days, and if you wait until late July or early August, ATO’s computers will most likely be able to give much of the information from employers, banks, government agencies, and other third parties.
We’ll be able to double-check the information and record any deductions you’d like to claim after that. However, to be comprehensive, these are the types of information needed to complete your tax return before you come in for your tax appointment.
- Payment summaries: These show how much money you’ve received from your job, a pension fund, or government benefits like Centrelink or the Department of Veterans Affairs.
- Bank statements: Include any interest you earned and any expenses you paid during the time period.
- Shares, unit trusts or managed fund statements: Details on any dividends or payouts you’ve been awarded in the past (reinvested dividends must be reported as income).
- Buy and sell investment statements: To calculate capital gains and losses, you’ll need this. If you acquired or sold any shares, you can get the facts from your financial adviser or stockbroker, or you can get them through your online broking account.
- Records from your rental property:<span style=”font-weight: 400;”> If you hire a property manager, you’ll almost certainly receive an annual tax statement detailing your revenue and spending. Otherwise, you’ll need to gather information on the income you’ve gotten and the expenses you’ve paid, as well as any capital gains or losses from the sale of the property.
- Foreign income: Details about overseas pensions and other sources of international income.
- Private health insurance policy statement: To complete the private health insurance portion of your tax return, you’ll need the following information.
Income that must be declared
Some sorts of income may seem self-evidently taxable, but in order to be complete, we’ve compiled a list of frequent sources of income that must be reported on your tax return.
- Income from work
- Government payouts, super pensions, and annuities
- Profits from investments (including interest, dividends, rent and capital gains)
- Profits from a business, a partnership, or a trust
- Foreign earnings
- Crowdfunding earnings (for example donations received for a venture in which you intend to make a profit)
- Money earned through the sharing economy (for example Airtasker, Uber or Airbnb
- Other sources of income include compensation and insurance payments, employee stock options, and some honours and awards. If you’re unsure, contact us.
When filing your tax return, you can deduct certain expenses, the majority of which must be directly tied to earning your income (called “work-related expenses”). A deduction, of course, lowers your taxable income, which means you pay less tax.
To deduct work-related expenses, follow these steps:
- you must have paid for the item and not been reimbursed.
- it has to be directly tied to your taxable income.
- you should have documentation to back up your claim.
Here’s a list of things you might be able to claim if your expenses fulfil certain conditions.
- Vehicle and travel expenses: While this does not generally include the cost of transport between work and home, you may be able to claim a deduction if you use your car for work or work in multiple places.
- Clothing, laundry and dry-cleaning expenses: To be eligible for a uniform reimbursement, it must be unique and distinctive, such as containing your employer’s brand or being specialised to your occupation, such as chef’s pants or coloured safety vests.
- Gifts and donations: Only claim for contributions to organisations that have been designated as “deductible gift recipients” by the Australian Taxation Office.
- Home office expenses: Expenses for your home office could include your computer, phone, or other technological gadgets, as well as operating expenditures such as internet subscription. Depreciation may be possible, but you can only claim the percentage of expenses that are related to work rather than personal use.
- Interest, dividend and other investment income deductions: Interest, account fees, investing journals and subscriptions, internet connection, and computer depreciation are all examples of investment income deductions.
- Self-education expenses: If your study is related to your current job, you may be entitled to deduct costs such as course fees, student union fees, textbooks, stationery, internet, home office expenses, professional magazines, and some travel.
- Tools, equipment and other equipment: You can deduct some or all of the cost of tools or equipment that you acquire to help you earn money. The sort of deduction you claim is determined by the asset’s cost. You can claim an instant deduction for the cost of things that aren’t part of a set and cost $300 or less, or that are part of a set that cost $300 or less. You can claim a deduction for the loss in value of products that cost more than $300 or that are part of a set that cost more than $300.
- Other deductions: Union fees, the cost of handling your tax affairs, income protection insurance (but not if it’s through your super fund), overtime lunches, super personal contributions (that is, after-tax) and other expenditures incurred in the process of earning an income are all items you can claim.
Of course, you can get additional ideas from this office. Even though some of the above appear to apply to your scenario, it’s a good idea to double-check with us first.
Off the deduction menu
The ATO is primarily concerned with assisting taxpayers incorrectly calculating their deductions, but it is also on the watch for red signs that indicate wrongdoing. Here’s a list of tax deductions that you can’t generally claim on your return.
- Private travel is defined as travel between one’s house and one’s workplace.
- Unless you’re transporting big tools or equipment that you need to accomplish your job and that your employer wants you to transport, car expenses aren’t necessary (and there is no secure area to store the equipment at work).
- Car expenditures for which a salary sacrifice has been made.
- Unless you were obliged to labour away from home overnight, meal expenses.
- Private travel, includes any personal travel that is part of a business trip.
- Even if your company needs you to wear them, everyday clothes you bought to wear to work (for example, a suit or black pants).
- Expenses for self-education that are not directly related to your existing job.
- Expenses for personal usage of the phone or the internet.
Top tips for the business end of financial year tax returns
Visit the Australian Tax Office (ATO) website for the latest tips and advice most relevant to your business.
The ATO website contains a plethora of information. Examine the most recent government levies and get the most up-to-date information on what you might be able to deduct.
Pay superannuation contributions before the 30th to ensure a deduction.
