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.

Costly Bookkeeping Mistakes When Using Accounting Software

It is common for business owners who take care of bookkeeping tasks to commit mistakes. Some may not be too serious while others can be quite costly. These costly mistakes are usually committed when using accounting software.

Mistake #1. Creating Complicated Chart of Accounts

Do-it-yourselfer business owners tend to create complex chart of accounts by including unnecessary information, which can be both time consuming and hard to read. Two or three page report is an indicator that you are putting unnecessary things on your Profit & Loss account. When creating a report, you need to keep it simple by reviewing how you list your accounts. For instance, individual accounts for expenses must be consolidated. You can classify them as motor vehicle expenses. If you intend to make changes to your Chart of Accounts, make sure you run it by your bookkeeper or accountant.

Mistake #2: Changing Historical Transactions

Once you have completed month end or quarter end period and lodged BAS, making changes to historical transactions must be avoided unless you inform your bookkeeper or accountant about it. The changes you make can create serious problems. One example is when you record a purchase of an item including GST. Eventually, you discovered that a mistake has been made after the month end has been completed. Since the item was purchased privately, it should not include GST. This means that the business owner should pay back the GST claimed for the item. Be sure to follow your bookkeeper’s advice when making changes. Most accounting software has an option to lock the period at a certain date to prevent changing historical transactions. This deters you from making any unnecessary changes to the transactions.

Mistake #3: Using Incorrect Tax Codes

There can be a number of situations in which a business owner can use the wrong tax codes such as purchasing goods and services from overseas sources, insurance, vehicle registration expenses, legislations and so on. Your supplier should provide you a tax invoice, which shows the actual amount of GST that is payable. If you are purchasing goods or services from overseas countries that show tax on the invoices, make sure you consult with your bookkeeper.  These non-Australian businesses are not considered eligible for claiming tax. In case you are unsure if there is GST on your purchased item, you can simply create a tax code called QUE GST Query at 0%. This way, you will be able to record the transaction and ask your bookkeeper or accountant to review the entry.

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.

Tax Deductions Your Business Might Have Overlooked

Even in businesses, old habits die hard and when left unchecked, they can create a ripple effect on the most critical area of your business. When running your business, you need to see to it that you are sharper and smarter. The expenses you incur is often claimed as deductions. However, deductions for domestic or private expenses are not considered valid for claims. There are also some other expenses that are excluded. This is why you need to check the following as you may have overlooked them come tax time:

Prepay Expenses

Prepaying your expenses is one reason for overlooked tax deduction. Prepaying your expenses can be done to cover a time-frame, which should not exceed more than one year. The purpose of prepaying expenses is to bring forward your operating expenses before each financial year ends. Some examples of expenses you can prepay are insurance, training events, travel expenses, rent, phone and others.

Employee Deductions

Your employees’ salaries, bonuses, wages and even commissions taking place before the end of each financial year can be deducted. This can be done even if you have not physically made the payment to your staff by that date. The said payment still counts as work performed within the specified financial year despite the wages and salary not appearing in the PAYG payment summary of the employee until the next financial year.

Accounting and banking expenses

Bookkeeping, accounting and activity statement preparation are considered the most common deductions you make when running your business. Common deductions may also include marketing and general advertising costs. However, bank fees and charges are still overlooked.

Stock and Inventory

Everything counts with tax deductions and with that said it is important to check your stock and determine which ones are damaged or obsolete. Make sure you write it off or write it down because this practice will create a great impact on the trading stock’s value and your profit margins. Make sure you consider how to value your stock trading every financial year because there might be a possibility that you will be entitled to a tax deduction especially when your opening stocks have already exceeded the closing stock.

Bad Debts

Bad debts and financial loss can also be overlooked. As much as possible, you should speak to your financial advisor so you can discuss the steps you need to take to minimise the impact of the loss. Make an attempt to recover bad debts. You can also document the debt as evidence and your financial advisor can help you with the process.

It is imperative that you keep track of the tax laws and regulations as they change frequently. You can prevent issues with filing your tax claims if you aware of these changes.

Key Lodgment And Payment Dates

time-481450_1280Have you ever shouldered late fees and penalties as you were completely unaware of the important dates for payment and lodgment? While it is quite understandable that you are busy focusing on other aspects of your business, it is also important that you know the key dates especially when it comes to paying your taxes. Many business owners have gotten themselves into trouble due to late payments. It is essential to every business owner to take note of important payment and lodgment dates to avoid penalties. Your bookkeeper should see to it that you do not miss these following dates:

July 2016

21 July

Lodge and pay June 2016 monthly activity statement.
Lodge and pay 2015–16 quarter 4 PAYG instalment activity statement for head companies of consolidated groups.

