No small business owner enjoys doing paperwork, but we have some tips to ensure you get the most out of your tax while avoiding the wrath of the Australian Taxation Office (ATO).

Keep organised or lose deductions

Two of the most common mistakes businesses make at tax time are:

  1. Not keeping their financial records up to date.
  2. Failing to prepare a budget for the next financial year.

If you have a disorganised file of receipts and expenses, it’s both difficult and time-consuming to claim them as tax deductions. Likewise, if you frequently use a vehicle for business purposes but don’t keep track of fuel expenses (or throw out your receipts), you may not be able to claim them. The same goes for tools, equipment, protective clothing, home office bills, work-related seminars and more.

If you want to claim more than $300 in tax deductions, the ATO may ask for proof. Importantly, that proof must be kept for up to five years.

Stay on top of super

Many businesses put off paying the superannuation guarantee (SG) when cash flow problems strike, but failing to pay the tax owing by the due date can result in an SG charge, plus interest and administration fees.

For business owners who are proactive with super, payments are tax deductible in the financial year they are paid. So paying your super obligations before the due date will boost your tax return, while putting it off will push those deductions back another 12 months.

Don’t forget FBT

Fringe benefits tax (FBT) is payable on specific benefits you provide employees. It’s often missed as it has its own tax year ending March 31, and some employers are unsure about which benefits are taxable and which are not.

If your employees use company-owned vehicles for personal use, or you provide them with food or entertainment, or reduced-price goods, you may be liable to pay FBT. Failure to pay FBT can result in hefty ATO fines, so keep track of all employee benefits you provide.

Employees or contractors?

Mislabelling employees as contractors can land small businesses in serious trouble. If you hire a ‘contractor’ who works regular hours, does not supply their own tools, is paid for their labour and not towards a specific outcome, and works on a continuing basis and not on a contract-by-contract basis, they are legally considered an employee. Getting this wrong in your tax reporting can result in fines, interest and backdated taxes.

Taxes are not expenses

A common post-tax mistake is the incorrect designation of taxes.

“We often see small businesses designating tax payments made to the ATO as expenses,” says Jumpei Morita, Director at accounting firm Global Hub. “Each tax payment should be allocated within the applicable balance sheet item.”

Morita warns small business owners should claim only the interest portion of borrowings – not the principal. Also, only the business portion of an asset such as a motor vehicle should be claimed – not its private use.

Finally, Morita says owners should check whether bank balances are reconciled with bank statements on a monthly basis. This will avoid missed income or expenses come tax time.

Final thoughts

With a little attention to detail throughout the year – and seeking specialist help where necessary – EOFY need not be painful.

Also consider taking advantage of the federal government’s $20,000 small business tax break. If your business is profitable and turned over less than $10 million in revenue, you could be eligible to claim spend on assets as an immediate tax deduction under the simplified depreciation rules, which apply until 30 June 2018.