Tax Returns for Small Businesses
Dealing with small business tax and understanding everything about tax minimization is a very important part of operating any small business. It always seems like Tax time comes around too soon each year and its best to deal with tax returns in a timely manner. It’s important to understand how you can reduce tax.
A Self-Assessment Based System
You can do this by learning how to maximize tax deductions, how making donations helps you and which other avenues are available for legal tax deductions. Another decision you will have to take is about whether do-it-yourself superannuation will be beneficial to you. The income tax system in Australia works on the principle of self-assessment. This means that the information that any small business provides about its income & deductions will initially be accepted by the Income Tax department.
This information is accepted as it is and it is presumed that it is accurate. The tax returns that you are required to pay are then worked out on this basis. However, you might also be asked to show the records that support this information. Thus it is important to keep all the relevant records handy. These are used to verify your claims for tax returns in Australia.
Tax returns for small business in Australia are worked out on your taxable income with the use of a simple formula:
Assessable income – the allowable deductions = the taxable income (this is the amount that you pay tax returns on). It is important to understand what constitutes assessable income. If we have to look at it very simply, most of the money that you receive for carrying-on your business is your assessable income. The exceptions to this are:
- Any loans you receive
- The money that has been contributed by you as a business owner
- The GST that you collect
How to Claim Business Deductions
As a small business owner, you are eligible to claim deductions for the costs that have been incurred in the running of your business. The condition is that these expenses should not be either domestic or private in nature. You are also able to claim most of the expenses that are incurred by you, to run your business. These are all considered as deductions and they reduce assessable income.
As a standard rule, you are also able to claim all the day-to-day operating expenses. These can be claimed in full in the same year that you incur them. On the other hand, buying equipments or even buying a manufacturing plant are capital items and these can be claimed over several years.
Lodging Your Tax Returns
You are required to lodge your tax return for every year in which you operate your business. The manner in which your income gets classified and the form you use to lodge returns will be dependent on the structure of your business. There may be updates and changes to tax returns rules. It is best to take the advice of Ward’s Tax Services before you lodge tax returns for small business in Australia. You can contact us on 07 5464 1309 or at 37 John St Rosewood QLD 4340.