With tax time around the corner, it’s time to start getting your records in order for your 2023-24 tax return. The Australian Taxation Office (ATO) wants to make it as easy as possible. They have a range of information, digital tools, and services to help small business owners and operators get their tax and super right. Here are some helpful tips for you to keep in mind this year.
Remember the 3 Golden Rules for Claiming Deductions
You can claim a deduction for most expenses you incur running your business, as long as they are directly related to earning your assessable income. If you’re not sure about what to claim, here are the 3 golden rules:
- The expense must be for your business – not for private use.
- If the expense is a mix of business and private use, you can only claim the portion that is used for your business.
- You must have records to prove it.
Do You Have a Home-Based Business?
If you run your business from home and have a dedicated area set aside as a ‘place of business,’ you may be able to claim occupancy and running expenses. If you don’t have an area set aside as a place of business but do some work from home, you may still be able to claim a deduction for some of your expenses relating to the area you use.
For the 2023-24 income year, you may be able to use the fixed rate method. This is a fixed rate of 67 cents for every hour you work from home that covers specific expenses such as electricity, internet, and phone. If you use the fixed rate method, you won’t be able to claim an additional separate deduction for the expenses already covered by this method. However, you can separately claim a deduction for the decline in value of depreciating assets, such as laptops, mobile phones, and office furniture.
If you don’t use the fixed rate method, you can claim the actual expenses you incurred while working from home. Whichever method applies to you, remember to keep complete and accurate records, for at least 5 years, so you can substantiate your claims.
Pay As You Go (PAYG) Instalments
If you’re running a new business, consider voluntarily entering into pay as you go (PAYG) instalments. PAYG instalments allow you to make regular prepayments of the tax on your business income, so you shouldn’t have a large tax bill when you lodge your return. You can find out how to start paying PAYG instalments by visiting the PAYG instalments page.
If you don’t voluntarily enter, you may be automatically entered into PAYG instalments if you earn business and investment income over the threshold. Review your tax position regularly so the amount you prepay is closer to your expected tax for the year.
Take Advantage of Small Business Concessions
It’s worth finding out whether you’re eligible for small business concessions, such as simplified depreciation rules, the small business income tax offset, and immediate deductions for pre-paid expenses. They can help reduce your tax bill and some may also save you time.
Work Out Your Motor Vehicle Expenses the Right Way
As a business owner, you can claim a tax deduction for expenses for motor vehicles – cars and certain other vehicles – used in running your business. You can claim expenses like fuel, insurance premiums, registration, depreciation, as well as servicing and repairs.
Your business structure and the type of vehicle you use affect the way you calculate motor vehicle expenses. For example, sole traders or those in a partnership can use the cents-per-kilometre method for cars, which has increased to 85 cents for the 2023-24 income year, or the logbook method for cars, but you’ll need to use the actual costs method for other vehicles. Those operating a company or trust will need to use the actual costs method using receipts.
The car limit has also increased to $68,108 for the 2023-24 income year. The car limit is the cost you can use to work out the depreciation of passenger vehicles that are designed to carry a load of less than one tonne and fewer than nine passengers, excluding motorcycles or similar vehicles. The maximum value you can use for calculating your depreciation claim is the car limit in the year in which you first used or leased the car.
Stay on Top of Your Employer Obligations
If you employ staff, make sure you’re prepared for your end of financial year (EOFY) tax and super obligations. As Sunday 30 June 2024 approaches, stay up-to-date with your employer reporting obligations and these upcoming key dates:
- Fringe Benefits Tax (FBT): The FBT year runs from 1 April to 31 March. If you provided staff benefits on top of their salary and wages during the FBT year, the due date to lodge your FBT return and pay any FBT owed has now passed. However, if you already have a tax professional that lodges electronically on your behalf, you have until Tuesday 25 June 2024.
- Pay As You Go (PAYG) Withholding: From 1 July, the individual income tax rate thresholds and tax tables will change, which will impact your PAYG withholding for the 2025 tax year.
- Super Guarantee (SG) Rate Increase: From 1 July, the SG rate will increase to 11.5%. Make sure you pay your SG contributions by Sunday 28 July 2024 in full, on time, and to the right fund.
- Single Touch Payroll (STP) Reporting: Remember to make STP finalisation declarations by Sunday 14 July 2024 for all employees you’ve paid during the financial year. Accurate reporting means your employees have the right information to lodge their income tax returns.
It’s important to keep good records and have good payroll governance for your tax and super reporting. If you make a mistake, take the steps to correct it as soon as possible. You can find out more about record keeping for business by visiting the record keeping for business page.
Record Keeping and Digital Services
A good record-keeping system will help you manage your tax and super obligations all year round. This will make it easier to report and lodge your tax return on time. You can use the ATO’s record keeping evaluation tool to help you make improvements and make next tax time even easier. Use the tool by visiting the record keeping evaluation tool page.
The right digital tools can also help you perform daily business activities easily and securely. Make sure you’ve set up myGovID and Relationship Authorisation Manager (RAM) to access the ATO’s online services, including Online services for business, which allows you to manage your business reporting and transactions in one place. For more information on Online services for business, visit the businesses and organisations online services page.
Essentials to Strengthen Your Small Business
Are you looking to improve your financial, record-keeping, and business knowledge to support your business’ long-term health? The ATO has recently launched a free online learning platform to help small businesses understand how to handle their tax and super basics. “Essentials to strengthen your small business” has courses specifically designed for small business needs. Course information is targeted, up-to-date, and interactive.
You can pick and choose a specific learning pathway relevant to your needs, where you’re at in the business lifecycle, and the industry you’re in. You can also complete each course at your own pace by saving your progress and coming back another time.
Ask for Help if You Need It
Remember, it’s important to lodge and pay in full and on time. If you’re worried you won’t be able to lodge and pay by the due date, contact your registered tax professional or visit the ATO website to find out what support options are available to you.
For expert guidance and support in preparing your 2023-24 tax return, contact BOA & Co. Financial Group at 1300 952 286, email info@boanco.com.au, or visit our website at www.boanco.com.au.