Yahoo Finance 3 major mistakes Aussie small businesses 'can’t afford to make' in the new financial year
Two Sides Accounting founder Natalie Lennon said tax returns, cash forecast and deductions should be on every business owner's list.
Aussie small businesses have been warned about the pitfalls of heading into a new financial year. There's no denying the end of one financial year and the start of another is a stressful and busy period for plenty of businesses.
Two Sides Accounting founder Natalie Lennon told Yahoo Finance while it's important to get tax returns filed, Aussies need to also keep one eye on the future. She said failing to plan ahead can be disastrous.
"With a little preparation and forward planning, small businesses can look to avoid the mistakes made in FY24 and kick off the new financial year on the right foot," she added.
Accounting software company Xero recently found an overwhelming amount (83 per cent) of small Aussie businesses find one aspect of the end of the financial year stressful and more than half (56 per cent) have made a "mishap" in their preparations for tax time.
Lennon has provided three major mistakes that business owners "can't afford to make" in the next 12 months.
RELATED
Leaving your tax return to the last minute
While there are plenty of Aussies who raced to submit their tax returns the moment the calendar ticked over to July 1, there are many others who wait weeks or even months to lodge theirs.
Lennon told Yahoo Finance that's all well and good for individuals, but businesses have to be a bit more savvy.
"Leaving it until the very last minute will only add to the stress," she said. "Lodging your tax return well in advance of the 31 October deadline will give you ample time to plan for your payment.
"The ATO is far more forgiving if you lodge on time and ask for assistance with a payment plan, and they also charge interest and penalties on late lodgment and payment of taxes."
October 31 is the deadline for taxpayers to either lodge their own tax returns for the 2023-24 financial year, or engage with a registered tax agent.
If you miss the self-lodge deadline, you'll be hit with a $330 fine. This increases by a further $330 every 28 days the return is late, up to a maximum of $1,650.
Lennon said businesses can get an extension up to May 15 next year, but that's only if you go through a tax agent and contact them before the October 31 deadline.
Don't run your business 'blindly'
Lennon explained that not outlining your cash flow for the full 12 months can cause businesses to get hunkered down too much in day-to-day trading.
"Without having a cashflow forecast in place for the next 12 months mapping out your expected income and expenses, as well as your estimated tax payable, you are running your business blindly," she said.
She said the two mistakes she often sees with this issue are:
Business owners paying themselves too much money and not having enough to pay their tax and GST liabilities and employee entitlements, such as superannuation
Owners not paying themselves enough money, and leaving too much working capital in the bank.
"It’s usually not in your best interest to leave too much money in your company bank account as it could be put to better use, such as to offset your mortgage or to reinvest in the business," she added.
Knowing how much money you plan on bringing into the business can help you determine whether you can get another staff member or whether you raise or drop your prices.
Understand the tax deductions available to you
There are many tax deductions for individuals and business owners to take advantage of (here are some of the ones you might or might not have heard about).
Xero discovered 31 per cent of business owners had forgotten to claim a significant tax deduction recently. While they might not be much individually, Lennon said it can provide a big cash boost for some Aussies.
Here's a list of some of the deductions the Two Sides Accounting founder believes every business owner needs to know:
Your car expenses if the vehicle is used for business-related purposes
You can claim a percentage of your rent and electricity bill if you run a home-based business.
There's a tax deduction for superannuation payments made on time for your employees
You can also claim a deduction (in your personal tax return) for your personal super contributions
Lennon added there are several working-from-home deductions that you can make, but the rules around what you can and can't claim changed last year. You can find out more here.
Get the latest Yahoo Finance news - follow us on Facebook, LinkedIn and Instagram.
