6 questions to ask this tax time

With the new financial year upon us, you might be thinking about getting ready to lodge your tax return, either on your own or through a registered tax agent. Ask yourself (or your tax agent) these six questions to make sure you get your tax right and use this tax time to set yourself up for a great year ahead.

1. Which records do I need to keep?

  • sales and other business income
  • expenses you can claim as a deduction such as staff wages, contractor expenses, and operating expenses.

You need to keep these records for at least five years once you’ve lodged your return.

Good record keeping sets your business up well, makes it run smoother and can help you to identify issues before they become problems. It will also make it easier to get ready for tax time next year – and every year.

Tax time is also a great time to review your record keeping practices and look for ways to improve it. For example, you could consider keeping your records electronically, which saves you time and money in the long run.

If you’re a sole trader, you can use the myDeductions tool in the ATO app to track your income and expenses throughout the year. Then at tax time you can send a copy to your registered tax agent or upload your data to your tax return in myTax.

Speak with your registered tax agent or use the ATO’s record keeping evaluation tool to see if you’re on the right track.

Read: Employee payroll tax and PAYG

2. Is it income?

When lodging your tax return, you need to report all income you make through your business. As well as payments you receive in person or online, check if your business has any of the following types of income to report:

  • sales made with cash, vouchers, gift cards and coupons
  • bank account interest
  • rental income from property that your business owns
  • assessable government payments (such as fuel tax credits).

All of these need to be reported as income. You can then claim a deduction for most business expenses related to earning that income.

Use: Critical information list template

3. What can I claim?

To claim a deduction for your business expenses, you need to follow these three golden rules:

  1. The expense must have been for your business – not for private use.
  2. If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
  3. You must have records to prove the expense and show how you worked out the business portion of an expense.

Claiming private expenses as business expenses and not properly separating private use from business use are two of the most common issues we see when small businesses lodge their tax returns. Have a look at the ATO’s sheets to find out more about how to separate private from business costs in relation to your motor vehicle, home-based business, and business travel expenses.

If you’re an employer, you can also claim the expenses relating to employing people, such as salary, wages and super contributions you make on their behalf. You can’t claim any super guarantee charge you have had to pay due to missed super payments.

Read: Assess your finances 

4. What is the instant asset write-off?

You might have heard about the instant asset write-off, but not know exactly what it means. If you bought an asset before 30 June that cost under a certain threshold, you can claim a deduction for the full business portion of the expense in your 2019 tax return. Different thresholds apply depending on when you bought the asset, so make sure you check which one applies to you. Find out more about the instant asset write-off on our website.

It’s also just one of many of concessions you may be able to take advantage of as a small business, such as the income tax offset (for sole traders and individuals in a partnership) or the lower company tax rate (for companies). See the full range at concessions at a glance.

5. How do I know if my business is on track?

Once you’ve got your records in good shape at tax time, you’ll be in a better position to assess whether your business is on track.

First, check your inward and outward cash flow – it’s what keeps your business going. You need to make sure your business will have enough cash available at the right time to pay your bills and meet your tax and super obligations.  Take time to prepare a cash flow projection and refer to it regularly.

Secondly, take the opportunity to use the ATO’s small business benchmarks to compare the performance of your business with your competitors. They’re available for more than 100 industries. If you use a registered tax agent, chat with them about where your business sits in comparison with the benchmarks. Ask them about steps you can take to improve your performance.

6. Where can I get help?

You’re responsible for what’s reported in your tax return, even if you lodge with a registered tax agent. If you’re not sure about something, just ask the ATO or your agent. If you’re feeling overwhelmed or getting behind with your obligations let the ATO know as early as possible so we can work with you to find a solution.

Most small businesses lodge their tax return through a registered tax agent. When you have your yearly appointment with your agent, why not take the opportunity to speak with them about more than your tax return? They could help you to identify areas of improvement, or check that your record keeping processes meet requirements.

You can also use the ATO’s range of free resources to educate yourself and stay up-to-date. Start by subscribing to our Small business newsroom and following us on social media.

The ATO can help you this tax time and throughout the year. Visit the ATO website to find out about our support services and tools, and how to contact us if you have any questions.

Andrew Watson

Assistant Commissioner | ATO

Andrew Watson is an Assistant Commissioner in the Small Business area of the ATO. His role involves engaging and supporting small businesses so it’s easier for them to meet their tax and super obligations, and they get the help and support they need. He is also focused on driving the ATO’s digital services and helping small businesses manage their cash flow.