With the Australian Taxation Office (ATO) becoming stricter year after year, adhering to set standards is absolutely essential for a much smoother accounting and bookkeeping experience.
Whether you’re a small business owner or an executive of a large conglomerate, you likely already know that nothing reigns supreme except for the ATO’s rules when it comes to financial matters. Fines for tax and financing-related blunders are skyrocketing, and related penalties are growing more severe, which is why it’s critical to ensure that you stay in the good graces of authorities.
This means it’s crucial to be mindful of mistakes that the ATO can pick up during tax audits.
Common Business Mistakes You Need to Avoid
With thousands of businesses being penalised by the ATO annually for avoidable mistakes, you must avoid the same fate to protect your finances and status. Staying away from tax mistakes isn’t as difficult as you might expect it to be; in fact, it merely requires simple awareness.
If you want to ensure that your company won’t commit blunders that can land it in hot water during tax audits, here are the pitfalls that you need to avoid:
Mistake #1: Failing to Keep Stock Records
Here’s something you should know: an increase in the value of your stock even in just a single year is classified as assessable income. Alternatively, a decrease in stock value is classified as an allowable deduction.
Some businesses value their trading stock at cost to minimise their taxes and have the lowest possible inventory value. Unfortunately, there are severe penalties for undervaluing business stock, similar to those imposed on businesses for not keeping records at all.
To help ensure that you don’t end up making the mistakes mentioned above, it’s ideal that you keep records of your stock for five years. It’s also worth noting that the records you keep much be written in English or in a form that the ATO can understand.
Mistake #2: Spending Too Much on Christmas Parties and Not Paying Your Fringe Benefits Tax (FBT)
So, you threw a much larger Christmas party last year and invited even your smallest clients to cut costs on tax audits. Well, newsflash: this doesn’t mean that you can avoid your FBT.
Aside from the fact that you can’t file your staff Christmas party under a classification of “staff amenities” for your deductions, actually throwing a party outside does not remove your obligation to pay Fringe Benefits Tax. If you want to avoid FBT the right way, you can celebrate at an after-hours offsite venue and keep the cost per employee for the celebration to under $300 (inclusive of GST).
Mistake #3: Maintaining Inadequate Record-Keeping
Another far-too-common mistake that business owners make is that they fail to maintain a distinct level of discipline with their record keeping. Even the smallest of mistakes when handling accounting and bookkeeping tasks can lead to severe lapses in your records. Unfortunately, these same lapses can result in the ATO levying severe penalties on your company once it finds out that things don’t add up.
If you want to avoid slacking on your record keeping-related work, then consider investing in professional bookkeeping and accounting services for your business’s finances. Through the help of an expert like SMB Accounting, you can ensure that your business has everything it needs to avoid problems with its numbers come tax time and beyond!
When it comes to keeping your business in shape and ensuring that it thrives, nothing is more important than ensuring that you don’t make any mistakes that the ATO can penalise you for. By keeping an eye out for the three mistakes mentioned above, you won’t experience any problems during your next tax audit!
We’re a business accounting firm on the Sunshine Coast specialising in a number of financial services, including tax returns, audits, company set-ups, and ongoing bookkeeping and accounting services that will help your business stay on top of its finances. Get in touch with us today to see how we can keep you in good financial shape!