Businesses of all sizes must guarantee compliance with Australian Tax Office rules. ATO maintains a close eye on all commercial operations. Failure to comply with their guidelines—whether intentional or unintentional—will result in severe fines. Australian businesses are expected to disclose total income, file complete and accurate tax statements, submit returns and statements on time, and correctly withhold sums needed under the PAYG system.
To make sure your business doesn’t end up in hot water with the authorities, you must ensure that you keep your tax obligations in mind. Here are some basic guidelines for companies to follow to guarantee tax compliance and avoid fines and penalties.
The Need to Identify Business Expenses
It is a must for businesses to be able to identify business-related expenditures since non-business expenses are not deducted. The Australian Tax Office’s “three golden criteria” for defining business deductible expenditures are as follows:
- If the cost is for business and personal use, you may only claim the amount utilized for business.
- The expenditure had to be for a commercial purpose, not for personal use.
- You must keep documents to back up your claim.
Evidence of business expenditure must contain the following items:
- Name of supplier
- Nature of the goods or services
- Date the expense was paid
- Amount of expense
- Date of the document
- Tax invoice number
- Payment summaries, bank statements showing earned interest, and receipts or invoices for asset purchases and sales are all examples of evidence.
Consider the Costs
There are financial expenses associated with handling tax affairs, such as buying tax reference material and tax software. These expenses may be deducted as well. ATO has highly developed data analytics and data matching technologies used to detect work-related expenditures.
The ATO also possesses the information needed to target internet merchants, credit cards, and share registrations. Given the digital predominance of business revenue activities, caution is advised. Failure to comply with the ATO’s reporting requirements may result in fines of up to 75% of the shortfall amount or the difference between your actual tax due and calculated based on the information you supplied.
Utilize Tax Advice and Other Tools
While hiring tax accountants has a cost, our expertise and experience mean that we can handle the intricacies of tax time and guarantee that you satisfy the ATO’s tax obligations. Other accounting software programs (like Xero) may be used to help manage invoicing, single-touch payroll requirements, and other data. Cloud technology, like Xero, links you with your accountant and centralizes information in real-time, making the process easier for everyone involved. These apps have grown in popularity owing to their user-friendly approach to handling the accounts and taxes of small businesses.
Accounting is essential in companies of all sizes. However, it frequently falls to the bottom of the priority list for small company owners, especially when juggling all other duties of managing and sustaining day-to-day operations. It should never be an afterthought. Maintaining balanced accounts may assist you in financially forecasting months in advance and alerting you to possible financial shortages. Accounting knowledge may even help you rescue your company if times become bad.
At SMB Accounting, we specialize in many financial services. Our SMB consultants can help you with your income 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!