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Starting a small business can be a scary proposition for many people. Small business owners not only invest a good amount of capital, but they also have to invest time and money. So, they have full rights to save as much money as possible through tax returns. Most business owners (small, medium, or large) hire a chartered accountant to get their taxes filed on time. This helps them get everything in line as filing tax is another time taking and tedious task to handle.
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Taxes are complicated and most small businesses have trouble preparing company taxes. If you improperly classify things, you may lose out on your hard-earned money to the ATO. Most people and colleagues would suggest hiring a professional to handle which is quite sensible, but as a novice, it is imperative to learn the tactics to prepare for small business taxation.
Avoid Common Mistakes During Taxation
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- In the beginning year, generally, businesses overestimate the start-up cost that is to be deducted. The truth is, first you need to make a sale, then these expenses are deducted over time.
- There are many entities like C-corp, Non-profit, LLC, and Partnership among which the small business has to choose any one of the entities based on their business structure, number of employees as well as financial goals. If the small business chooses the wrong entity, it can impact the company’s future and double the amount of tax.
- Showing personal expenses along with business expenses is a huge mistake that most business owners do. For example, you can’t deduct fancy business dinners but you can get deduct property taxes and auto loans.
- Sometimes small businesses hire independent contractors to avoid taxes. However, if these independent contractors are working for certain hours and were forced to work on-site, then they’re considered as employees, thus classify your staff correctly to avoid any penalties from ATO.
- Lodging tax returns on the ATO website should be done on time otherwise it may lead to penalties and double the amount of tax. The last date of the tax return in Australia is 31st October, if you feel you can’t submit due to any reason, appoint a chartered accountant for help.
- Keep all records clean, precise, and ready. This will include the payroll logbook and receipt of all business-related purchases. You should keep all documents, invoices, and receipts prepared otherwise you can lose money.
There are so many elements involved while lodging a tax return. It is not only about deductions and managing payroll or receipt, but other taxes like property taxes, local taxes, payroll taxes, etc. should also be considered while filing for tax returns. Yes, filing for tax is a brain-wrenching task, thus it is wise to appoint a chartered accountant. Search online in the tax accountants directory to get the best tax saver.
