There are multiple reporting obligations relating to self-managed super funds SMSFs, with the main one approaching in just a few days for some self-lodging funds.

An annual return must be lodged with the ATO once the audit of the SMSF has been finalised. This is more than an income tax return; it is also used to report super regulatory information, member contributions and pay the SMSF supervisory levy.

For trustees that lodge their own return, the due date is 28 February. For trustees that use a tax agent to lodge their return (a more common scenario, thankfully) there is more time available, with a deadline of 15 May in most cases.

The lodgement of the annual return is the culmination of a long process of compliance and regulatory reporting. Whilst tardy self-lodgers are now too late to tick all these boxes, tax agent lodgers still have time to get everything done before the final May deadline.  Tax agents will generally need all the same information as those who lodged on 28 February and an auditor will need to be appointed at least 45 days before lodging date (or by the end of March).

Here’s what needs to happen:

Annual accounts

As soon as practical after the end of each financial year the Trustee must attend to a number of financial reporting requirements. These include the preparation of: 

• A statement of financial position recording the assets and liabilities of the fund as at the end of that preceding financial year; which is June 30 of the previous year,
• An operating statement recording the profit derived or loss incurred by the fund for that financial year (or part of the year if the fund was not in existence for a full year),
• Member and other statements and reports to be prepared

An SMSF is required to maintain accounting records. These records are to be kept in a form, with supporting documentation, to enable them to be properly audited. Accounting records need to be retained for five years after the end of a financial year to which they relate.

Audit requirements

Once the annual accounts are completed, the trustees must then arrange for the financial statements and the accounting records of the fund to be audited by an independent and approved SMSF auditor, registered with the Australian Securities & Investment Commission (ASIC). They must also have a valid SMSF auditor number (SAN).

The SMSF auditor is required to review the financial statements and supporting records of the funds, and provide an opinion as to whether it considers the financial statements provide a true and fair view of the position of the fund.

If the auditor detects any breaches of the fund, it is obliged to report these to the ATO.

In addition, the auditor must assess the fund’s overall compliance with the Superannuation Industry (Superannuation) Act 1993 and associated regulations.

Some of the common issues we have seen that means the auditors have to report a breach, or caution the client by qualifying the audit, and recording the issue in a management letter to the trustee are:

• Not keeping sufficient documentation to substantiate activities and transactions of a super fund. You can’t just provide an excel spreadsheet of items to the auditor that you wish to claim. You need to have original bank statements, invoices for expenses etc.
• Not holding onto the documents that established the super fund. Signed trust deed, ATO trustee Declarations and establishment minute are just a few of the important documents that need to be kept and maintained by the trustee.
• Ensuring they have documented a current investment strategy
• The assets of the fund must be held in the name of the super fund to ensure separation of assets between the trustees’ personal assets and the super fund.

The auditor must provide the audit report before the due date for lodgment of the annual return. Remember, this is 28 February for self-lodgers and 15 May for tax agent clients. The return must not be lodged until the audit of the fund has been finalised.

Once the audit is finalised, only then can the annual return be lodged.

Failing to meet the lodgement requirements can result in penalties, including monetary fines (a FTL – failure to lodge – penalty is currently $330 for each period of 28 days that the Annual Return is overdue up to a maximum of five penalty units, or $1,650). FTL penalty is also not a deductible expense for the SMSF.

In addition, the ATO has a number of more stringent sanctions which can be applied, including the requirement for the trustees to undertake education, rectification directions, trustee disqualification, winding up of the fund, civil and criminal penalties and the fund being made ‘non-complying’.

A non-compliance notice is for very serious breaches of the SMSF legislation. The fund loses its concessional tax rate of 15 per cent. Instead, a rate of 45 per cent is applicable on income earned by the fund AND on the value of the assets held by the fund. Franking credits can’t be claimed, and the exempt current pension income deduction isn’t available. Any tax or capital losses can’t be carried forward either. These sanctions exist until the fund is wound up, or the breaches are rectified, and the tax office advises the fund is again complying.

It therefore pays for advisers to give tardy trustees a push to ensure that deadlines are not missed!

The post SMSF annual return deadline looms appeared first on Inside Small Business.

