- Failing to report all of their income
- Not having the necessary records to prove claims
- Incorrectly claiming private expenses as business ones
We’ve compiled our top five tax tips for 2020 so that you can avoid making easy errors and get the most out of tax time.
Don’t wait until tax time rolls around
There’s a lot to prepare in the lead up to tax time, but that doesn’t mean you should forget about your taxes throughout the rest of the year.
The best way to avoid stress (and missed opportunities) is to consistently prepare throughout the year, taking a load off your shoulders when it actually comes time to file your tax return.
Note down key dates in your diary for the year ahead, and create a system that allows you to easily document what you’re purchasing each month so you can make claims later on without things getting messy.
It could also be helpful to figure out which tax deductions you can claim ahead of time as this might change what you purchase and when, and it can save you money.
Claim home office expenses
If you work from home full-time you can claim work-related expenses such as internet bills, software, equipment, furniture and even a percentage of your energy bills and rent/mortgage.
Even if you work from home part-time you can claim the cost of your personal computer and potentially other office expenses.
If you’re unsure what you can and can’t claim, it’s worth checking with an accountant or tax agent who can help you get the most out of your tax return.
Claim work-related travel costs
If you use a car to travel for work you might be eligible to claim costs on fuel and other related travel expenses.
Note that you must be the owner of the vehicle to be eligible, and travel must be a part of your working day. This means you need to be either driving from one job site to another, between offices or making other special trips specifically for work.
For example, taking parcels to a post office or stopping by the bank for business-related activities is acceptable. Unfortunately, stop-offs on the way home don’t count!
Keep track of income and expenses
Make sure you’re reporting all business income. That includes money sitting in different accounts and invoices that were paid in cash. Keep receipts on hand to manage this process more efficiently and ensure your figures are accurate.
According to tax law, you should be keeping business records handy for at least five years. Hang on to the following:
- Sales receipts
- Expense invoices
- Credit card statements
- Bank statements
- Employee records (such as wages, super, tax declarations and contracts)
- Vehicle records
- Lists of debtors and creditors
- Asset purchases
Keeping a record of your business expenses is not only necessary for tax time, but can also help you manage your business.
Having receipts and invoices on hand allows you to keep track of your income and expenses, manage cash flow and give lenders an idea of how your business is doing should you need to take out a loan.
Use the tools available to you
There are lots of tools available to help you keep track of business expenses and put them into ‘buckets’ so you can easily see where money is going both now and when tax time hits. Some apps can even scan and code your receipts, making it simpler than ever to record on the go.
You might also like to consider investing in electronic accounting software, though it’s still a good idea to book an appointment with your accountant to make sure you’ve covered all bases before filing your tax return. But online filing systems can help to lower your bill.
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Anthony is a Private Lending Specialist with over 10 years experience in the finance industry. He loves helping clients and SMEs achieve their business dreams with start-up loans, and tailoring finance solutions to maximise their opportunities.