Proactive tax accounting to enable business growth
Falling behind in your tax obligations is one of the major causes of business failure for Australian businesses. In an increasingly complex tax environment, keeping up to date with taxation regulations is an absolute must for businesses of any size or industry. Our team of accountants will work with you and your team and share their knowledge and expertise to help provide transparency when it comes to all things tax accounting.
Whether you are an established business that has been trading for some time or a start-up launching your new business venture, our pro-active accountants work with you to make a real difference that really works to improve your performance and achieve genuine growth, all whilst adhering to current taxation laws. You’ll be able to have absolute confidence that your business or personal tax is in good hands.
To help with explaining the importance of professional tax advice, we’ll use a real-life scenario to show a what could happen.
A business started trading in July 2015 (the 2016 tax year). As such:
- No physical tax will be paid in the first 12 months (ignore GST and employee taxes)
- At the end of the financial year, the business would be required to lodge a tax return
- The tax liability would be due in March 2017 (up to 18 months after the business initially began trading)
Although the thought of not paying any tax for a year seems like a great idea, particularly during your first year of trading when you can expect to encounter more costs than following years, there are a lot of pitfalls with not paying tax during this first year:
- The business will now be triggered for PAYG instalments (tax in advance for 2017) as well as having to pay the 2016 tax liability
- This is two years’ worth of tax payable in just 12 months
- In addition, if the business didn’t lodge their tax return until late 2017, say December, then they have missed two of the quarterly instalments meaning the two years’ worth of tax has to be paid over a six-month period
The above example is typical of a business starting out and unfortunately it is all too common for a business to lodge their first tax return late in the year, leaving very little time to find tens of thousands of dollars to cover two years’ worth of tax liability.
By taking a proactive approach to accounting, Carbon can help you to avoid experiencing this situation. Here’s a few of our tips to help keep you on top:
- Put tax money aside from day one (if you are unsure of how much, start with 25% and go up from there)
- This money can sit in a high interest account or against your home loan in an offset account
- Engage in tax planning with your accountant before the end of the year. From this, you can see if you have enough money saved or if you can implement any strategies to reduce your liability
- Lodge your tax return early. Your liability will still be due in March, but you have a longer time to save any shortfall
For more tax advice to ensure your business stays on the right side of the ATO, contact Carbon today.