Common small business tax mistakes
Small businesses often experience the most stress during tax season, but making these common mistakes will make things worse.
Not isolating GST, PAYG, and superannuation guarantee withholding
Your business is likely required to withhold GST, PAYG, and superannuation guarantee liabilities.
These funds should never be used to pay down outstanding business debts.
In order to make up the gap of any unremitted amounts, directors may be required to sell their own assets to make up for the unremitted amounts.
Speaking with an accountant to ensure best practices is vital.
Mixing personal and business bank accounts
A simple fix can sometimes be the most effective.
We strongly urge early-stage business owners against pooling their personal and business resources since it can muddy the facts when it comes to taxes.
To see how much money you have available for personal use, you should open separate bank accounts.
Don’t ignore Fringe Benefits Tax.
An employee’s fringe benefits (FBT) are benefits that are above and beyond their standard salary.
Often, FBT covers items like company cars provided to employees, which are partly used for personal use.
Exemptions from FBT can be granted when those benefits are primarily used in the course of employment.
Data-matching systems, including Main Roads registration checks, have been instituted by the ATO to ensure compliance with its claims that work cars are used 100% for business purposes.
If the balance between personal use and work use is off, businesses should contact their accountants about an FBT self-correction.
Family trusts-distributions to low-income beneficiaries
ATO compliance measures will be ramped up next year to address distributions from family trusts, a constant ATO focus area.
Particularly, it monitors trusts that claim to distribute funds to a number of beneficiaries but then fail to do so.
It is designed to take advantage of the lower tax brackets of listed beneficiaries in order to minimize tax payments, and the strategy is ineffective.
To ensure compliance, the ATO is investigating unpaid distributions dating back to 2015.
Accountants should be consulted by businesses engaging with such plans so that corrections can be made.
If you have questions about tax best practice, please email [email protected] or book a meeting to discuss.
