ATO Tax Lodgement: What Is Your Excuse?

October 31 is the deadline for lodging tax returns and yet some people are still making up the boldest excuses just to delay payment.

With only less than a week left to lodge returns, the ATO expects to receive the lamest excuses for failing to lodge tax returns on time. In recent years, a company claimed that their paperwork flew out the car window when they were on their way to see the accountant. There was even an excuse that the business owner had a condition that only permits 30 minutes of work each week.

There people that will even go to a certain extent of putting the blame on other people. One late lodger claimed that the reason for the delay was because his wife burnt everything that belonged to him including his tax records. Another ludicrous reason was that the lodger’s accountant has gone to prison while he was still working on the tax returns. He could not access the computer either.

A back injury also deterred another confused Aussie from lodging tax returns in a timely fashion. The lodger failed to lodge between 2008 and 2015 due to the injury he had to endure. Others are bolder and would even use the recent death of his father as an excuse for the delayed lodgement. Although this sounds reasonable, the ATO found out that he previously used the same excuse.

The ATO has made it easier for Australians to lodge their tax returns. If they cannot lodge on time, there are still ways that the ATO can provide help. Online options and apps are also available so lodgers no longer have to leave their office for a short trip to the ATO. Data-matching technology makes it faster for everyone to fill out their information including dividends, bank interest and wages. The pre-filled information bypasses all the hard work that you need to undergo in the past. All you have to do is to double-check the information to ensure it is correct.

The ATO encourages early lodgement of tax returns because, in the event of making mistakes, errors can still be corrected before the deadline. The ATO also advised lodgers to get in touch with them should they have problems with paying their tax debt. They are willing to create a payment plan tailored to the lodger’s ability to pay. Setting up a payment plan online is also possible, but it will still depend on the lodger’s situation.

What Are The Basics In Starting A Business In Australia?

Starting a business can be both exciting and challenging. It involves a lot of preparations and for you to cross the finish line, you have to focus on your goal regardless of the demands and distractions. Since a myriad of requirements must be complied in running a business, creating a checklist ensures you do not miss out any essentials. Aside from marketing and product development, you also have to think about finance and other important issues involving your business. Here are the steps to setting your business right:

1. Determine the business structure that suits you.

Before you start a business, it is important to figure out the business structure, which is suitable to you. Whether you want to be a sole trader or in a partnership, trust or company identifying the business structure that works for you will help you weigh the pros and cons of each type.

2. Get your business registered.

Once you have chosen a business name, you need to get it registered before considering having letterheads, business cards, websites and logos. This is to ensure that the name is accepted by the Australian Securities and Investments Commission (ASIC). You will also have to decide whether or not your logo or business name should be registered as a trademark.

3. Secure an ABN

When you are registered to collect GST, you will need an Australian Business Number (ABN). This can be secured from Australian Business Register’s website. You will also need to apply for a Tax File Number (TFN) from the ATO if you are going to open a partnership.

4. Be familiar with PAYG withholding responsibilities

For employees to make PAYG payments, their salaries must have taxable amounts. Without familiarising yourself with PAYG, you will never know how the payments are deducted. It is also important to seek advice from your accountant to ensure your business meets its tax responsibilities.

5. Check permits, licenses and legal requirements

Your business cannot operate without securing national or local licenses. Aside from licenses, you will also have to check out the ATO’s fuel scheme information to find out if your business is eligible for fuel tax credits. Being familiar with the laws that apply to different products, services and businesses is also essential. You can check out Competition and Consumer Act or visit Australian Government Department of Industry to know your legal obligations. These resources are going to help you gain a deeper understanding about privacy laws, Australian consumer law and other legal responsibilities.

Tips For Avoiding ABN Cancellation

If you are operating a small business, one of your responsibilities as a business owner is to make sure that it generates profit. Once ATO deems your business to be more of a hobby than an enterprise, ABN or Australia Business Number will be cancelled. If your business has also violated the terms and conditions of setting up a business and you are no longer operating your business you are most likely to have your ABN cancelled as well.

