Come tax time, sole traders have enough to worry about without getting their taxes in a tangle. Here are 5 tips to make tax time easier.
#1. Separate business and personal expenses
If you don’t already have a business account set up, you should make this a priority. Pay all of your business expenses through a business bank account and a dedicated credit card. This will ensure you don’t miss out on any tax deductions.
If you do have to pay for something business-related with cash, or from a personal account, reimburse yourself from your business bank account so you have a record.
#2. Know the rules around expense claims
If you are spending money on things that help you make money in your business, it will be either fully deductible or partially deductible. But it’s important you only claim the portion that is used for your business. For example, if you have one mobile phone for both work and personal use, you can only claim a certain percentage of your bill as a business deduction.
To learn what can – and can’t – be deducted, head to the ATO website’s business tax deductions summary.
#3. Keep digital copies of work-related receipts
There’s a lot of confusion around the need for receipts. You cannot claim a tax deduction for an expense if you do not have a receipt. You’re required to keep these records for a minimum of five years. And, as paper receipts fade and are easily misplaced, it’s best to have a digital backup in case of an audit.
#4. Don’t leave tax planning (and returns) to the last minute
It’s always best to undertake tax planning strategies well before 30 June. This enables you access to a range of tax reduction strategies you may not be able to put in place at a later date. We recommend sole traders complete their returns well before the due date, even if a tax bill is anticipated. This way they can start setting aside money for that year and the current year.
#5. Don’t go it alone
Whether you’re yet to submit last year’s tax return or planning for the new year, consider seeking some outside help. At Elite Tax Success, we can help you out and provide valuable insight into the health of your business. Working with us will produce your profit and loss statement.