With EOFY fast approaching, business owners face the intimidating prospect of meeting their tax obligations.
As of June 2023, there are 2.5 million actively trading businesses in Australia, with almost 800,000 of those operating as sole traders. For those sole traders, it can be easy to ignore tax obligations throughout the year only to meet with stress and worry at EOFY.
Sole traders have long faced a tricky dilemma when it comes to taxes. Hiring an accountant — a safe bet — can be simply too expensive. However, going solo and collating invoices, receipts, and deductions, to file an accurate return can be fraught with stress and challenges.
To help sole traders survive, and thrive, during tax time – these tips can help.
To complete an accurate end-of-year statement, it’s essential to keep track of all invoices, income, and expenses throughout the year. Doing this manually, either on paper or via a digital spreadsheet, however, can prove tricky. The process can be both time-consuming and leave plenty of room for error.
Ideally, sole traders should use a digital system designed precisely for invoices, payments, and expenses. This will help ensure there are no missed invoices, and no costly mistakes made when filing the final return.
The only thing that could be worse than filing your tax return incorrectly, is missing the deadline entirely. Not meeting one’s tax obligations can result in serious repercussions, so it’s important to keep important dates in mind.
The tax year begins on July 1 and ends on June 30 each year. June 30 is also the final day to claim deductions for business expenses incurred throughout the year.
The other key date is October 31 — this is the deadline for individuals and businesses not using a registered tax agent to lodge their tax returns.
As a sole trader, it can be easy to overlook the various expenses incurred as part of running a business.
Anything from asset purchases, business expenses such as your phone bill, internet usage, and related power costs, and charitable contributions, can all be considered expenses if they meet requirements.
Claiming dedications for those expenses can take time, but can make all the difference when it comes to funds owed to the ATO.
A common problem for sole traders is omitting to pay themselves super. Retirement may seem like a long way away to many, but to have enough money in your later years, it’s critical that you pay attention to your superannuation now.
Paying yourself super can also reduce the amount of tax you pay, so it’s worth your while.
Just as the new calendar year is a good time to set personal goals, the new financial year is the ideal time to make financial plans. This might include reassessing the type of business structure you have, setting financial goals, and considering how you could be better with tax deductions in future.
You might also consider how you can set up your finances to make tax time easier next year.
Gone are the days when manual tax returns or tax agents were the only way. In today’s age, advanced platforms can manage tax time for sole traders, and can be a fraction of the cost of the typical accountant.
Dedicated platforms are designed to help sole traders with invoicing, business activity statements, streamlined payments, and filing tax returns. The good news is, these solutions can be easy to use, accessible on the go, and competitively priced.
These digital platforms streamline tax time to take care of your invoices, receipts, payments, logbook, bookkeeping, business activity statements, and tax returns with minimal input from you.
This means less worry about taxes and more time to spend running your business.
Selda Kaplan is the CEO and co-founder of TaxLeopard.
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Selda Kaplan is the CEO and co-founder of TaxLeopard.
