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Top 5 avoidable tax mistakes small business owners keep making

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, the third of new businesses that fail each year can attest to a different reality.

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.

  1. 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.
  2. 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.”
  3. Not paying the superannuation guarantee, or on time
    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.
  4. 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.

5. Not using a tax agent
One sole trader started a jewelry 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-only are crippling for small businesses, and they’re avoidable.

DISCLAIMER:All information provided in this publication is of a general nature only and is not personal financial or investment advice. It does not take into account your particular objectives and circumstances. No person should act on the basis of this information without first obtaining and following the advice of a suitably qualified professional advisor. To the fullest extent permitted by law, no person involved in producing, distributing or providing the information in this publication (including Taxpayers Australia Incorporated, each of its directors, councilors, employees and contractors and the editors or authors of the information) will be liable in any way for any loss or damage suffered by any person through the use of or access to this information. The Copyright is owned exclusively by Taxpayers Australia Inc (ABN 96 075 950 284).


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