How Small Business Owners and Individuals Can Navigate Tax Season

In Australia, tax season is the time of the year when both individuals and business owners alike can be left stressing out. There are so many rules and deadlines, as well as possible deductions, so your tax landscape needs to be clear. If you are doing your own return or working on your business tax obligations — there are ways to save money and reduce the risk of penalties.

In this guide we talk about strategies to help individuals & businesses to traverse through the tax season as efficiently as possible.

Australian Tax Season Explained

The financial year in Australia is 1 July to 30 June with a due lodgement date of 31 October if you are self-lodging your tax return. The deadlines can also differ from one business type to another, especially when a registered tax agent is being used

Some Key Tax Advice for Individuals

Lodge Your Tax Return on Time

The ATO can impose penalties for late lodgement. Your lodgement date could be pushed back if you engage a registered tax agent.

Maximise Your Deductions

Individual taxpayers can claim work-related expenses deductions for:

WFH expenses (electricity, internet, and office supplies)
Professional self-education expenses
Protective clothing or work uniforms including laundry expenses.
Cost of vehicle and travel (if they are directly related to your job)

If you claim deductions, ensure you keep receipts and documentation.

Understand Income Tax Rates

The Australian income tax rates are also progressive you pay more on a higher rate as you earn higher. Check the current tax brackets to get an idea of what you would owe in taxes so that you can plan for it as needed.

Look into Private Health Insurance

Those who earn above a certain level may be liable for the Medicare Levy Surcharge if they do not hold appropriate private health insurance. This extra tax can be diminished by having proper coverage.

Declare All Sources of Income

Include all income sources that you have earned (which is mandatory.):

Salary and wages
Income from investments (dividends, interest, rental income)
Cryptocurrency transactions
Income from foreign sources (if applicable)

It can attract penalty from ATO if you are not declaring all the income.

Important Tax Deductions for Companies

Maintain Bookkeeping To Keep Accurate Records

Businesses are required to keep complete records of income, expenses, and assets for a minimum of five years. To ease some of the record-keeping burden, use of accounting programs such as Xero, MYOB, or QuickBooks is recommended.

Bottom line: Learn what taxes are levied against your business

Tax Obligations Based on Your Type of Business Structure

Business income is reported in the personal tax return of sole traders.
Partnerships allocate income to their partners, who report it separately.
Corporate Tax is paid by companies on profit.
Instead of paying taxes on income as they earn it, trusts pass along income to their beneficiaries, and it is taxed as such.

Claim Business Deductions

Filing deductions can lower taxable income, these include:

Office rent and utilities
Equipment and tools
Salaries and superannuation for employees
Expense for marketing and advertisement
Business travel expenses

Master Your GST and BAS Lodgment

Australian businesses that earn greater than $75,000 per year are required to register for the Goods and Services Tax (GST) and lodges a Business Activity Statement (BAS) monthly or quarterly.

Contribute to Your Superannuation

Employers are required to pay 11% of an employee’s wages into their superannuation fund. It is important to pay on time because there are penalties on late payments.

Use a Registered Tax Agent

A tax agent will assist you in making sure you are finding all of the deductions your business is able to take, compliance, and making sure your tax return is accurate. Those who have a tax agent do have longer to lodge.

Avoiding Common Tax Mistakes

These are the most common tax mistakes that you should avoid to not get into trouble with the ATO:

Skimp on reporting income (particularly for side gigs or freelance jobs)
Deductions for which you do not qualify
Forgetting to lodge on time
Combine personal and business accounts
Poor record keeping

Final Thoughts

Tax season in Australia can be a tricky time of the year! But it doesn’t have to be. Regardless of whether you are an individual or business owner, getting organised, knowing what you are entitled to, and what you need to claim can ensure that tax time is much less painful.

When in doubt, ask a registered tax agent to make sure you follow the law and get the best info possible. These tips will allow you to tackle tax season with confidence and make the right financial decisions for the coming year.