Here is my comprehensive guide to the tax consequences of Christmas for your business. First of all, I’ll consider entertainment for your employees and then I’ll consider your customers and suppliers.

Employees

If you throw a Christmas function for your staff off-site, for example at a hotel, restaurant or function centre, the cost of providing the party would normally be treated as a fringe benefit, with fringe benefits tax (FBT) payable by the employer. However, provided the cost per employee is less than $300, no FBT will be due. This is because of the so-called minor benefits exemption. This exemption also applies if spouses or partners come along to the party.

The minor benefits exemption applies to each benefit provided. What that means in practice is that if you’re feeling generous and spend $290 per head on the party and then give a gift to each employee valued at a further $290, then both expenses are free of FBT.

If you spend more than $300 per head on the function, the whole lot will be subject to FBT, not just the excess.

The costs (such as food and drink) of a Christmas party are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees.  If spouses or other guests of employees are entitled to attend, there could be an FBT liability unless the cost is covered by the minor benefits exemption (above).

Employers must keep all records for the entertainment-related benefits you provide, including records of how you calculated the taxable value of the benefits. In particular, you should keep records showing:

• The amount spent on each employee
• Then and where the celebration is held
• Who attends – is it just employees or are partners, clients or suppliers also invited?
• The value and type of gifts provided.

If your business also covers the cost of taxi fares to and from the festivities, these costs will count as part of the $300 per head limit if the function is off-site but will be exempt from FBT if the party is at your premises.

The bad news is that if the cost of your Christmas party is exempt from FBT, it isn’t tax deductible for income tax purposes. Nor can the business claim GST credits for the costs incurred.

Confusingly, even though gifts to employees are also covered by the FBT exemption, they generally ARE tax deductible and a GST credit can be claimed.

None of this generally impacts on the employee’s own tax position. They can eat, drink and be merry knowing that the tax consequences usually fall only on the employer.

And what about your clients and suppliers?

If you hold a bash for clients and suppliers, there is no FBT (which is only relevant where a benefit is provided to employees and their associates) but the costs aren’t income tax deductible. This is because the provision of entertainment isn’t tax deductible.

The post The do’s and don’ts of Christmas party tax deductions appeared first on Inside Small Business.

Take advantage of the instant asset write-off

One of the best tax breaks for small business is the instant asset write-off which means that you can score an immediate tax deduction for the costs of capital assets costing up to $20,000 if your business turnover is less than $10 million. With many businesses offering EOFY promotions, now is the ideal time of year for your business to take advantage by acquiring some much-needed assets to build your business and, at the same time, reduce your taxable profits.

The scheme is scheduled to run until 30 June 2024 so you have a limited time to take advantage of the scheme. Whilst now isn’t the ideal time to make large capital purchases for many small businesses, if your business needs to invest in new capital equipment and has the cashflow (or the borrowing capacity) to finance it, now is certainly the time because generous tax breaks like this may not last.

Prepay expenses

You can get an immediate tax deduction for certain pre-paid business expenses.  The basic rule is that a deduction is available for expenses that cover no more than 12 months. That covers expenses such as insurance premiums, telephone and internet services, subscriptions to trade or professional bodies, rent or leasing charges on your premises and bookings for seminars, conferences or business trips.

Pay superannuation

Employers have to pay superannuation contributions within 28 days of the end of the quarter. Ensure that all June quarter superannuation contributions are paid by 30 June to accelerate the tax deduction. Note that contributions must actually be paid, cleared in the business bank account and received by the employee’s super fund before 30 June for a tax deduction to be available. Any other outstanding amounts should also be paid before year-end.

Write off bad debts

If your business has to write off a debt, a tax deduction is available for the amount of the debt written off.

A debt that is unpaid and deemed to be a bad debt is an allowable deduction provided it was included as assessable income in the current or a previous income year. Go through your debtors list and if there are any debtors on it who you believe can’t or won’t pay, write off those debts by 30 June to claim the deduction this year. The business must keep a written record to document that the debt has been written off.

Get the right trading stock valuation

Damaged and obsolete stock can be written down or written off entirely and a tax deduction claimed – now is the time to crystalise that tax deduction.

