Six things to do now to make tax time 2020 a little less taxing
It’s a new decade, but tax never stops. SMEs looking to get on the front foot with their obligations this year should check out these tax tips.
New decade, new me? We’re more than two weeks into the New Year now and the countdown clock to tax time 2020 has already started ticking.
It’s going to be a big year for SMEs in the tax domain, with some changes on the cards heading into July — not least of which is the end of several exemption periods for single touch payroll (STP) reporting.
For small business owners, July might seem like an eon away, but accounting experts are advising SMEs to get on the front foot now to avoid unnecessary headaches in a few months.
It’s never a bad time to get your tax affairs in order, or to plan ahead to ensure your taxation obligations don’t pop up as a rude surprise later this year.
Perigee Advisers principal Lisa Greig tells SmartCompany small business owners should be getting their tax ducks in a row now and planning for the cashflow implications of tax time as early as possible.
“Cashflow needs to be looked at in terms of tax planning,” she says.
“Remember: tax impacts your cashflow.
“If your business is struggling, consider paying GST or instalment rates in payment plans.
“There’s a lot of SMEs finding it financially tough at the moment, and plans can help them weather the storm.”
Greig also advises business owners to remember that if they’ve made a donation to a bushfire cause in recent weeks, it won’t be tax-deductible unless the entity is a registered charitable organisation.
Social media and crowdfunding campaigns don’t fall under this banner; it doesn’t make these initiatives less worthy of support, but it does have tax implications.
Business owners are advised to talk to their accountant about their tax position and consider how incoming revenue over the next six months places you to meet your obligations without putting a strain on operations or other growth plans.
For many small businesses, tax time 2020 will be a bit different due to the inclusion of STP reporting obligations. The tax office will kick its compliance action into gear for firms that still haven’t signed up for the reporting scheme past July 1, while exemptions for closely held payees (family members working in the business) also end on this date.
That means depending on the structure of your company, you may need to work through some red tape between now and July 1.
If your business still hasn’t signed up for STP reporting and doesn’t use digital payroll software already, you may want to consider getting a wriggle on. Some companies have reported needing to do a good deal of housekeeping to enable digital accounting software and tick all the STP boxes.
New year tax tips for SMEs
Stacey Price, accountant and owner of Healthy Business Finance, tells SmartCompany there are other some important tax things for small business owners to keep in mind at this time of year.
- Get on top of due dates for tax returns. If using a tax agent, the deadlines for tax returns for the year ended June 30, 2019, will be coming up in a few months. With New Year hangovers still in full swing, due dates can creep up quickly.
- Understand your cashflow. Often there is a Christmas credit card debt to deal with; ATO obligations and holidays means there are competing priorities for your money.
- Set yourself up for success. We see many new businesses launch in the new year, which is exciting. So set up your business accounting software right from the start. Invest in training to boost your knowledge and create consistent good habits.
- Understand the difference between GST, income tax and PAYG withholding. Some business may have all, none or some of these obligations. Don’t assume you know the difference or rely on advice from your long-lost relative at the family BBQ. Your tax agent is your best friend to explain all of these.
- Set up separate bank accounts to save money for GST and income tax. Out of sight, out of mind. This means paying the ATO is much less stressful as you will already have the funds set aside outside of your normal business operations.
- Know who can help you. Do you need a tax agent or a BAS agent? It all depends on what help you need. But getting unqualified advice could be detrimental to your business viability.
Don’t forget, if your business has been affected by bushfires over the summer period there are a range of tax-related services you can access for help.
The tax office has granted automatic deferrals on business activity statement reporting for certain areas. More information is available here.
NOW READ: Tax reprieve for SMEs as ATO offers bushfire support
