Are you running a small business? Then, you know, it comes with multiple responsibilities. One such responsibility is filing taxes. No one likes to file taxes, but they have to, as it is their duty. But what if you end up filing the wrong tax? It can lead to many issues and even an audit, which no small business owner wants. Yet, many small owners make mistakes while filing for a tax. If you are reading this and thinking, ‘Oh, I will never make these silly tax mistakes,’ you are wrong! Why? Well, running a business is complicated, and as the business grows, the tax filing process becomes messier and more complex, so it is necessary to know what can go wrong.
This blog will discuss tax filing mistakes that you should avoid. If you do that, you will not have to worry about paying more or getting an audit. So read carefully.
Mistake 1: Failing to keep accurate records
The first common mistake small business owners make is not keeping an accurate record of all the assets their business has. Or the expenses it incurs. You cannot file the right income tax return without accurate records. As a business owner, you must record everything: income, assets, expenses, bank statements, invoices, and more. All this will help you file the tax on time. For a sole trader, this might be challenging as he is responsible for everything. So, hire someone or have a digital record so that paying the sole trader tax return is easy.
Mistake 2: Missing tax deadlines
Often, small businesses forget to pay the tax on time. It happens because they are busy with other things. However, this is not right. Missing tax deadlines can lead to paying penalties, which are not cheap. Also, your business can get into trouble due to late payments.
The solution is to have a CA or a finance team working for you. They can file the tax on your behalf in a timely. If they are freelancing for you, ensure you provide them with all receipts and bank statements on time.
Mistake 3: Losing track of Super
Ensure you know about the people working for you. Knowing whether they are legally considered contractors or employees is super important. If you report them incorrectly, even in one tax filing, you will be shorting them the supercontribution, which you should pay them legally. Also, if you are unsure where to make the super contribution, it causes much pain when filing the tax. So, be sure who the employees and contractors are to make paying taxes easier.
Mistake 4: Forgetting to report all incomes
Are you reporting all the income you have? Even as a small business, you may have multiple sources of income. For instance, running a business brings profit, which you are mentioning. But if you are running another business, like mentoring students, that income must also be mentioned. Moreover, anything else, such as the interest you got on your bank balance or interest on the dividend from your shares, should also be reported.
Mistake 5: Not registering for an ABN or Australian business number
You must register yourself for an ABN or Australian business number. It is a unique 11-digit number that you can use to identify your business to others, like the community or other businesses. It also helps identify the business to anyone else when ordering or creating an invoice. The essential purpose of having an ABN number is to help you avoid paying PAYG tax on any payments you receive.
Mistake 6: Failing to call every deduction you are entitled to
The Australian tax law allows for multiple ranges of deductions for a small business. Claiming them is helpful for you. However, if you do not know about it or fail to claim it, you will pay more tax than you should.
Mistake 7: Not paying superannuation
Small businesses have to pay a superannuation contribution to any worker who is eligible for it. If you fail, you will get interest charges and penalties from the ATO.
Mistake 8: Procrastinating
It is a mistake everyone makes when it comes to filing taxes. You procrastinate, thinking you will pay the tax on a specific date. But this delay can cost you penalties because delaying filing the tax can lead to forgetting about paying it altogether. Stop procrastinating and file it on time.
Ensure you do not make these mistakes. Otherwise, you will pay more or, God forbid, get an audit. The best way to avoid these mistakes is to stay truthful and organized. If you follow these two rules, you will not have to worry about making tax mistakes. So, save all the receipts, be organized, and follow the money trail to be sure you are paying the right taxes.
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