The ‘Golden Rule’: keep records

Good record-keeping is your best friend for efficient business management and will also make life easier if the ATO asks you questions. It’s essential that records are kept to substantiate what’s in your tax return; any unsubstantiated deductions, for instance, are generally not allowable.

Tax law requires that records be kept for five years, and they should include:

• sales receipts
• expense invoices
• credit card statements
• bank statements
• employee records (wages, super, tax declarations, contracts)
• vehicle records
• lists of debtors and creditors
• asset purchases.

Records can be kept on paper or electronically but should be easily retrieved. In our experience, businesses often stumble when asked by the ATO to verify transactions by providing supporting records, with the consequence that even “innocent” businesses can find themselves stung by the tax man where they are unable to provide the requested evidence.

The post Six tax tips for your small business this EOFY appeared first on Inside Small Business.

However, far too many people who’ve made the transition haven’t given any thought to the financial challenges. To help ease the stress, I’ve prepared some tips that all new business owners should know:

Declare your income

First and foremost, income you receive from your business is taxable and must be declared on your tax return. You might think your side-hustle is just a hobby but the ATO will disagree!

What can I claim?

You can claim deductions for any expenses you incur as part of running your business. That could include the costs of using your vehicle for business journeys (particularly relevant for ride-share drivers), the cost of any materials you use in your work, as well as the costs of any courses you undertake that are relevant to your business.

If you offer your services through a sharing economy platform, they generally take a fee or a commission out of the price you charge your customer for the service. That fee or commission is tax-deductible. 

If you run the admin side of your business from home, don’t forget to claim the appropriate proportion of home-office expenses, such as internet fees, landline or mobile phone bills, costs of office furniture, etc.

Finally, where expenses relate to a mixture of business use and private/domestic use, make sure you only claim the business-related element.

You’re on your own now

Particularly if you’re coming out of a paid job, you’re probably used to getting your taxes deducted straight from your pay packet by your employer. But now you’re in business on your own account, nobody is going to be deducting anything so you need to proactively manage your cashflow to set money aside for future tax bills. This might seem obvious but, unfortunately, failing to set money aside to pay tax is one of the most common pitfalls that new businesses fall into.

You might also need to register for GST. If you’re an Uber driver, you must register for GST with the ATO and charge GST on all your fares, from the first dollar. For most other businesses, you only need to register for GST if your turnover from your business (combined with any other business you run) exceeds $75,000.

You can also claim back GST incurred on business purchases. You will need to report your GST sales and purchases at least quarterly by lodging a Business Activity Statement (BAS) with the ATO.

So, being self-employed comes with extra tax obligations. But it also comes with some tax perks. For instance, you have access to all the tax concessions available to small businesses, including the full expensing of capital assets, which is available until 30 June 2022. That means you can immediately deduct the cost of any plant, tools or equipment you use in your business, including items such as computers and even most motor vehicles.

Stay out of trouble with the ATO

My tip for keeping taxes stress-free is to get an accountant. Most people find it far less stressful to simply pass on all their information to a tax accountant and leave it to them to complete their BAS and tax return, safe in the knowledge that the work done will be accurate and complete.

An experienced accountant will usually be good at sniffing out those obscure tax deductions you didn’t know you could claim so they can often pay for themselves several times over.  Best of all, their fee is also tax deductible!

The post The biggest challenges Aussie start-ups face…and how to overcome them appeared first on Inside Small Business.

Here is H&R Block’s comprehensive guide to the tax consequences of Christmas for your business. First of all, consider entertainment for your employees and then consider your customers and suppliers.

Employees

If you throw a Christmas function for your staff off-site, for example at a hotel, restaurant or function centre, the cost of providing the party would normally be treated as a fringe benefit, with fringe benefits tax (FBT) payable by the employer. However, provided the cost per employee is less than $300, no FBT will be due. This is because of the so-called minor benefits exemption. This exemption also applies if spouses or partners come along to the party.

The minor benefits exemption applies to each benefit provided. What that means in practice is that if you’re feeling generous and spend $290 per head on the party and then give a gift to each employee valued at a further $290, then both expenses are free of FBT.

