It's something of a little white lie, isn't it —
the one told to aspiring small business owners and entrepreneurs is
that hard work guarantees success. Hard work is vital, but it's
not the only quotient. And while you may be told by starry-eyed
blog writers or charismatic motivational speakers that you
can't lose if you try hard enough,
A third of new businesses that fail each year can attest to a
In our experience, a lot of businesses fail because they
don't plan the tax side of things well enough. From payroll tax
to super guarantee contributions to GST, we've seen businesses
blindsided by hefty penalties and tax debts because they put their
obligations out of sight and mind.
Here are the five most common tax mistakes that can trip up a
small businesses – avoid these mistakes, and you're
likely to more than double your chances of making it.
Not keeping good records
Good records means good business – there's no way around
it. One small business owner with a truck delivery business
neglected to put in place a system to keep track of her fleet's
fuel usage, and had to rely on estimations. Because of this, she
missed out on valuable fuel tax credit claims.
Not getting the status of workers right
Not getting the engagement status of workers right can land
employers in unforeseen hot water. An events business owner hired a
group of contracted cleaners every week to tidy up his party hall
after functions, but ended up in trouble with the law. "I
thought because they were contractors I didn't have to pay
super. I was wrong."
Not paying the superannuation guarantee, or on
When cash flow becomes an issue, too many businesses leave
superannuation guarantee payments until last. If you want to avoid
penalties from the Tax Office, you need to make sure your employees
are paid superannuation when they need to be paid. You can't
risk late lodgements.
Not keeping track of changes to tax laws
Did you know payroll tax rates changed this year? One business
owner didn't. "I've got three employees working for my
electrical estimation business, and I didn't withhold enough to
cover the rate increase. Now it's tax time, and I've a tax
penalty because my books weren't right."
If you're not following tax law closely, it's
understandable you'll miss things. Luckily, our monthly client
newsletter keeps you up to date, but it also couldn't hurt to
check in with us from time to time for updates.
Not using a tax agent
One sole trader started a jewellery business from home. "For
the first year, my revenue was relatively small. I didn't think
I needed an accountant or tax agent to do my return. I thought I
could just leave it. The only problem is this year I missed out on
claiming a big asset write-off deduction for my pendant-pressing
machine. If only I'd used a tax agent!" If-onlys are
crippling for small businesses, and they're avoidable.
ATO has released 2 draft fact sheets relating to the 2010 amendments to corporate law and tax in relation to dividends.
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