Top 5 tax mistakes small businesses make when they don’t use an adviser
It’s something of a little white lie, isn’t it? The one told to aspiring small business owners and entrepreneurs that hard work guarantees success.
Hard work is vital, but it’s not the only quotient. And while you may be told by starry-eyed blog writers or charismatic motivational speakers that you can’t lose if you try hard enough, the third of new businesses that fail each year can attest to a different reality.
In our experience, a lot of businesses fail because they don’t plan the tax side of things well enough. From payroll tax to super guarantee contributions to GST, we’ve seen businesses blindsided by hefty penalties and tax debts. Unfortunately we’ve had to step in to make it right.
Here are the five most common tax areas where small businesses can trip up. You can avoid these mistakes with our help, and boost your chances of making it.
1. We’ll help you keep good records
Good records means good business – there’s no way around it. We’ve seen one small business owner with a truck delivery business who neglected to put in place a system to keep track of her fleet’s fuel usage, and had to rely on estimations. Because of this, she missed out on valuable fuel tax credit claims.
2. Get advice on the status of workers
Not getting the engagement status of workers right can land employers in unforeseen hot water. There was one events business owner hired a group of contracted cleaners every week to tidy up his party hall after functions, but ended up in trouble with the law. “I thought because they were contractors I didn’t have to pay super. I was wrong.”
3. Pay the superannuation guarantee, and on time
When cash flow becomes an issue, too many businesses leave superannuation guarantee payments until last. If you want to avoid penalties from the Tax Office, you need to make sure your employees are paid superannuation when they need to be paid. You can’t risk late lodgements.
4. We’ll keep you up-to-date on changes to tax laws
Did you know payroll tax rates changed this year? One business owner didn’t. “I’ve got three employees working for my electrical estimation business, and I didn’t withhold enough to cover the rate increase. Now it’s tax time, and I’ve a tax penalty because my books weren’t right.” If you’re not following tax law closely, it’s understandable you’ll miss things. Luckily, our monthly newsletter keeps you up to date, but it also couldn’t hurt to check in with us from time to time for updates.
5. Don’t miss out on deductions
One sole trader started a jewellery business from home. “For the first year, my revenue was relatively small. I didn’t think I needed an accountant or tax agent to do my return. I thought I could just leave it. The only problem is this year I missed out on claiming a big asset write-off deduction for my pendant-pressing machine. If only I’d gone to see my tax agent!” ‘If-onlys’ are crippling for small businesses, and they’re avoidable.