If you spend more than $300 per head on the function, the whole lot will be subject to FBT, not just the excess.

The costs (such as food and drink) of a Christmas party are exempt from FBT if they are provided on a working day on your business premises and consumed by current employees. If spouses or other guests of employees are entitled to attend, there could be an FBT liability unless the cost is covered by the minor benefits exemption (above).

Employers must keep all records for the entertainment-related benefits you provide, including records of how you calculated the taxable value of the benefits. In particular, you should keep records showing:

• the amount spent on each employee
• when and where the celebration is held
• who attends – is it just employees or are partners, clients or suppliers also invited?
• the value and type of gifts provided.

If your business also covers the cost of taxi fares to and from the festivities, these costs will count as part of the $300 per head limit if the function is off-site but will be exempt from FBT if the party is at your premises.

The bad news is that if the cost of your Christmas party is exempt from FBT, it isn’t tax deductible for income tax purposes. Nor can the business claim GST credits for the costs incurred.

Confusingly, even though gifts to employees are also covered by the FBT exemption, they generally are tax deductible and a GST credit can be claimed.

None of this generally impacts on the employee’s own tax position. They can eat, drink and be merry knowing that the tax consequences usually fall only on the employer.

What about your clients and suppliers?

If you hold a bash for clients and suppliers, there is no FBT (which is only relevant where a benefit is provided to employees and their associates) but the costs aren’t income tax deductible. This is because the provision of entertainment isn’t tax deductible.

The post Having a staff Christmas party? The ATO has put you on notice appeared first on Inside Small Business.

Make a business plan

The reason that a lot of businesses fail is that they don’t have a plan. Every new business owner should sit down at the beginning (before they start the business!) and plan what they hope to achieve from their new business; in other words, establish goals and objectives. A good way to achieve this is to establish a business plan.

The business plan should include:

• Defining what type of business you are in.
• Analysis of the industry and markets you will operate.
• Your goals and objectives, with your timeline to achieve these.
• Main products and services to be offered.
• Customers and your target market, both now and in the future.
• Advantages your business has over others; i.e. its ‘unique selling points’.
• Marketing plans to establish and grow your business.
• Suppliers required and others that may be needed, including staffing.
• What your competitors are doing.
• Facilities required.
• Pricing.
• Capital required to commence and potential financing required in the future.
• Equipment needed now and later.
• Financial projections and an analysis of your cashflow requirements.

Take care of bookkeeping

Good business records help you manage your business, make more timely decisions and comply with tax compliance obligations.

If you decide to look after your bookkeeping yourself, accounting software can help you to accurately record your income and expenses, with features such as the ability to automatically upload your bank transactions on a daily basis and back-up your information.

If you decide to outsource your bookkeeping to a specialist bookkeeper, you simply hand over your paperwork to them and they will take care of it; freeing you up to spend time doing what you do best and focus on running your business. An outsourced bookkeeper can also act as a second-pair of eyes to help keep your business on track, while using accounting software that has the ability for both you and your outsourced bookkeeper to view your information together, remotely.  

Monitor cashflow

One of the main reasons businesses fail is not necessarily because they’re not making a profit (although this is, of course, important) but because they run out of cash and are unable to pay their debts when they fall due. 

So, make it easy for your customers to pay you, so that you can get paid faster. Monitor and chase debts as they fall due and introduce direct payment technology such as point-of-sale software, mobile card readers, etc.

Take care of your taxes

Particularly if you’re coming out of a paid job, you’re probably used to getting your taxes deducted straight from your pay packet by your employer. But now you have your own business, you need to proactively manage your cashflow to set money aside for future tax bills. Failing to set money aside to pay taxes is one of the most common pitfalls new businesses fall into.

You might also need to register for GST. For most businesses, you only need to register for GST if your turnover from your business (combined with any other business you run) exceeds $75,000.

But being self-employed also comes with some tax perks. For instance, you have access to all the tax concessions available to small businesses, including the full expensing of capital assets, which is available until 30 June 2023. That means you can immediately deduct the cost of any plant, tools or equipment you use in your business, including items such as computers and even most motor vehicles.

The post Bookkeeping 101: Everything you need to know when kicking off your start-up appeared first on Inside Small Business.

