It’s no secret that tax time can be a little on the stressful side. One example that immediately springs to mind is that scene in the Simpsons where Homer is rushing at the eleventh hour to mail in his return (watch it here - it’s gold). And he wasn’t even submitting as a business!
For the sole traders and freelancers out there, we thought we’d do something just for y’all and put together a definitive list of 10 red-hot tips that’ll help you put your best foot forward at tax time this year, helping you stay as stress-free and calm as humanly possible throughout the process.
Tip 1. Don’t pull a Homer and leave it ‘til last minute
It’s amazing how many people do this. Putting it off again and again until there’s little time left to get it all done is pretty much the most common mistake people make when it comes to submitting a tax return, and it’s easy to understand why doing so can make it even more of a stressor than it already is. Sorting everything out nice and early means a much more relaxed process.
Tip 2. Be meticulous with receipts
Did you know that every receipt you claim as a deduction needs to be kept for 5 years? Keeping them digitally makes everything so much easier, so make sure you scan any physical receipts and save them on your computer (backing them up to the cloud, too).
Tip 3. Stay on top of record-keeping
It’s a total pain in the butt having to constantly update spreadsheets, yes. But staying on top of things throughout the financial year means at tax time you know it’s all up to date and ready to rock and roll. Otherwise it’s a mad rush to go through invoices, receipts and other paperwork to prepare it all at the last minute.
Tip 4. Know what’s deductible
The Government’s most recent Budget included some really great tax benefits for sole traders - read our article that covers all of them here.
Outside of those, if you want to minimise how much tax you need to pay it’s imperative that you know all of the deductions that you’re allowed to apply to your business income well. These will be completely dependent on a number of things - take time to read about them to determine which apply to your business.
Tip 5. Don’t push your luck
You might hear other business owners and operators talking about some ways they’ve pushed the envelope when it comes to deductibles and expenses that perhaps shouldn’t have been put through and gotten away with it. Great - good luck to them, unless of course they get audited sometime over the next few years.
Be comfortable with what you’re putting forward to the ATO - there’s no point stressing and sweating about something that saved you all of $100.
Tip 6. Back up everything in the cloud
This includes scanning all physical receipts and any other physical documents, adding them and all of your digital receipts and documents into a folder along with locally-saved records such as P&L and other business-related spreadsheets, invoices et cetera and saving everything to a cloud-based file storage such as Dropbox or Google Drive.
Tip 7. Put money aside for tax payment
Ensuring you have a reasonable amount of money set aside to pay your tax bill means you’ll have peace of mind when tax time rolls around. There’s nothing worse than getting a request from the ATO for several thousand dollars when you have zero on hand!
Tip 8. Lodge online via myTax
Keep things as simple as possible and utilise the myTax online tool provided by the ATO - it’s essentially the quickest and easiest way to submit (and let’s face it, who wants to draw the process out?!).
Tip 9. Get expert help from an accountant
If you don’t already have an accountant, it’s important to do some research and find someone who has a reasonable amount of experience specifically with sole trader businesses. This information should be on their website, but if not you can ask them when you have your initial chat (make sure you ask what their areas of expertise are before you tell them the type of business you run though).
Tip 10. Buy business-related assets to reduce your tax payable
With tax time drawing ever-nearer, if you’re in need of a few assets that’ll really help your business to thrive, purchasing them now can help to lower the amount of tax you’ll need to pay by effectively reducing your total taxable income.
Get a business loan to help your business grow sooner
If you’re a sole trader or freelancer interested in improving your cash flow or adding some equipment to better your output and help your revenue soar, Stratton Finance is here to provide expert assistance. With more than two decades of experience working with businesses of all sizes right around Australia, you can bet we’ve got the knowledge to help you secure the right business finance deal to suit your needs to a T.
Give the team a call now on 1300 787 288 or send us a message via our online enquiry form and you’ll hear back from us as soon as possible for a more in-depth chat about your requirements.
Disclaimer: Nothing in this article should be assumed as personal advice. You should consider whether the information is appropriate to your needs, and where appropriate, seek advice from a professional financial adviser.