The ATO is making things easier for small business. Whether you use a registered tax agent or manage your own tax affairs the ATO has a range of tips to help you get things right.
The ATO have released information about ‘dodgy deductions’ people try to claim at tax time, the information also explains to people how to make the right decisions with what they can and can’t claim. To read more about ‘dodgy deductions’ click here.
The ATO has prepared some tax time tips for small business that we think you will find useful:
1. Include all your income
Make sure you declare all your income in your tax return. Income includes cash and online sales, commission income and income earned outside Australia.
Income also includes money you earn when participating in the sharing economy. If you earn money from renting out a room, house or car space, transporting passengers for a fare, or providing goods or services for a fee, you could be part of the sharing economy. Depending on what you’re doing, you will have different income tax and GST obligations and entitlements – what you’re earning may count as assessable income and you might need to declare it on your tax return.
Check if you are part of the sharing economy and to understand your tax obligations click here.
2. Claim what you’re entitled to – no more, no less
You can claim tax deductions for most costs you incur while running your business. Operating expenses, such as office stationery and wages can generally be claimed in the year you incurred them. If you run your business from home, you may be able to claim expenses such as utility and business phone costs, decline in value and occupancy expenses.
You cannot claim deductions for private or domestic expenses.
You must also remember to keep accurate and complete records of all the assessable income and business deductions you claim.
3. Check for personal services income
If you are self-employed and paid mainly for your personal efforts, skills or expertise, you may be earning personal services income.
The new personal services income tool will help you work out if your income is personal services income and if special tax rules apply. The tool is available on the ATO’s website here.
4. Simplify depreciation
There are a few things to keep in mind when working out your depreciation deductions. If you’ve chosen to use simplified depreciation for small business, here are some tips to get it right.
You can use the simplified depreciation rules (such as the instant asset write-off) if your small business has an aggregated turnover of less than $2 million. The instant asset write-off means you can immediately deduct assets bought for your small business, which cost less than $20,000 each. You can claim the deduction in the year that you buy and use them, or install them ready for use.
Another important rule to remember is that if the balance of your pool for depreciating assets is less than $20,000, before applying any other depreciation deduction, you will need to immediately deduct the full amount in your tax return.
For more information on claiming depreciation deductions and working out the balance of your small business asset pool click here.
5. Lodge on time
If you're preparing your own return you must lodge by 31 October. If you are using a tax agent for the first time or using a different tax agent you need to let them know before 31 October.
If you have staff, you should lodge the PAYG payment summary annual report to the ATO by 14 August each year.
6. Find out more about myTax
MyTax is no longer just for individuals. Sole traders who prepare their own tax return can now lodge online using myTax too!
MyTax now includes a business and professional items section for sole traders and distributions from a partnership or trust. MyTax also gives sole traders access to new online tools to assist with their tax return. Find out more.
To use myTax you will need a myGov account. If you use a tax or BAS agent check with them before creating a myGov account.
If you need to complete a partnership, trust or company tax return these will need to be lodged through a tax agent or on paper.
To set up a myGov account, go to my.gov.au.
7. Make the most of myTax tools
If you’re a sole trader planning to use myTax, you will find a number of inbuilt tools to help you save time and avoid mistakes.
The new Depreciation and capital allowance tool will help you work out the deductible amount for your depreciating assets. It will also reduce your search time when determining the effective life of an asset.
The new Capital gains tax record keeping tool can help you calculate your capital gains events. Capital gains events might include the sale of a rental property, vacant land, holiday home, real estate, or shares in a company or units in a unit trust.
8. Get support
If you need assistance from the ATO, you can use their free after hours call back or web chat services to get the help you need, when you need it. You can also ask their online virtual assistant Alex for help with general tax enquiries.
Find out about the ATO’s range of digital services for small business.
9. Access the latest news
Keep up-to-date with the latest tax and super news by subscribing to the ATO’s Small Business Newsroom at ato.gov.au/sbnews