Individuals and businesses are both subject to mandatory contributions to the government in the form of taxes, but tax compliance for business isn’t as straight forward as you may think.
To avoid penalties it’s important to adhere to tax requirements set by the Australia Taxation Office (ATO) and settle obligations in a timely manner.
We’ve provided 5 useful tips below to set you on the right track:
- Do your homework
While it’s not expected business owners will fully comprehend our often complex taxation legislation and other legal matters, it will help you to understand what is required. Below we have outlined some important things to consider for your business.
- All businesses, regardless what structure, must have a Tax File Number (TFN). Sole traders use their individual TFN for their business, while those operating as a company, trust or partnership will need to register a separate TFN.
- Obtaining an Australian Business Number (ABN) is also a must for all businesses.
- Those paying wages or salaries must register for Pay as You Go (PAYG) withholding.
- Businesses who buy or sell goods and services must register for Goods and Services Tax (GST) once annual turnover hits $75,000.
- Keep your records up to date
Many business owners may find it hard to fulfil their tax obligations because their records are not up to date. Unfortunately, some leave it until the last minute and then struggle to meet deadlines and lodge correct returns.
Business owners should regularly review their records to avoid backlogs. Monthly or weekly reviews can ensure that the process of lodging taxes does not become too overwhelming when deadlines loom. A good bookkeeper can help here and will also liaise with your accountant.
- Open and operate a separate bank account
Although this isn’t a legal requirement for sole traders, operating a separate bank account for the business can make it easier for owners to track and control income and expenses. It also makes information more accessible when tax time comes around.
- Make proper declarations
Naturally, tax payers aim to maximise deductions. However business owners will encounter trouble with the Australian Taxation Office (ATO) if they make dubious tax claims; even if there was no ill intention to the claim. This reinforces the importance of ensuring that records are up to date and the business is tax-compliant.
- Consult a professional
Working with a professional will ensure that someone is taking care of the tax obligations for your business. An accountant can provide a complete and suitable tax solution for your business. (Did you know that the expenses of hiring an accountant to lodge your returns can be claimed against your taxes?)
Tax compliance can be complicated, especially if you aren’t sure of your obligations. The team at McKinley Plowman have the experience to make sure your business is tax compliant and provide you with strategies to boost your business’ growth and profitability.