Every year, the Australian Taxation Office (ATO) becomes stricter in implementing its standards when it comes to good business practices and accurate record-keeping of taxes. If you don’t want to get in trouble with tax authorities, you must adhere to those set standards at all times, or you risk being hunted for during tax or financial audits. Consider the following business mistakes you should avoid, so you don’t put yourself under the ATO’s radar.
Claiming Ineligible Donations
Receiving donations isn’t uncommon, but don’t make the mistake of claiming for donations that are ineligible for a tax deduction. In order for a donation to be eligible for a deduction, it must be a purely charitable gift, with no reward or benefit being accrued by the donor. Another requirement is it must also be made to a Deductible Gift Recipient (DGR) approved by the ATO. One such example of a non-qualifying donation are donations given by a company to a political party. First of all, they are not DGR s and a reward or benefit is already implicit in such a donation.
Failing to Disclose Shares or Other Assets Subject to CGT
As a general rule of thumb, you need to keep records of all your invoices and every transaction your business has made for at least five years, especially those that are relevant to working out a capital gain or loss from a capital gains tax (CGT) event. Despite this, some business owners still fail to declare shares and other assets that could be subject to CGT. This is a big no-no in the eyes of the ATO, and you can get penalised for any missing records. Make sure you have a complete set of financial and bookkeeping records for your company that includes all the little details in case you’re up for a financial audit.
Claiming Expenses Paid by Cash and Without Receipts
Claiming for expenses paid for in cash and for which you have no written evidence is a common error committed by taxpayers. The ATO always requires written and documented evidence for any expense valued at $300 or more. This can be a document from a supplier of goods and services that contains all the necessary information like:
- The supplier’s name
- The amount of the expense
- The nature of the goods or services
- The date the expense was incurred
- The date of the document
That’s an excellent example of written evidence that is acceptable to the tax authorities. However, written evidence could also be another document or combination of documents containing the details listed above, such as credit card statements, email receipts, bank statements, etc.
Giving Employees Interest-Free Loans Subject to FBT
Giving loans to employees isn’t something new to businesses. It’s one of the perks of working for an employer. However, what’s wrong is offering employees low or interest-free loans without being aware that they may be subject to Fringe Benefits Tax (FBT). Any loans will attract FBT if there is no interest charged or the rate you’re offering is less than the relevant statutory interest rate. If the employee is also under no obligation to repay the loan, then that’s also subject to FBT.
Tax and business finance can be a complicated and stressful endeavour, especially if you’re under the pressure of a tax audit. What’s worse is, being prepared for an audit is a continuous process. It doesn’t end after the audit results are in and the tax authorities have no major findings. You need to continuously keep good and accurate records and follow the ATO standards even after the audit is done to make sure you won’t be violating anything in the future.
SMB Accounting is your partner when it comes to keeping your taxes and your finances in check. You never have to worry about failing a tax audit and being hunted down by tax authorities. We offer a range of accounting services, including taxation, business advice, and XERO/MYOB/Quickbooks consulting. If you’re looking for a competent accountant in Sunshine Coast, SMB Accounting firm can help. Get in touch with us today!