small business tax tips

Top 5 tax tips for small business

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.

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 one out of three start-ups 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. Let’s face it, tax can seem boring! From payroll tax to super guarantee contributions to GST, we’ve seen businesses blindsided by hefty penalties and tax debts because they put their obligations out of sight and mind.

Here are five common tax mistakes that can trip up a small businesses when they don’t use an adviser – avoid these mistakes, and you’re likely to more than double your chances of making it.

  1. Not keeping good records
    Good records means good business – there’s no way around it.
    One small business owner with a truck delivery business 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. Not getting the status of workers right
    Not getting the engagement status of workers right can land employers in unforeseen hot water.
    An 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.”
    In previous articles we talk about the characterisation of an employee and a contractor, and twelve common myths often adopted by both workers and employers when it comes to deciding the tax status of a job appointment.
  3. Not paying the superannuation guarantee, or not paying it 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. Not keeping track of 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 have a tax penalty because my books weren’t right.”
  5. Not using a tax agent, or not using them enough
    If you’re not following tax law closely, it’s understandable you’ll miss things. It doesn’t hurt to check in with us from time to time for updates.
    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 used a tax agent!”

‘If-onlys’ are crippling for small businesses, and they are avoidable.

“Like most business owners I’m busy.  However, I appreciate that Synectic give me a push now and then to spend time working on the business with them. They provide me with advice that ultimately saves me time, money and future headaches.” Peter Herbert, joinerydotcom. Read the joinerydotcom story here.