Small business tax time made easier

• Is your small business prepared for tax time?
• Keeping good records is essential
• Knowing what you can – and can’t – claim is important

If you’re a small business owner tax time can be, well, taxing. Knowing what you can claim, what you can’t and how to do it can be daunting.

But with a bit of preparation, you can make tax time a breeze. Here’s how.

How does tax work for small businesses?

In Australia, the financial year runs from 1 July to 30 June, and all businesses need to declare to the Australian Tax Office (ATO) how much they’ve earned – and spent. The figure that’s left is called your taxable income.

The ATO uses the following formula:

Assessable income – allowable deductions = tax payable¹

Every business, including sole traders, partnerships, trusts and companies, needs to file a tax return every year.

When do I need to lodge my small business tax return?

• For sole traders, partnerships, and trusts that lodge tax returns themselves, the deadline is 31 October.²
• For small companies lodging for themselves, the deadline is 28 February, unless a previous year’s return is outstanding – in which case the deadline is 31 October.³
• If your registered tax agent is lodging on your behalf, the deadline to lodge the tax return is usually later – but you should contact them by 31 October.⁴

What records do I need to keep?

Keeping good records throughout the year can make tax time easier. The records you keep for your Business Activity Statements (BAS) can come in handy.

It’s important to keep evidence of:

• All income, including tax invoices, receipt books, cash register tapes, and records of cash and digital sales
• Every business-related expense, including receipts, tax invoices, cheque book receipts, credit card vouchers, or diaries for small cash expenses⁵

All records:

• Must explain every transaction
• Be in writing (paper or digital)
• Be in English (or a form that is easy to translate)
• Be kept for five years⁶

What’s the best way to keep good records?

The easiest way to keep good records – and make things easy at tax time – is to use accounting software. There are a number of options available, including Xero, MYOB, Hnry and QuickBooks.

What are the benefits of using accounting software?

Accounting software can help you to:

• Scan and upload receipts in real time
• Record income and spending as it happens
• Issue invoices
• Report to the ATO directly
• Keep back-up records

Using accounting software throughout the year could help you understand your income and expenses, making your tax return quick and straightforward. At any point, you can see how much GST, PAYG (pay-as-you-go) and super you need to pay, helping you stay on track financially.

Accounting software platforms can also make other financial-related business tasks – such as preparing your BAS and paying staff wages and superannuation more straightforward.

They can also produce reports and issue invoices, keeping everything in one place and giving you greater insights into the finances of the business.

If you don’t have an accountant but are thinking about using one, speak to them first before subscribing to accounting software. Many accountants have a preferred platform, and some give you access as part of their service.

What tax deductions can a small business claim?

Small businesses can claim tax deductions for everything they’ve spent directly related to running the business.

If the expense is partly business, partly private use, you can only claim the portion used for business use.

Common deductions could include:

• Motor vehicle expenses – including fuel and oil, repairs and servicing and insurance premiums, or, for a sole trader or partnership, cents per kilometre⁷
• Home office expenses – including a new desk and chair you use for work, stationery and internet⁸
• Any equipment used for your business – for example, a cafe would claim its coffee machine, and a cleaning company would claim its new steam cleaner. This can be done via an Instant Asset Write-Off⁹ or by depreciation¹⁰
• Property expenses – including rents, mortgage payments and bills for running costs
• Insurance costs – small business insurance premiums directly related to your business can be offset against tax
• Salaries and superannuation paid

Should a small business use a tax accountant?

A tax accountant can save a small business a lot of time ­– and potentially save them money, by maximising deductions. They can advise you on what you’re entitled to, help you keep good records and can also help you from a strategic financial perspective.

Good practices to prepare for tax time

No business likes an unexpected bill, so it’s important to have a good idea about how much GST, PAYG and tax you’ll need to pay.

Some businesses have a separate account to keep this money in, away from the everyday business account, which can help ensure you’re not caught by a surprise ATO bill.

For example, is your business prepared for a tax audit? That’s where the ATO checks your tax affairs to make sure you’ve followed the rules. Tax audit insurance covers fees paid to accountants, who can help you prepare for an audit and represent your business throughout the process.

You can get Tax Audit cover as part of your QBE Small Business Insurance.

Tax time is a good time to review your small business insurance

As you prepare your tax return, it’s a good opportunity to make sure any new purchases you’ve made this year are covered by your small business insurance policy. QBE Small Business Insurance offers optional covers such as glass, theft, portable items and more.

Remember, business-related insurance premiums are tax-deductible, which means if your policy is up for renewal soon, you could claim the deduction this financial year.

Learn about QBE Small Business Insurance

To decide if the product is right for you, please read the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD).

¹ Taxable, assessable and exempt income | Australian Taxation Office
² Income tax return | Australian Taxation Office
³ Income tax return | Australian Taxation Office
⁴ Income tax return | Australian Taxation Office
⁵ Record keeping for small business | Australian Taxation Office
⁶ Record keeping for small business | Australian Taxation Office
⁷ Claiming a tax deduction for motor vehicle expenses | Australian Taxation Office
⁸ Working from home expenses | Australian Taxation Office
⁹ Small Business Support – $20,000 instant asset write-off | Australian Taxation Office
¹⁰ Tax deductions for depreciating assets and capital expenses | Australian Taxation Office