There are ways to avoid ABN cancellation and as a business owner, you need to make sure that you have a viable plan and effective business management. Even if you are running a small business, you can still make sure that it is going to be in good hands if you consider hiring a bookkeeper.

A bookkeeper prepares the financial statement and report so business owners will have an idea where their business is going. A bookkeeper also gives business owners peace of mind knowing that their business has enough to survive. Although having enough is not a proof that your business is going to be profitable, you will have an idea of the aspects that you still need to improve.

A bookkeeper prevents ABN cancellation by ensuring that you have a steady cash flow. While watching over your cash flow is not deemed be-all-and-end-all of running a business, ensuring that your cash flow is not in danger can help you maintain its stability. With the help of your bookkeeper, your assets and actual liability are going to be separated so you will know the sum of money that goes to your business savings account. It is also easy to determine whether or not you are making a profit or a loss once your financial statements and reports are organized.

You may also have to take various financial factors into consideration

• Reconnect With Your Associates
When it comes to networking with people, you need to make sure that you have a continuous or ongoing process. Consider reconnecting with your business associates as you can get advice from them especially when it comes to creating viable action plan.

• Build New Connections
Aside from reconnection with your associates, you should not also forget to build new connections. Make sure you have two or three acquaintances that you can build a good working relationship with. You should give importance to community as it can serve as your strong system of support especially for tough times.

• Assess Your Goals
If it has been a year since you opened a small business, make some assessment if you have achieved all of the goals you set. If there are goals which you have not accomplished, determine the factors that deterred you from accomplishing those goals.

• Re-Evaluate Your Spending Habits
Unnecessary purchases can also affect your business. Assess your spending habits and if you find out that you made purchases on impulse, try implementing new measures so you can prevent unnecessary spending. You may also speak to your bookkeeper for recommendations. With these simple changes, your business can make a difference.

Simple Steps To Prevent Missing Tax Filing Deadline

Getting all the tax details in order can be a difficult tasks if the tax return deadline is quickly approaching.

However, this is not an excuse to miss the deadline because it can result in incurring penalties. Following great practices can help you file your tax return in a timely fashion. It only takes 5 steps to ensure you do not miss the tax filing deadline.

1. Correct discrepancies on your tax statements

Incorrect statements may be one of the reasons you miss tax filing deadline. You can still do something about these discrepancies by putting some pressure on your bookkeeper to send the documents you need or correct tax statement errors. Your tax documents must be available before the deadline to ensure you file your taxes in a timely manner.

2. File your tax return online

Since you now have the option to file online, take advantage of the opportunity to file your tax retun right away. Once you file your tax return, it will be processed within 24 hours.

3. Submit an extension

File an extension to prevent filing an amended return. The extension allows you to buy some  time so you can deal with your tax statement. If you have enough time to check your tax statement, it will be easier for you to get your taxes filed correctly. This is a great option for those who cannot track down corrected tax forms. However, you still have to keep in mind that if you owe any tax, you will still have to pay the estimated balance on the required date.

4. Pay as much of the balance as possible

Keep your penalty charges and extra fees to a minimum by paying as much of the tax balance as possible. You can also apply for an installment agreement to pay the remaining balance. If your application for installment agreement is approved, you will no longer have to worry about paying interest charges and excess fees.

Some business owners also choose to pay the tax balance with a credit card. This option saves time and money as you do not have to pay for high interest rates and fees that the ATO charges.

5. Create a system

If you do not want to get caught by the same cycle of delayed tax payments, be sure to consider setting up a system for next year. A good tax system prevents delays and minimises stress. Timely filing of tax return gives you peace of mind as you no longer have to worry about paying for penalties.

Payroll Challenges Most Small Businesses Face

Once you hire staff for your business operation, you need to make sure that you know the details of payroll. Employing someone is not as simple as having a verbal agreement. There should be a fair amount of initial preparation including business relations and business processes. There are many challenges that business owners face when hiring employees, here are the most common.