28 July

Lodge and pay quarterly activity statement for quarter 4, 2015–16 – paper.
Pay quarterly instalment notice (form R, S or T) for quarter 4, 2015–16. Lodgment is only required if you vary the instalment amount.
Employers must make super guarantee contributions for quarter 4, 2015–16 to the funds by this date.
Employers who do not pay minimum super contributions for quarter 4 by this date must pay the super guarantee charge and lodge a Superannuation guarantee charge statement – quarterly (NAT 9599) with us by 28 August 2016.

Note: The super guarantee charge is not tax deductible

31 July

Lodge TFN report for closely held trusts for TFNs quoted to a trustee by beneficiaries in quarter 4, 2015–16.
Lodge Venture capital deficit tax return for June balancers.
Lodge Franking account return for 30 June balancers when there is an amount payable.

August 2016

14 August

Lodge the PAYG withholding payment summary annual report for:
large withholders whose annual withholding is greater than $1 million
payers who have no tax agent or BAS agent involved in preparing the report.

21 August

Lodge and pay July 2016 monthly activity statement.

25 August

Lodge and pay quarterly activity statement for quarter 4, 2015–16 – tax agents and BAS agents – if you are lodging using:
electronic lodgment service (ELS)
electronic commerce interface (ECI)
Tax Agent Portal
BAS Agent Portal
practitioner lodgment service (PLS).

28 August

Lodge the Superannuation guarantee charge statement – quarterly and pay the super guarantee charge for quarter 4, 2015–16 if the employer did not pay enough contributions on time.

Employers who lodge a Superannuation guarantee charge statement – quarterly can choose to offset contributions they paid late to a fund against their super guarantee charge for the quarter. They will still have to pay the remaining super guarantee charge to us.

Note: The super guarantee charge is not tax deductible

For help working out the super guarantee charge and preparing the Superannuation guarantee charge statement – quarterly, use our Super guarantee charge statement and calculator tool.

Lodge Taxable payments annual report – building and construction industry.

September 2016

21 September

Lodge and pay August 2016 monthly activity statement.

30 September

Lodge the PAYG withholding payment summary annual report for payers whose registered agent (BAS agent or tax agent) helped prepare the report.
If a payer has only closely held payees and their tax agent helps prepare their report, they may be eligible for a concession to lodge this report by the due date of their tax return.
Lodge Annual TFN withholding report 2016 when a trustee of a closely held trust has been required to withhold amounts from payments to beneficiaries.

October 2016

21 October

Pay annual PAYG instalment notice (Form N). Lodgment is only required if you vary the instalment amount or use the rate method to calculate the instalment.
Lodge and pay quarterly PAYG instalment activity statement for quarter 1, 2016–17 for head companies of consolidated groups.
Lodge and pay September 2016 monthly activity statement.

28 October

Lodge and pay quarterly activity statement for quarter 1, 2016–17 – paper lodgments.
Pay quarterly instalment notice (form R, S, or T) for quarter 1, 2016–17. Lodgment is only required if you vary the instalment amount.
Employers must make super guarantee contributions for quarter 1, 2016–17 to the funds by this date.
Employers who do not pay minimum super contributions for quarter 1 by this date must pay the super guarantee charge and lodge a Superannuation guarantee charge statement – quarterly (NAT 9599) with us by 28 November 2016.

Note: The super guarantee charge is not tax deductible

Lodge and pay annual activity statement for TFN withholding for closely held trusts where a trustee of a closely held trust withheld amounts from payments to beneficiaries during the 2015–16 income year.

31 October

Final date to appoint a tax agent to the income tax role for any new client. If you advise us of your appointment after this date, the client’s 2016 tax return may not be covered by your lodgment program.

Note: The lodgment program is a concession to registered agents. We can ask for documents to be lodged earlier than the concessional due dates.

Lodge tax returns for all entities if one or more prior year returns were outstanding as at 30 June 2016.

Note: This means all prior year returns must be lodged, not just the immediate prior year

If all outstanding prior year returns have been lodged by 31 October 2016, the system will reset the 2016 tax return due date as in the normal program.

SMSFs in this category must lodge their complete Self-managed superannuation fund annual return by this date.

Lodge and pay Self-managed superannuation fund annual return (NAT 71226) for new registrant (taxable and non-taxable) SMSF where we have advised the SMSF the first year return will have a 31 October 2016 due date.

