Small business owners have much to consider, from managing employees to keeping track of inventory. One of the most critical aspects of operating a small business is ensuring you stay on top of your taxes.
As a small business owner, you must appreciate your tax obligations to avoid legal or financial consequences. Failing to comply with small business tax laws can result in hefty fines, penalties, and legal action, harming your business’s financial health.
Understanding your small business tax obligations also allows you to plan and budget accordingly, ensuring you have enough funds to pay your taxes when they are due.
By keeping up with your tax obligations, you can focus on managing your business and achieving your goals without worrying about potential tax issues. Here are five tax facts that small business owners need to know.
2. Keep Good Records
One of the smartest things you can do as a small business owner is to keep good records. This means keeping track of all your income and expenses, as well as all your receipts and invoices. This will make it much easier when it comes time to file your taxes.
Keeping your business and personal finances detached is also a good idea. This will make recording your business expenses and deductions easier and help you avoid any potential tax issues.
2. Deductible Expenses
As a small business owner, you can subtract many operating costs from your taxes. These include office expenses, travel expenses, and even certain entertainment expenses.
It’s important to remember that not all expenses are deductible. For example, you cannot deduct personal expenses like groceries or clothing. Ensure you understand which expenses are deductible and keep good records of them.
If your small business has an annual income of $75,000 or more, you must register for the Goods and Services Tax (GST). This is a tax of 10% accumulated on top of the price of goods and services in Australia.
Once you register for GST, you must regularly charge your customers this tax and remit it to the Australian Taxation Office (ATO). You will also be able to reimburse any GST that you have paid on business expenses.
4. PAYG Instalments
Another important tax fact for small business owners is PAYG instalments. You make these payments to the ATO throughout the year to cover your expected income tax liability.
The amount of your PAYG instalments is based on your estimated income for the year. You will need to make these payments regularly, either monthly or quarterly.
Superannuation is another important tax consideration for small business owners. If you have employees, you must make super contributions on their behalf.
The super you must pay is based on the Superannuation Guarantee (SG) rate, 9.5% of an employee’s ordinary time earnings. You will need to make these payments regularly because failure to do so can end in penalties and interest charges.
It’s also important to remember that you can claim a tax deduction for your super contributions. This can reduce your tax liability and benefit your employees.
As a small business owner, keeping up with taxes is important. By keeping good records, understanding which expenses are deductible, registering for GST, making PAYG installments, and paying superannuation, you can ensure that you meet your tax obligations and keep your business on the right track. Speak to a tax professional or auditor in Brisbane for more information on small business taxes and how to manage them effectively.
Looking for expert advice on managing your small business taxes? Contact SMB Accounting today and speak to our team of experienced Sunshine Coast accountants. We can help you navigate the complexities of tax law and ensure that you are meeting all of your obligations as a small business owner. Don’t wait until tax time – get in touch with us now and start planning for a successful financial future.