To avoid a penalty under the Superannuation Guarantee Charge, employers must check that they have made sufficient superannuation contributions (9 percent) for all employees every quarter during the financial year (SGC).
Scrap obsolete plant and machinery
Reviewing your asset registry and taking the necessary measures before June 30 is the easiest method to achieve a write-off deduction for outmoded assets. The asset register is a list of all firm equipment, including furniture, as well as all goods purchased, sold, or disposed of throughout the year.
Get capital gains tax concessions.
This concession permits you to defer 50% of the capital gain from a company asset (an active asset). To be eligible for the 50 percent active asset reduction, you must meet the same basic requirements that apply to all CGT small business concessions. You can use all of the concessions you’re eligible for (rules apply) until your capital gain is zero. If you’re still unsure, go to the ATO website for more details.
Value trading stock at the lower cost – market value or the replacement value
You can use the most favourable valuation technique if you are required to include a value in your accounts of stock on hand as of 30 June, which could allow you to lower your trading revenue.
Write off bad debts and claim back the GST credits where the debt has been outstanding for more than 12 months.
To do so, the debt must have been accounted for as assessable income, and you must have physically written off the amount before the year’s end. Taxpayers who recognise revenue on a cash basis are unable to claim bad debts.
Ensure private company loans that extend beyond the end of the income year are properly documented
They may be seen by the Tax Office as unfranked dividends given to the shareholder if they are not set up correctly. You may be paying more tax than necessary if this is the case.
Review PAYG instalment obligations
If your estimated income tax payable for the year is less than the ATO’s projected instalments, consider changing the instalment for the June 2011 quarter.
Claim a deduction for Director’s fees and bonuses
If you plan to pay your team Directors’ fees or bonuses this fiscal year, you may be able to claim the deduction. Make sure the persons you’re paying are aware that the charge or incentive will be paid, and keep proof that you informed them before the end of the tax year. To claim the deduction, the payment does not have to be made this fiscal year. If the money is not received until July, the individual will not be required to file a tax return until the following fiscal year.
What you need to do to prepare for EOFY
Collect your receipts and organise your records
This is something you should start (or continue) doing as soon as your tax return is filed — start gathering receipts for the next one! You should keep track of all work-related expenses and income that is eligible for a tax deduction (including kilometres driven for work, uniforms and dry cleaning, home office expenses, sun protection and self-education).
However, the days of stuffing electronic dockets and handwritten notes into a shoebox and sifting through them at the end of the financial year are long gone. There are now useful mobile phone apps that allow you to track your work-related spending conveniently and consistently.
Here are a few examples:
- TrackMySpend – This app, created by the Australian Securities and Investments Commission (ASIC), allows you to keep track of where your money is going so you can cut back where you need to and save more.
- Concur – Lets you to automate and photograph your travel and business expenses, as well as manage invoices.
- Pocketbook – A powerful personal budgeting and accounting application that categorises your expenditure and allows you to understand where your money is going.
If you want to help the environment by reducing your paper usage, you can start requesting email receipts instead of paper receipts. Create a special folder in your email inbox and drag the receipt into it as soon as it arrives. This means you’ll be prepared and organised during tax season because you’ll have everything in one location.
Get big work-related purchases out of the way before EOFY
If you need to buy anything expensive for work and it’s something you’ll be able to claim for, make sure you get it before the end of the fiscal year to maximise your return. A wholesale uniform order, a new laptop, new work equipment, or products for home offices are all examples of this. You might even be able to enrol in that upskilling course you’ve been eyeing!
Find a great accountant
That’s fantastic news if you think you’ll be able to complete your tax return. You’ll save money on tax preparation fees (but keep in mind that these are tax deductible as well).
If you have a lot of goods to claim (or a few separate PAYG summaries to reconcile), however, finding a decent registered tax agent might save you a lot of time.
Only registered tax agents are allowed to charge fees for their services, so do your homework to be sure you’re employing a trustworthy, honest, and accredited tax agent. One of these three industry organisations should recognise your agent: Chartered Accountants Australia and New Zealand, CPA Australia, or the Institute of Public Accountants (IPA).
Making an appointment with an accountant early (at least a couple of months before the end of the financial year for a July appointment) will help ensure that you obtain a place, as tax agents can get fairly busy around tax season (obviously).
What can I claim?
When it comes to maximising your return, here is where we get to crunch time. Making sure you claim every potential tax deduction will ensure you receive the largest possible deposit from the Australian Taxation Office in your bank account – and the less likely you are to owe the tax office money and have to pay a bill.
Let’s look at some of the things you can claim that you might not have considered.
- Fees charged by your tax advisor
- Magazine subscriptions, if they’re relevant to your field.
- Your monthly electric bill (if you work from home)
- If you use your handbag for work, be sure it’s in good condition.
- Self-education relevant to your current profession
- Any donation to a registered charity that exceeds $2 is tax deductible.
- Insurance that protects your income
- Hats, sunscreen, and sunglasses are all examples of sun protection.
- Meals prepared outside of normal working hours
- Work-related kilometres travelled
- Uniforms for work
- Work uniforms should be dry cleaned
If the total of your work-related expenses is less than $300, you don’t need to produce written proof (such as a receipt); nevertheless, if the total exceeds $300, you must give proof.
It’s never too late to start keeping track of your expenses and developing better spending habits for the coming fiscal year. You’ll be surprised at how big of a difference a receipt/spending tracker can make to your bank account — both at tax time and now.