5 common tax mistakes that small businesses often overlook
LAST UPDATED ON: October 21, 2021
Are you a small business owner in Victoria? Learning the basics of paying and filing your taxes is important, but did you know that there are many common tax mistakes that you're probably making? Here are 5 tax mistakes that small businesses often overlook.
1. Not filing tax returns on time
The tax year in Victoria ends on June 30th, and tax returns should be filed to the government by October 31st of each year, or a penalty will be imposed. If your business is registered for GST, it's also important to file GST returns every quarter. When tax forms aren't filled out correctly or at all, additional penalties can apply when tax is due. In addition to these penalties, interest accumulates when tax isn't paid in full by the deadline. The amount of interest accrued depends on when you pay your tax bill through an authorized method such as electronic transfer or cheque.
2. Treating tax as a form of spending instead of an investment
While tax is a cost every business has to deal with, you should consider tax as an investment in your company. Small businesses sometimes make the mistake of viewing tax as a line item on their profit and loss statement, not realizing that tax contributes to the profitability of their company by creating jobs and improving infrastructure. Tax is the lifeblood of the economy and paying tax in Victoria contributes to economic growth and helps small business owners like yourself.
3. Not taking advantage of tax deductions or tax rebates available for small businesses
In addition to tax credits designed to encourage specific types of business development, there are tax deductions that apply specifically to small businesses. In order to claim these tax deductions, however, records have to be kept – so save those receipts! Businesses can also save money by using tax software, tax calculators, and tax planning tools to manage their tax affairs.
4. Not seeking tax advice from a professional
While it is possible to file your tax returns without outside help, some business owners feel more confident and secure knowing they have an expert on their side helping them through the process. The government of Victoria has information about different amounts that businesses can expect to pay in taxes based on their size and revenue, but this information should be used as a guideline only. To ensure you're not missing out on any deductions or rebates available for small businesses as well as to ensure you're paying the least amount of tax legally possible, seek tax advice from a professional accountant that specializes in small business.
5. Not staying informed about tax rules and regulations
Business tax rules and regulations change from time to time, so it's important to be aware of current tax policies that could affect your business. You can stay up-to-date on tax rates and other tax information by visiting the government website at victoria.ca/taxes once you have registered for My Business Account. In addition to tax laws, other tax obligations such as GST also change over time, so make sure you have a complete understanding of how these work for your business
The 5 tax mistakes mentioned above are just some of the common tax mistakes often overlooked by small businesses everywhere, including those in Victoria. There are also many others that can apply, including failing to claim all available deductions or rebates both at home and abroad. While you might think only large companies have enough employees or infrastructure to warrant tax being invested back into them, this isn't the case! By keeping records and receiving assistance from a professional accountant, tax can become an investment in your business and the economy, not a cost.
The tax advice provided in this article was accurate at the time of publishing and may change over time due to changes in legislation or professional tax advice available when reviewing individual tax affairs. While every effort has been made to ensure this tax information is accurate at publication, it can't replace specific tax advice tailored to your personal tax situation. If tax advice is required on the tax implications of a specific transaction or matter, please contact an Australian tax agent or tax professional. The information contained in this article must not be used without first obtaining independent professional tax advice from your tax adviser who can advise you of your tax obligations and how the legislation applies to you