Lodge tax return for all entities prosecuted for non-lodgment of prior year returns and advised of a lodgment due date of 31 October 2016:

Some prosecuted clients may have been given a different lodgment due date – refer to the letter you received for the applicable due date.
Payment (if required) for individuals and trusts in this category is due as advised in their notice of assessment.
Payment (if required) for companies and super funds in this category is due on 1 December 2016.

SMSFs in this category must lodge their complete Self managed superannuation fund annual return (NAT 71226) by this date.

Lodge Annual investment income report (AIIR).

Lodge Departing Australia superannuation payments (DASP) annual report.

Lodge Franking account tax return when both of the following apply:

The return is a disclosure only (no amount payable).
The taxpayer is a 30 June balancer.

Lodge PAYG withholding annual report no ABN withholding (NAT 3448).

Lodge PAYG withholding from interest, dividend and royalty payments paid to non-residents (NAT 7187) annual report. This report advises amounts withheld from payments to foreign residents for:

interest and unfranked dividend payments that are not reported on an Annual investment income report (AIIR)
royalty payments.

Lodge PAYG withholding annual report – payments to foreign residents (NAT 12413). This report advises amounts withheld from payments to foreign residents for:

entertainment and sports activities
construction and related activities
arranging casino gaming junket activities

Lodge lost members report for the period 1 January – 30 June 2016.

Lodge TFN report for closely held trusts for TFNs quoted to a trustee by beneficiaries in quarter 1, 2016–17.

November 2016

21 November

Lodge and pay October 2016 monthly activity statement.

25 November

Lodge and pay quarterly activity statement for quarter 1, 2016–17 if you are lodging using:
electronic lodgment service (ELS)
electronic commerce interface (ECI)
Tax Agent Portal
BAS Agent Portal
practitioner lodgment service (PLS).

28 November

Lodge Superannuation guarantee charge statement – quarterly and pay the super guarantee charge for quarter 1, 2016–17, if the employer did not pay enough contributions on time.

Employers who lodge a Superannuation guarantee charge statement – quarterly can choose to offset contributions they paid late to a fund against their super guarantee charge for the quarter. They will still have to pay the remaining super guarantee charge to us.

Note: The super guarantee charge is not tax deductible

For help working out the super guarantee charge and preparing the Superannuation guarantee charge statement – quarterly, use our Super guarantee charge statement and calculator tool.

December 2016

1 December

Pay income tax for taxable large/medium taxpayers, companies and super funds. Lodgment of return is due 15 January 2017.
Pay income tax for the taxable head company of a consolidated group with a member deemed to be a large/medium taxpayer in the latest year lodged. Lodgment of return is due 15 January 2017.
Pay income tax for companies and super funds when lodgment of the tax return was due 31 October 2016.

21 December

Lodge and pay November 2016 monthly activity statement.

Source: https://www.ato.gov.au

Tax Mistakes That Can Put Your Business In Peril

If you are afraid of incurring additional expenses, you will surely allow bookkeeping to take a backseat and carry every responsibility for your business just to save money. However, skimping on bookkeeping, would mean that your business is not immune to mistakes and it can certainly affect your business during tax time. There are many mistakes that small business owners often commit but these three are the most common.

Late payments

Some business owners make a payment when they file their tax returns but this is a common mistake many businesses commit. Owners are supposed to make quarterly estimated tax payments and should be mindful of the due date. When payments are not made in a timely manner, you can trigger an audit from the ATO and this will result in paying tax penalties and interest charges once you file your tax return.

Misclassifying employees

Determining whether an individual should be considered a contractor or an employee is not as complicated as some small business owners may think. You will need to take a few points into consideration because misidentifying a person can lead to interest for non-payment and penalties in terms of employment taxes.

Poor Record keeping

Although you might be tempted to make a mental note of every transaction for the belief that you can retrieve information instantaneously, this habit can do more harm than good. There are instances when businesses mix personal with business expenses and this can really spell trouble. When you rely on bookkeeping in a shoebox, it can have a serious effect on your business as there is no way to find out whether the numbers on your report are accurate. The numbers can either be lower or higher than the expenses you have incurred.

These mistakes can still be corrected by ensuring that you keep tabs on entertaining and travel expenses. So long as business was discussed, you can deduct the cost but you need to write notes on the receipt and indicate the people you were meeting with and the business that was discussed. When it comes to filing, you can also ask for an extension if you need more time. However, extra time to file will also mean extra time to pay. You need to set your expectations because you will surely owe money and you need to estimate the money you owe for the extension. It is quite challenging to keep track of your business but you cannot afford to make these mistakes as they can impact your taxes.