1. Superannuation Obligations

Superannuation only applies to ordinary time earnings However, superannuation can be applied to commissions, bonuses, loadings and allowances. For contractors that are sole traders, it is also important to make a payment for superannuation depending on the working arrangement’s nature.

Some business owners may consider a worker as a contractor simply because of invoicing and their services are only used sporadically. However, ATO will still consider the employee  for superannuation purposes. Using the online contractor decision tool, the ATO will determine if superannuation still applies to the employee. It is important to pay superannuation on time to avoid penalties. The director can also be held liable for any late super, which is not paid for by the company.

2. Pay Slips and Record Keeping

It is mandatory for business owners to keep records of receipts for a period of 7 years. The records that should be kept include the pay records, leave records, hours worked super contribution, payment details and others. These records must be handled with confidentiality. When it comes to pay slips, employees must receive them within one working day of pay day. In case the employee is on leave, certain information must be included.

3. Taxing Correctly

These days, small business bookkeeping software makes it easy for employers to calculate employees’ tax. However, the software is not capable of correctly taxing unusual payments such as commissions, terminations and bonuses. If these are not properly reviewed, it can lead to either overtaxing or undertaxing employees. For unusual payments, the tax must be calculated manually.

4. Default Superannuation Fund

It is mandatory for employers to provide a choice of superannuation to workers whether they are employees or applicable contractors. In case the worker does not select a fund, superannuation contribution must be paid somewhere. The default fund will be used to make a payment. It is the employer that selects the default fund.

5. Payment Summaries

There are cases when payments to employees are not taxed or set-up correctly. This only implies that you are taxing a worker for a payment, which is considered tax free. The employee may not get a refund even especially if it is reported incorrectly on the annual Payment Summaries. The money that is supposed to be awarded to employees will end up going to the ATO if correct payroll is not set up.

Is There A Way To Keep Your Tax Bill Down

Paying taxes is every business owner’s obligation. Miss a payment and you will get yourself into hot water with the ATO. This is something you do not want to happen. Tax may be deemed as a complicated subject matter because of the responsibilities you need to fulfill. However, it is actually much simpler than you might think. If you are going to do your own research, you will come to realise that there are still ways you can keep your tax bill down.

Pay Superannuation Contributions

It is important for employers to make a payment of superannuation contributions withing 28 days of the end of the quarter. For instance, all June quarter superannuation contributions must be paid by June 30. Doing this can accelerate your tax deduction. You should also keep in mind that the only way a tax deduction will be available is if you have actually paid the contributions, cleared them in the business bank account and the employee’s have received super fund before June 30. It is also necessary to pay any other outstanding amount before year-end.

Pay Bonuses To Your Employees

You have to put a properly executed bonus plan in place if you intend to pay bonuses to your employees. This plan should be executed by June 30 so you will be able to claim the deduction this year. A deduction will be available for employee bonuses if you have incurred the expense before year-end. No deduction will be available if your organisation failed to calculate or authorise the amounts of any bonuses.

Write Off Bad Debts

Insolvency can really hurt a business, but it can be inevitable. If this happens, you can write off a debt for the tax deduction to be available. Bad debts are the ones left unpaid. This is considered to be an allowable deduction so long as it was included as assessable income in a previous or current income year. What you can do is go through your debtors list for you to find out if there are any that you believe cannot make a payment. You need to write off those debts by June 30 so you can claim the deduction this year. You will also have to keep a written record as proof that the debt has been written off.

Pre-Pay Business Expenses

Another way you can get a tax deduction is when you consider pre-paying business expenses. For this deduction, the expenses must cover a period of no more than 12 months. The expenses included in this category are the insurance premiums, internet and telephone services, rent or leasing charges and more.