If you provide benefits to your employees, you could find that your business is liable to pay Fringe Benefits Tax (FBT). This is a tax paid by the employer – not the employee – on the taxable value of certain benefits paid to employees, including benefits provided to the family of employees or to associates (such as friends) of employees.

Examples of Fringe Benefits

Amongst the most commonly provided benefits that can give rise to FBT are:

• Providing a car for your employee that can be used for private purposes
• Providing free or subsidised car parking for your employees
• Providing your staff with “entertainment”, such as meals, drinks, sporting or leisure pursuits, theatre tickets, and holidays
• Either reimbursing an employee for private expenses or paying for such expenses directly to a third party (for instance, paying your employee’s domestic utility bills)
• Giving your employee a loan and charging no interest or a reduced rate of interest
• Providing accommodation to an employee rent-free or at a reduced rent

How is FBT calculated?

FBT is payable based on the grossed-up ‘taxable value’ of the benefit provided. This grossing up process is intended to reflect the gross salary employees would have to earn to buy the benefits you’re providing after paying tax. Fringe benefits are split into Type 1 and Type 2 benefits and there are different gross-up rates for each.

The grossed-up value of the fringe benefit is then multiplied by the current FBT rate (47 per cent ) to give the actual liability.

The actual calculation can be complex and is best done by your accountant.

Can my business reduce its FBT liability?

It’s possible to reduce your FBT liability, or even eliminate it altogether, by getting your employee to make a cash contribution towards the cost of the benefit provided to them. Each dollar that they pay towards the provision of the benefit reduces the taxable value of the benefit by the same amount.

Are any benefits FBT-free?

Some benefits are free from FBT, such as the provision by a small business of tools or electronic devices (such as laptops) that are mainly used for work purposes.

So-called ‘minor benefits’ are also FBT-free. A minor benefit is one with a notional taxable value of less than $300 and could include things like the annual staff Christmas party, provided the cost per head is less than $300.

There are a number of generous concessions and exemptions available to certain not-for-profit organisations like charities, hospitals and religious institutions.

How does my business report and pay FBT?

The FBT year runs from 1 April to 31 March so now is the time to determine if your business needs to register for and pay FBT.

If you provide benefits to your employees and think you might have an FBT liability, the first step you need to take is to register for FBT with the ATO. Your tax agent can help you with that process.

If you have provided fringe benefits for your employees, you must then lodge an FBT return by 21 May at the latest, though if you use a tax agent you may qualify for an extended deadline.

If you haven’t paid FBT before, or if the amount you had to pay for the previous year was less than $3000, you only make one payment for the year when you lodge your return. Otherwise, it is payable quarterly through your activity statements for the next FBT year.

The post FBT advice for micro and small businesses appeared first on Inside Small Business.

The problem is that far too many people who’ve made the transition haven’t given any thought to the tax implications. To help ease the stress, I’ve prepared some tax tips that all new business owners should know.

Declare your income

First and foremost, income you receive from your business is taxable and must be declared on your tax return. You might think your side-hustle is just a hobby but the ATO will disagree!

Claim what you’re entitled to

You can claim deductions for any expenses you incur as part of running your business.

Remember, if you offer your services through a sharing economy platform, they generally take a fee or a commission out of the price you charge your customer for the service. That fee or commission is tax deductible.

If you run the admin side of your business from home, don’t forget to claim the appropriate proportion of home-office expenses, such as internet fees, landline or mobile phone bills, costs of office furniture, etc.

Finally, where expenses relate to a mixture of business use and private/domestic use, make sure you only claim the business-related element.

You’re on your own now

Particularly if you’re coming out of a paid job, you’re probably used to getting your taxes deducted straight from your pay packet by your employer. But now you’re in business on your own account, you need to proactively manage your cashflow to set money aside for future tax bills. This might seem obvious but unfortunately failing to set money aside to pay tax is one of the most common pitfalls that new businesses fall into.

You might also need to register for GST. For most businesses, you only need to register for GST if your turnover from your business (combined with any other business you run) exceeds $75,000.

You can also claim back GST incurred on business purchases. You will need to report your GST sales and purchases at least quarterly by lodging a Business Activity Statement (BAS) with the ATO.

