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Small business owners: 9 tips to keep the taxman off your back
Andrew Stubbs • Sep 16, 2018

When Benjamin Franklin said that the only things certain in life were "death and taxes" most people didn't consider that they may be closely linked.

But problems with taxes can lead to the death of your small business unless you take steps to keep the taxman off your back.

With sales meetings, recruitment, salaries, cashflow issues, marketing, suppliers, and a whole string of other things for small business owners to worry about, there's no need to add the taxman to the list.

A robust financial system that keeps the tax authorities happy should be the foundation that underpins your business - allowing you to focus on the multitude of other issues that require your attention.

The specific requirements set out by your tax authority will differ by location but many of the basics remain the same wherever you are.

And most authorities are currently tightening the rules and clamping down on tax cheats and tax avoidance.

Nine of the most important general guidelines are detailed below: wherever you're located, whatever your business size, and whatever industry you're in, these will help you identify red flags in your tax setup:

Understand all the tax requirements - or find someone who does

Do you think your tax affairs are simple? They're probably not. Ninety-nine percent of small business owners don't fully understand tax legislation - so it's important to seek specialist help.

The temptation a business owner is to try to look after everything yourself. With tax, this can be a false economy: not only can it take ages to get to grips with what you need to do; it's likely that you'll miss something important. And the taxman will be on your back!

File returns on time

The general rule is to file tax returns within twelve months of the end of your accounting period but this may vary with location.

Good planning in your business will ensure that you're ready for the process; you know when it's coming, have scheduled time to do it each year, and don't end up scrambling around at the last minute to avoid penalties.

Keep consistent & accurate records

You should already understand the importance of accuracy and consistency: quite apart from generating the management reports to make good business decisions, the tax authorities love you for it too.

Being consistent and accurate will help you flag any changes that affect your tax liability and explain any changes that raise questions from the tax authorities.

If you have some bookkeeping experience, you may be able to manage this yourself with user-friendly cloud software like Xero and Quickbooks Online. Otherwise, it's best to have a certified bookkeeper or accountant keep your accounting records up to date.

Keep the 'evidence' together

Keep the receipts and invoices for business expenses together. Most business owners know they should do this but it's surprising how many find themselves scrambling around looking for receipts when the time comes to do tax returns.

And even when they do find the receipts, they don't know what they relate to.

Keep it organised. All tax authorities want to know that there is sufficient documentation to justify business expenses. Receipts don't have legs. Your own inefficient system is responsible for losing them or causing confusion about their origin.

One of the benefits of using a cloud computing app such as Xero is the ability to take a photo of a receipt with your smartphone to 'scan in' an expense receipt straight into Xero; or you can use specialist apps that integrate with Xero such as Receipt Bank or Expensify.

File business & personal expenditure separately

It's easy to confuse business and personal expenditure. Unfortunately, it's one of the quickest ways to get offside with the tax authorities.

By keeping them separate, you can see at a glance what you can deduct and what you can't: that means two separate (probably electronic) filing systems. Don't be tempted to think "I'll sort them out when the time comes for my tax return". You'll forget or cause delays.

If you're a cash-based business, take extra steps

For small business owners such as tradespeople, who often get paid in cash, take extra steps to keep things transparent. You can guarantee that you will be on the taxman's radar at some point.

For income, keep additional records to back up bank deposit records, such as cash register printouts or manual records of daily sales that can be matched to the bank records.

One of the benefits of moving your accounting systems to the cloud, is the ability to do things faster and easier with paperless processes. For example, trades-based businesses can use apps like ServiceM8 to quote and invoice in the field and even take electronic payments on site.

If you're thinking, "I prefer to be paid in cash," the 'cash economy'-where a business does not declare all its income in order to reduce profits and therefore tax-is not such a great idea. Your business will be more valuable when it comes time to sell it if you have always shown all your sales revenue 'on the books'.

Create a clear policy for employee reimbursement

Tax auditors want to know that you're following the regulations with regards to employee reimbursement for travel, mileage, personal expenses, etc. They also want to know that expenses are appropriately signed off within the business to indicate that the business accepts liability.

Document a clear policy that determines what employees can claim for and how they go about claiming it. Make sure that this is clearly communicated to all employees.

Plan for your tax bill

There's no room for surprise tax bills on the path to success. Tax is generally predictable and consistent. This means that you can - and should - plan for it in advance.

Sit down with your tax professional, understand what's coming and when, and create a fund that can be used to pay the bill when it arrives. Maybe lock away a set sum every month. That way there are no nasty surprises ahead.

Never avoid the letters

Just because your tax authority writes to you asking questions or requesting records, it doesn't necessarily mean the worst. Never avoid or delay answering these questions, as they don't go away.

Answer in a timely fashion - there will normally be an expected response date detailed on the letter. Don't go beyond this.

