Top Four Common Mistakes On Tax Return

A business tax return is best prepared by someone who knows the ins and outs of your business. Hiring an accountant gives you peace of mind when it comes to tackling one of the most challenging tasks of running your business. However, an accountant does not guarantee immunity to mistakes. There are many reasons your business can fail on making a business tax return.

Not taking bookkeeping seriously

Poork bookkeeping has a negative effect on your business as it involves record-keeping. Your company tax return is computed based on your records and when the task is handeed over another bookkeeper who seems to run through everything including making necessary adjustments, things can get really mixed up. For a seasoned bookkeeper, these tasks are just a walk in the part not until tax time. When the ATO knocks on your door, checking your records is one thing that make bookkeeping a tedious task.

Nowadays, bookkeepers no longer spend too much time on reconciling bank accounts, chasing unpaid debts, reviewing reports and others. Cloud services such as Xero allows bookkeepers to deliver accurate reports and ensure that superannuation is paid up. These are simple and basic tasks, but they are the ones that business owners often miss out.

Not paying on time

Tax returns are usually due on May at the end of the financial year. Since your company has all the time in the world to prepare and lodge timely payments, there are still business owners who still lodge late. As a result of late payment, business owners suffer from penalties.

The good news is penalties can be avoided by ensuring that your tax affairs are in order. Having a good process is key to preventing problems associated with your tax returns. It is also imperative that you plan your tax bills in advance.

Taking out personal loans

Cashflow is an important aspect of your business and just because you are the business owner does not mean you can borrow money from your company. Before making any decisions of taking the cash, take tax rules into consideration. Taking money from your company to cover living expenses can impact your business. Speak with your bookkeeper or accountant so you can obtain sound advice and recommendation.

Not paying superannuation

Superannuation brings stress to business owners especially those who do not completely understand how it works. If you are still wondering whether or not you should pay super, checking out ATO’s employee/contractor decision tool will be a huge help. Knowing what you need to pay for will enable you to pay the superannuation on time.

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.