So, running your own business comes with extra tax obligations. You’ll need to look after your own taxes (and potentially your own super). But running your own business also comes with some tax perks. For instance, you have access to all the tax concessions available to small businesses, including the full expensing of capital assets, which is available until 30 June 2023. That means you can immediately deduct the cost of any plant, tools or equipment you use in your business, including items such as computers and even most motor vehicles.

Stay out of trouble with the ATO

My tip for keeping taxes stress free is to get an accountant, such as H&R Block. Most people find it far less stressful to simply pass on all their information to a tax agent and leave it to the agent to complete their BAS and tax return, safe in the knowledge that the work done will be accurate and complete.

An experienced agent will usually be good at sniffing out those obscure tax deductions you didn’t know you could claim so they can often pay for themselves several times over. Best of all, the tax agent’s fee is also tax deductible!

The post 2022 is the year to kick-off your small biz dream – these are the tax implications appeared first on Inside Small Business.

So, you’ve decided to join thousands of Australians and jump off the employment bandwagon to start your own business. There are so many different things to consider when setting up a new business but one thing you need to be on top of is your financial situation. Here’s my guide to what you need to do to make your new venture financially robust.

Make a business plan

The reason a lot of businesses fail is that they don’t have a plan. Every new business owner should sit down at the beginning (before they start the business!) and plan what they hope to achieve from their new business; in other words, establish your goals and objectives. A good way to achieve this is to establish a business plan.

The things you should consider in preparing your business plan include:

• defining what type of business you are in
• an analysis of the industry and markets you will operate in
• your goals and objectives, with your timeline to achieve these
• the main products and services that will be offered
• customers and your target market, both now and in the future
• advantages that your business has over others (ie its “unique selling points”)
• marketing plans to establish and grow your business
• suppliers you will require and others you might need, including staffing
• what your competitors are doing
• facilities required to operate your business
• your pricing – how much you will charge
• capital required to commence your business and potential financing required in the future
• what equipment will you need, now and later
• financial projections and an analysis of your cashflow requirements.

Keep good records

Good business records help you manage your business and make timely decisions. Business records are also useful if you want to sell your business and ensure better accuracy and ease when conducting annual compliance and preparing financial reports.

Under tax law, you must keep records to document and explain your business transactions, including records relating to income tax, GST, payments to employees and business payments. You can keep records on paper or electronically.

“Good business records help you manage your business and make timely decisions.”

It is also a legal requirement to keep your business transaction records for a minimum of five years, so it’s important you maintain good record-keeping practices. The accounting records you must keep include all documents relating to the income and expenditure of your business, as well as compiling and preparing the business’s financial reports and income tax.

An effective method of recording all your financial transactions will not only assist you in reducing administration time but will also provide a means of keeping accurate records to assist you in the analysis of your business activities, lodging and paying tax, meeting all your reporting requirements, seeking finance and attracting potential investors, as well as being beneficial when selling your business.

A further consideration, which not many new business owners consider, is that one day you may get audited by the ATO. When that day comes, you will need to be able to support the financial and tax transactions you have reported on. Comprehensive and accurate bookkeeping records will help you to achieve this.

Take care of bookkeeping

If you decide to look after your bookkeeping yourself, accounting software can help you to accurately record your income and expenses, with features such as the ability to automatically upload your bank transactions on a daily basis and back-up your information.

If you decide to outsource your bookkeeping to a specialist bookkeeper, you simply hand over your paperwork to them and they will take care of it, freeing you up to spend time doing what you do best and focus on running your business. An outsourced bookkeeper can also act as a second pair of eyes to help keep your business on track, while using accounting software that has the ability for both you and your outsourced bookkeeper to view your information together, remotely.

Monitor cashflow

One of the main reasons businesses fail is not necessarily because they’re not making a profit (although this is, of course, important) but because they run out of cash.

ASIC’s published data on insolvencies reports that almost 50 per cent of insolvencies were caused by inadequate cashflow (ie they ran out of cash and were unable to pay their debts when they were due). Directors of companies have a specific responsibility and obligation to not trade while the company of which they are a director is insolvent.