The Benefits Of Lodging Your Tax Return Online

Filing your tax returns in a timely manner should be observed to avoid penalties and fees. You can also get a good impression from the ATO if you do not fall behind your schedule. Tax returns cover the financial year from July 1 to July 30. The due for lodgement of tax returns is by October 31. There are various ways you can lodge your tax return and the most convenient and easiest way is by using MyTax. Since MyTax is web-based, you have the option to lodge your tax return from any device be it your computer, tablet or smartphone. Make sure you have a myGov account linked to the ATO to use this option.

Why Lodge Online

  • By late August, the information from your bank, employer and government agencies will be pre-filled and what better way to do this than to opt for the online option.
  • When it comes to protecting your sensitive information, myTax uses online banking encryption to ensure that your information is safe from data breaches.
  • Regardless of the time you wish to lodge your tax return, myTax is available 24/7.
  • You can also get your refund within 2 weeks.
  • Even sole traders can take advantage of myTax because it is available for all individuals who wish to lodge their tax return online.

The upgrades and features to expect in 2016 include:

  • fully integrated tools and calculators
  • ability to amend or lodge prior year returns
  • myDeductions data automatically loads into your return
  • new online tools to records capital gains and depreciation
  • helpful messages that will guide you through lodgement

Pre-filling your online tax return

Pre-filling your tax return means partially completing the tax return by automatically loading information through myTax. The information you will find in your pre-filled tax return are the current year information from the organisations that report to the ATO. These usually include government agencies, employers and banks. The data from your previous tax returns and account activity are also supplied.

You can review your pre-filled information and supply any missing details. You can also update incorrect details. The purpose of pre-filling is to make the process of lodging your tax return easier. It also ensures that the information is complete and accurate. Once you report organisations report to the ATO, the pre-filling information will be available within a couple of days. The information is made available by early August.

Pre-filling is beneficial because it enables you to resolve discrepancies before you decide on lodging your tax return. Checking tax returns for any discrepancies is important because the ATO checks that the information you have provided matches the information your report on your tax return.

Common Superannuation Mistakes

If you are running a small business, one of the most essential employment obligations you should fulfill is the superannuation. Aside from paying super contributions for eligible employees, it is also considered a key incentive area for your employees. One of the best practices to follow so you can prevent problems with superannuation is generating report of bulk payments and regular pay cycle. When you have already paid the super contributions, you need to process and maintain the employee records related to superannuation. However, there are still instances when business owners fail to follow the correct process. Here are the common mistakes often committed when it comes to complying with superannuation laws.

Mistakes To Avoid According To The ATO

  • Missing the due dates
  • Failing to understand when super should be paid for workers
  • Failing to pay the required amount of super for employees
  • Failing to pass on the employees TFN to their super fund
  • Error recovery

These Mistakes Can Be Avoided By Following These Rules:

  • Be sure to calculate income correctly
    Super Guarantee contributions are based on the income of your employees. This is why you need to see to it that their income is calculated correctly. Since the contributions are set as a percentage of regular Ordinary Time Earnings, it is important to note that shift loadings, paid leave, allowances and commissions are included in the regular wage of the employee.
  • Avoid influencing an employee’s choice of fund
    You are not allowed to make changes to the employee’s choice of fund unless you hold a Financial Services Licence. The employee will be the one to find out how to join a fund or get product information. If the employee needs additional information about their choice of fund, you simply direct them to government websites so they can make a comparison of different super funds.
  • Pay your employees’ superannuation guarantee
    Any eligible employees must have a compulsory contribution or Super Guarantee contribution, which is paid directly to employees nominated super fund. It is the employer’s obligation to make Super Guarantee contributions. It is a percentage of the employee’s regular income. As of 2015/16, the Australian Government has set the rate at 9.5% of regular income.

Superannuation Cut-Off Dates

When paying superannuation contributions, an employer must also take note of the cut-off dates. Contributions must be paid at least four times a year. For the 1st quarter covering July 1- September 30, the cut-off date will be on October 28. for the 2nd quarter covering the period October 1 to December 31, the cut-off date will be on January 28. For the 3rd quarter covering January 1 to March 31, the cut-off date will be on April 28. For the 4th and final quarter covering April 1 to June 30, the cut-off date will be on July 28.

