Tax Mistakes to Avoid

As a BAS Agent, I come across a number of costly mistakes that small businesses make on a repeated basis.

I am only going to share just six of them with you in this article.

My goal is to make you aware of what these are to save you money, a tax audit and sleep more soundly at night.

Please let me know if you can add some more, as I know that there are a lot I could have included!

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1. Poor Record Keeping

This is an area I find time after time that many small businesses struggle with. They are so focused with working in their business, that they fail to keep clean, well organised records.

I would go to say as many as 7 / 10 businesses I come across fail with keeping records that are up to date and well organised.

What to do:

• Have a filing system [see Control your paper nightmare]
• Keep your personal spending and business spending completely separate!
• Save your receipts and invoices in one area or use dropbox [see Small Business Tools – Dropbox]

2. Pay for an tax service you do not need

When you start out as a sole trader, you might “think” that you need to have your tax return completed by an accountant. But, the truth is, if you have not been self employed the entire year, if your income was under $20,000, or if you have kept good records you might be able to save yourself a lot of money and complete your own tax return!

What to do:

• Check out the new service MyTax and how it replaces e-tax [ see Lodge Online]
• Set up a MyGov account and download the free app [ see  MyGov ]
• Ask your family | friends for a referral to an accountant who doesn’t cost the earth
• Pick up the phone and ask accountants what they charge
• Ask a bookkeeper who they use

3. Do not use online tools or accounting software

Failure to use online apps or accounting software is a big mistake I see all the time.

Please don’t use the excuse, “If it’s not broke, don’t fix it” because you still just use an excel spreadsheet on desktop.

New options are now available that will not only save your time and money, but also reduce a substantial amount of stress.

These include bank feeds, apps on your phone, online receipt management add ons that will save data entry and time.

What to do:

• Find out what online options are available Xero, Myob Essentials, QBO
• List all the important features you absolutely need and “match” these to a new online system
• Ask a BAS Agent what add on’s are available to save more time & money
• Pay for the new accounting system to be set up correctly by a certified partner or BAS Agent
• Invest in yourself and be trained how to use it’s functions as it’s a tax deduction you can claim

4. Claim GST on all expenses

While it is easy to just claim GST on each and every expense, there are items that do not include GST.

If you get audited by the Australian Taxation Office, ignorance is not a good excuse and they won’t accept it as one either.

What to do:

• Check ABN Lookup to see if a supplier is GST registered or not
• Car rego, levies and stamp duty on motor vehicle registrations are not GST
• ASIC does not have GST
• Paypal, Etsy, Ebay unless Australian registered businesses are not GST [tweet me]
• Interest expenses and director fees do not include GST
• Facebook Ads and other overseas social media accounts do not charge GST [tweet me]
• Know what is GST and what is not!

5. Not claiming all business expenses

This is something I see small business owners doing all the time. They miss out on legitmate business expenses. They do so by loosing cash receipts like their fuel docket. Forget that a network group where you buy lunch and a drink is a business expense. Make sure you keep all your receipts for every business related expense you make.

What to do:

• Keep a diary of all your network meetups, training events and staple your receipts to the page
• Photograph your fuel, motor vehicle, stationary purchases on your phone, so if you loose the docket you can still claim them
• Endeavor to keep every receipt, invoice or email that relates to business expenses.

6. Forget to pay on time

Another frequent mistake is paying your bills, tax or credit cards late. These fines, charges and late fees all add up to the thousands a year. One client when shown the amount of interest, fines and late fees they paid in a year was shocked to see the amount of an overseas holiday. That’s right! Failing to pay on time is costly and a unnecessary expense!

What to do:

• When you open your mail, forward date your payment there and then to when it’s due. Print out the payment remittance & attach
• Keep a electronic or paper diary of when bills are due and pay them every time
• Create a reminder on outlook, google or some other system to send you a message and remind you when the bill is due
• Organse a filing system and check it daily to never forget a bill again

Bonus Infographic below

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Amanda Hoffmann

Amanda Hoffmann is a registered Tax Practitioner / BAS Agent No.18613005, Associate of Finance, Xero, Myob & Quickbooks Proadvisor / Trainer and a Consultant for the Australian Taxation Office.

She says she is more than just a bookkeeper with experience in real estate investing, social media, podcasting, blogging and recently recording monthly youtube episodes

Amanda loves to teach smart, easy online cloud solutions and fix messy bookkeeping. Follow her on social media and say “Hi”