Ensuring your business taxes are filed correctly can be challenging, especially when it is your first time filing taxes. You can easily find yourself confused or overwhelmed, unsure where to turn or who to trust for a smooth and successful tax year. To ensure you are filing your taxes correctly, we have detailed the 7 common mistakes that businesses make when filing their taxes and how you can avoid them to avoid penalties or larger-than-necessary tax bills!
1. Not Keeping Accurate Records
Failing to keep accurate financial records is one of the most common mistakes we see. The Australian Taxation Office (ATO) requires a detailed record of income, expenses, and tax-related transactions for a minimum of five years of operations. Failing to keep accurate records can lead to inaccurate tax returns and missed deductions.
To avoid this, ensure that you keep digital copies of your invoices and receipts, use accounting software to track transactions, and maintain a structured record-keeping system.
2. Missing Key Lodgement Deadlines
Lodging your tax return late can cause late penalties, interest charges, and add unnecessary stress to you or your business. You will want to ensure that all your tax returns and statements are lodged on time, including PAYG withholding reports, Business Activity Statements (BAS), and income tax returns. A calendar with key tax dates is advisable, along with reminders to submit reports and payments on time.
You can also work with an accountant who will handle all of your lodgings for you, ensuring every statement and payment is correct, reducing any stress you might experience.
3. Claiming Ineligible Deductions
Another common mistake we see is incorrect claiming of deductions. The ATO closely examines deductions, and any incorrect claims can result in penalties or audits, adding more stress to your business.
You must understand what deductions you can claim, and that all of your claimed expenses are justifiable and business-related. You will also want to understand the difference between capital expenses and operating expenses. It’s worth consulting an accountant to learn more about the specific deductions that apply to your business and how to successfully claim them.
4. Missing Superannuation Deadlines
Superannuation deadlines are crucial, with a quarterly deadline for superannuation guarantee contributions for employees. Missing these deadlines can result in penalties and a loss of tax deductions for late or missed contributions.
Should your business have employee superannuation contributions, ensure they are paid before the 28th of each quarter and that you are using suitable methods to process the payments. It is worth considering automating your super payments through accounting software to ensure that you never miss a payment again.
5. Ignoring GST Obligations
Many businesses can fail to register for GST (Goods and Services Tax) when required or misreport it on their BAS statements, leaving them with higher tax bills than necessary or failing to pay a significant tax. To avoid this, ensure your business is registered for GST if its annual revenue exceeds $75,000. You should also charge and collect 10% GST on all taxable sales and report all GST collected and paid on BAS statements.
You will want to keep a record of all GST transactions to support your claims, ensuring your records are accurate and up to date.
6. Not Planning for Tax Payments
Failing to plan for your tax payments is a significant business tax reporting error that can leave you short when it comes to paying your taxes, resulting in cash flow issues throughout your business. You should ensure that there is a portion of cash set aside to cover your tax payments, whether this is through a separate tax savings account or by regularly setting aside funds based on your annual tax liability. Again, an accountant can help you estimate your future tax contributions and set aside funds accordingly.
7. Not Reviewing Tax Changes
Tax laws can change, and it is essential to stay up to date with current tax laws and understand how these changes may impact your business. This ensures you take advantage of all relevant tax incentives and deductions. You can regularly check the ATO for the latest updates and tax laws, or work with a tax professional who will ensure that any changes to taxes are reflected in your plans.
Understanding the latest laws and changes will help you take advantage of any government grants and tax concessions, ensuring more financial resources for your business.
Find An Accountant To Avoid Tax Mistakes Today
The best way to avoid any of these 7 common business tax mistakes is to work with an experienced accountant who will ensure your payments are accurate and submitted on time. Skilled accountants, like those at Walker Hill, are an excellent option, no matter your tax needs. They have experts in every relevant field, including providing tax help for eCommerce brands, to ensure that you never have another accounting error again!