Take some tax advice and answer the questions to the best of your abilities. Most tax issues can be solved relatively easily if they are dealt with before they spiral out of hand.

Don't get caught out by non-compliance with tax or it can cost you and your business. Get the right tax advice from the start and follow the tips above to keep the taxman happy.

If you need any specialist tax advice for your business, contact  one of our advisors to talk it through.

By Andrew Stubbs 05 Jun, 2022
Here's some good news if your business sends invoices to business or government customers. Peppol* is on its way. (That's Peppol, not Peppa .) Ever had this conversation in your business? You or one of your team: "Hello, I'm calling to follow up the invoice we emailed to you last month. It hasn't been paid yet." Customer: "Really? We didn't receive that invoice?" In addition to the time and expense of following up, the cash flow delays create stress for you and they hurt your business. Thankfully, the adoption of Peppol will solve this problem. What is Peppol? Peppol is an obscure acronym for Pan-European Public Procurement On-Line. What's more important than what it stands for, is what it enables. Peppol is an international 'eProcurement' framework for the electronic exchange of information. It creates a standard approach for governments and businesses to structure and exchange information such as invoices and other documents. What Peppol means for you and your business Peppol makes electronic ordering, invoicing and shipping between governments and private companies faster, simpler and more secure. This means your business will get paid faster when dealing with government and larger businesses. In 2019, Australia and New Zealand adopted this platform for e-invoicing which, when implemented, will make 'we never received your invoice' issues virtually impossible. The new e-invoicing system is more secure than email and provides many other benefits. Which countries are adopting Peppol? There are currently 40 OpenPeppol member countries: 32 countries in Europe plus Australia, New Zealand, USA, Canada, China, Japan, Mexico and Singapore. Each country has a Peppol authority. For example, in Australia that's the Australian Tax Office (ATO). Is Peppol already in use? Yes it is. For example, the SuperStream system in Australia-which many businesses are currently using to automate the payment of employee superannuation contributions-is based on the Peppol protocol. How does e-invoicing work? The system connects the accounting systems of all businesses and government departments via the secure Peppol network.  Suppliers generate sales invoices in their accounting systems which are sent to Peppol.
By Andrew Stubbs 04 May, 2022
If you're a director of an Australian company-or you plan to be-take 5 minutes now to read this article. All existing directors (and intending directors) of Australian companies need to be aware that the Australian Government has announced the introduction of a new mandatory Director Identification Number (DIN) system. (You'll notice the term director ID is also used for DIN.) This system is the initial step in the Modernising Business Registry (MBR) Program which has been established under the Treasury Laws Amendment Act which was legislated by the Australian Government in 2020. More information on the MBR program can be found here . What is the DIN system trying to achieve? The DIN aims to provide accountability and traceability of a director's relationships over time, across all companies and will provide information on a director's involvement in what may be repeated unlawful activity, including illegal phoenix activity. It should also solve the problem of false or fraudulent director identities. What are the key features? It is mandatory for all directors, foreign directors and alternate directors of Australian companies to hold a DIN. The DIN is a unique 15 digit number. The first 3 digits will be 036 which is the identifier for Australia. The last digit is a check digit to help with accuracy when quoting your DIN. Like your tax file number, you will only be issued with one DIN which you will hold for life - even if you cease acting as a director for any period. To obtain a DIN, you will need to prove your identity so you will not be able to hold multiple DINs. Other office holders (e.g. company secretaries) are not required to register. The director is responsible for updating the DIN records for any changes in personal information within 7 days of the change. The director must apply personally. The process cannot be completed by your accountant, lawyer, spouse or executive assistant. There are significant penalties for non-compliance. How do you apply for a DIN? Directors have 3 options for applying. You can apply online from 1 November 2021. To use this method, you must first establish your identity via myGovID (an app you download on your smart device which is different from myGov). Once set up, your myGovID will make accessing a wide range of government services easier. (It's not just for your DIN application). For information on how to set up a myGovID please go to https://www.mygovid.gov.au/set-up During the DIN application process, you will need additional information such as your tax file number (TFN) and your residential address as per ATO records. It would also be advisable to have other personal details such as bank account details, medicare card or a recent income tax assessment available in case these are required. You can also apply by phone ( 13 62 50 ). During the call, the operator will ask for the identity documents you would have used to obtain your myGovID (passport and driver licence) as well as the additional information listed above. These details will be confirmed with the records held on existing government databases and, assuming the details agree, your DIN will be issued. Or you can apply by mail, but this is not recommended because the process for doing this seems vague ("Write to us") which means you can probably expect a lengthy process of certifying documents and coping with the vagaries of the postal system. One of the other two methods would be a better choice. When will you need to apply for a DIN? Transitional arrangements will allow directors to become familiar with the new requirement. When you need to have a director ID will depend on when you were appointed as a director.
By Andrew Stubbs 07 Apr, 2022