To help avoid incurring cashflow issues for your new company, there are several initiatives that should be considered at the outset. These include:

• Implement accounting software to quickly generate invoices as well as record income/expense transactions, reconcile cash movements and provide detailed reports on outstanding debts.
• Set up automated bank feeds to allow ongoing and real-time visibility on your business’s updated cash position, with direct updates to your accounting software.
• Make it easy for customers to pay you, so you can get paid faster through direct payment technology such as point-of-sale software, online technology systems, mobile card readers, etc.

Take care of your taxes

This might seem obvious but unfortunately failing to set money aside to pay tax is one of the most common pitfalls that new businesses fall into. Particularly if you’re coming out of a paid job, you’re probably used to getting your taxes deducted straight from your pay packet by your employer. But now you’re in business on your own account, nobody is going to be deducting anything so you need to proactively manage your cashflow to set money aside for future tax bills.

Remember, with small businesses, cashflow is king. Even if you seem to be trading profitably, if your customers aren’t actually paying your invoices you’ll struggle to pay your debts, and one organisation you definitely don’t want to end up in debt to is the ATO.

You might also need to register for GST. For most businesses, you only need to register for GST if your turnover from your business (combined with any other business you run) exceeds $75,000.

But being self-employed also comes with some tax perks. For instance, you have access to all the tax concessions available to small businesses, including the full expensing of capital assets, which is available until June 30 2022. That means you can immediately deduct the cost of any plant, tools or equipment you use in your business, including items such as computers and even most motor vehicles.

This article first appeared in issue 33 of the Inside Small Business quarterly magazine

The post On the record appeared first on Inside Small Business.

Advertising and sponsorship

Costs to promote your brand and garner publicity for your business are deductible and can be claimed, as can advertising or sponsorship to sell ‘trading stock’ and to hire staff. Take care to ensure that the costs incurred do not fall within the definition of “entertainment”, which is not usually deductible.

Business travel

Travel for business purposes can usually be claimed. Keep all receipts and your itinerary or diary, and of course airline tickets. Note the nature of the travel, its purpose, and where, when and for how long (and look out for any personal activities that are mixed in, as these expenses are non-deductible).

Car expense deductions

You can claim a full deduction for any expenses your company incurs while running a vehicle, leased or owned, provided the vehicle is used only for business purposes. If your business operates as a sole trader or partnership, you can claim certain proportions of deductions for vehicle expenses, but they are subject to substantiation rules.

Fringe benefits

You can generally claim a deduction for any costs involved with providing a fringe benefit to an employee.

Home work claims

If your work is done from home, or is partly home-based, you can usually claim deductions for expenses such as interest, telephone, insurance and a portion of running expenses like heating, lighting or cleaning.

Insurance

Workers compensation insurance premiums are deductible, as are insurance costs for fire, business-use cars, public liability, theft and loss of profits.

Plant and equipment (depreciating assets)

Larger items like cars or even buildings can be claimed over time as depreciating assets. “Temporary full expensing” means that most items of a capital nature can be written off immediately, if acquired after 6 October 2020. And you may also be able to claim (either immediately or over a five-year period) certain capital costs in setting up or ceasing a business, as long as an outright deduction can’t be claimed for that expenditure.

Repairs, replacement, maintenance

A deduction is available for the upkeep of machinery, tools or premises used to produce assessable income (provided they are not “capital” costs). These deductions include things like painting, plumbing and electrical maintenance, upkeep to windows and fences, guttering and machinery maintenance. Generally, it means fixing defects, not totally replacing an item, and does not include improvements or work done immediately after acquiring an asset.

Salary and wages

You can claim a deduction for salary paid to employees or to yourself provided the salary is in respect of duties connected with the business. Partnerships can’t claim for salary paid to a partner, but a deduction is available for salary paid to other employees. Sole traders can’t claim for salary paid to themselves (and you can’t claim for amounts taken from the business for private purposes).

Telephones

For a telephone you use for business only, you can claim for calls and rental, but not installation. If the phone is used for both business and private calls, you’re able to claim all business calls and a proportional part of the rental. An itemised phone account will guide this, but you can also base the claim on using a representative four-week period to get an average rate for the whole year.

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