BAS Errors You Need To Avoid

When it comes to preparing and lodging Business Installment Activity Statements (BAS), you might be unaware of the mistakes you have already committed. It is important to pay heed to these statements and make sure you avoid these common mistakes.

1. Selecting the cash method

Do you understand the implications of a turnover? Perhaps, you need to be aware of these things because they play a critical role when it comes to registering for GST with the ATO. If your business has a turnover of less than $2 million, you need to select whether you are going to use the cash or accrual accounting method. More often than not small businesses opt for the cash method, but this may not always be a good choice. For cash-based businesses that have no debtors and creditors to pay, the accrual method is a great option to consider. This option allows you to claim the GST back on purchases immediately. You will not hurt your cash flow this way. Make sure you update your bookkeeping system with this method and correct reports must be printed.

2. Not declaring the wage amount when preparing a quarterly BAS

If you are withholding more than $25,000 per annum in PAYG Withholding from your employees, the ATO will decide to move you to a lodgement cycle which is on a monthly basis. The advice will be done in writing. Once advised, you will need to lodge monthly Instalment Activity Statements (IAS) and quarterly Business Activity Statements (BAS). You should also take note of the lodgement schedule for GST and PAYG. GST must be reported once a quarter while PAYG should be reported once a month.

3. Varying your PAYG Income Tax Instalment without the accountant’s advice

When calculating your tax amount, the ATO is usually working about one to two years behind the actual amount you should be paying. You have to understand that circumstances can really change over these years especially when businesses grow or shrink. These circumstances may lead to changing your income tax instalment amount. You need to check with your accountant or bookkeeper before you consider revising the amount paid. If you choose to vary your instalment downwards without the advice from your accountant, you may end up paying fines and penalties.

4. Failing to lodge by the deadline

Take note of the lodgement dates so you will no risk falling behind. For BAS, you need to lodge on the 28th day of the month following the quarter except for the December quarter where the due date is moved to 28 February. For businesses lodging via a Tax agent or BAS agent, you will be given an extra lodge in addition to your lodgement date. Avoid late lodgements as the ATO will fine you $180 for each month of delayed submission of BAS.

Modern Bookkeeping For New Business Owners

Bookkeeping can be an entrepreneur’s pain point if there is no proper process put in place. While you can certainly resort to DIY bookkeeping, the result can be disastrous once you have lost track of the most important details that should be in your financial report. Mention the word ‘taxes’ and it will sure bring chills to any business owner. Aside from the physical pain for paying a percentage of your hard earned income, you will also have to ensure that you agree to the term and conditions so you do not trigger an audit from the ATO. There are some questions that may linger in your mind regarding taxes and not knowing how to solve them can create a negative effective on your business. This is where a modern bookkeeper comes in.

A bookkeeper will help you keep track of your expenses and identify which expenses are considered eligible for write-offs. They will also help you keep track of your income especially for payments coming in from various sources. While these tasks can be overwhelming, your bookkeeper will help you ensure that you will not be intimidated by taxes. When it comes to taking care of your taxes, you just need to take it one step at a time. First, you need to break down your income sources and break them into payments. Your bookkeeper will help you track the payment transaction as you go and track the every single expense that you incur while you operate your business. Once you have these two figures, the next thing you should do is to determine the net loss or profit of your business.

Your bookkeeper should also keep track of your working hours on a weekly basis as this can help you break down your hourly rate. Tracking these things on excel will definitely suffice, but it is also much better to track them using bookkeeping programs. When you have complicated rules, it is really easy to get overwhelmed. This is why it is best to personalise rules and simplify the process as much as possible.

You must also understand that there is no such thing as ‘one size fits all’ approach. Make sure you keep track of your taxes and do not consider a professional bookkeeper as an additional expense. Bookkeeping will no longer be a pain point of your business if you know how to make the process simple with the help of a reliable bookkeeper.