If you're a small business owner, you're always on the lookout for better ways to go about routine tasks to boost growth and underpin reliability. So, yes, you have the will; now, what are the ways? What are those consistent routines you can instill that will have the most benefits? This article looks at the top 6 things you can do to help your business thrive. We're going to cover finances, goals, marketing, technology and you ! So, let's take a look… 1. Your finances are a scorecard … and a predictor Boil it all down and dollars in the bank are the report card on the health of your business operations. Surprising then that so many people don't really pay much attention to how much they've earned, nor how much they're likely to earn. As much as it might feel like a chore, reviewing your sales and financial projections and then using them to ascertain if you need business financing is a discipline worth cultivating . If you suspect that your cash flow is precarious, you should be checking out your options today. First metric to check: your credit score. If it is too low, you need to take steps to shore it up. Next, check in with your bank or finance broker about what loans are available. 2. Goal setting, goal achieving, goal celebrating So, if you're using current and future dollars in the bank to keep score, the next thing is to do something about it. This is where goal setting comes in. If thoughtfully set and persistently pursued, goals help you orientate your willpower and your energy at each moment of the business day. This is the hidden power of goals: giving you a good sense of direction and a way to channel your instincts towards wise objectives. Constantly checking in with your goals makes them a benchmarking tool to keep your business pointed in the right direction. Yes, just having goals helps. Actually achieving a goal helps too, of course! 3. Increasing the impact of your marketing Marketing is not magic. It is not a mystery. It is not an art. However, many less-than-reputable marketers will try to claim that it is. They do so to gain wiggle room to pad their invoices and cover up their lack of skill. What this means is that it is easy to waste money on ineffective marketing. The good news is that there are many low-budget marketing strategies that actually work to help grow your brand and reputation. Scout around on the internet and choose one or two new tactics. Deploy them and test them. If they work, double down. If they don't, try something else. If you can't tell if they're working, also try something else. Social media is the obvious starting place for these low-stakes experiments and the old classics of LinkedIn, Facebook and Twitter are where to trial them. 4. Bringing your business up to date technologically The ability of modern productivity and project-management tools to give small players the same capabilities as the big boys simply cannot be ignored. Harness them properly and they'll let your small businesses operate with the same productivity as the titans of your sector. And, if your business is in the services sector, the increased controls that business technologies can yield also lets you be highly agile - that's something the big boys can't do. So, ask yourself: are you taking full advantage of what's out there? Don't worry, the answer to this question is always 'no' - the field is simply moving too fast for anyone to be able to take full advantage. However, if you have a realistic view of your needs, then you have a yardstick to help assess all the solutions out there. When you know what you need the technology to do, then you can wisely choose what hardware, software, platforms and techniques to introduce. 5. SEO has changed and it is going to change again Google - indeed all platforms offering broad search functions, from Youtube to Facebook - are constantly altering and optimising their algorithms. This, in turn, means SEO practice must constantly evolve to keep pace. So, if your SEO approach hasn't been overhauled in a few years, the time has come to give it some attention. Do a review of best practice and score how you cater to SEO in your online presences. Yet, because the underlying concept of SEO has not changed, the corrective actions you need to take may not be major. Then again, they might be! It is better to know unpleasant news sooner than outright bad news later. 6. Download the right new apps The remote work trend has gone mega and this means mobile productivity apps are very much of-the-moment. See, you can get a surprising amount done with just your phone and tablet. And apps are how it all happens … plus connectivity and a full battery, of course! Usually, apps are best for keeping an eye on things, boosting effectiveness on the "busy" tasks and enabling you to give your stamp of approval to work that needs your say-so to progress. In general, these are not value-adding tasks, just the value-neutral tasks that get in the way of the value-adding tasks. Now, there is no end of apps out there. So, as always, don't bother looking until you have some idea of what you need. 7. You are the ultimate business tool Health is the single most important aspect to consider for anyone running a business. It's the non-negotiable factor that governs everything else you are capable of. To adapt a quote from Arnold Schwarzenegger, being fit and healthy is "a status symbol. It reflects you worked hard for it; no money can buy it. You cannot borrow it, you cannot inherit it, you cannot steal it". This means that you must get enough sleep every night (most people need 7 hours or more). This means a healthy diet must become your preferred way of eating. This means that you should exercise every single day (except when sick). This means you must give your mind a rest too . Meditation isn't some mystic monkish thing, it's simply the practice of letting your thoughts come and go while you - the observer - stay peaceful and undisturbed by them. Think of it like this, meditating is mediating your mind. Take stock, choose wisely, make small steps in the right direction In this article, we've talked about some improvements you can make to what you're already doing. You don't have to do all of these at once. Start with the one that seems easiest and then stick with it to see if it works. Remember, it's not always about big changes. Often, you can make major improvements in outcome by making small changes to input. Doing the little things better. So take stock, choose wisely and be sure to make those small steps in the right direction for success today, tomorrow and the next day.
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