Tax Strategies recipes
Every business encounters bad debts from time to time. These can include everything from unpaid bills to unwise investments that have gone sour. The normal way to deal with such debts is to write them off whenever possible.
What is a bad debt?
A debt is considered ‘bad’ when every avenue of recovery has been exhausted and there is absolutely no possibility of collecting on the debt. This could be because the debtor is either dead, bankrupt or cannot be located. If there is still a possibility that the debt could be recovered, then the debt is considered ‘doubtful’ rather than bad and cannot be written off.
If you are starting a small business, registering as a sole trader is often the best way to go. It requires minimal set up and administration costs and offers several advantages for taxation purposes. However, there are also some disadvantages associated with being a sole trader and this article takes a look at each of the pros and cons.
What is a sole trader?
A sole trader is the most basic form of business structure. As a sole trader, you own and run the business yourself and are solely responsible for it. You can either run the business in your own name or you can register a business name with the Australian Securities and Investments Commission (ASIC).
Many people choose to fill out their own tax returns, encouraged by the fast, easy nature of the ATO’s online e-tax system. But, while it may be quick and fee-free, doing your own tax can sometimes turn out to be a costly mistake.
Advantages of DIY tax
Using the ATO’s e-tax filing system has several advantages:
Even for trustworthy taxpayers, nothing is quite as stressful as a tax audit. While most people hope to glide under the radar of the taxman forever, the truth is that being targeted for a tax audit isn’t as unlikely as you’d think. Every year, the Tax Office writes to tens of thousands of people regarding their business or personal tax returns, asking them to review their claims, and conducts thousands of audits.
But being chosen for an audit doesn’t spell the end for you. First of all, many calls from the taxman are to simply clear up small discrepancies on your tax return. Of course, if the review reveals something just isn’t right, then you’ll have to brace yourself for the audit. The following tips will help you understand, prepare for, and work through a tax audit and come out unscathed.
General tax deductions are deductions that apply to a broad segment of the tax-lodging public, and more often than not are claimed as a result of work-related expenses. These types of deductions are available to everyone, no matter their occupation. In general, work-related deductions are for items used for work or business purposes, and you can make claims of up to $300 without written proof (anything more than that will require a receipt). The following are some of the most common work-related general tax deductions you can make on your personal tax return.
Electronics can be claimed on your tax return
Calculators and electronic organisers, such as smartphones, PDAs, tablets and so forth, are fully deductible if the cost is $300 or less. If the cost exceeded this price when you bought it, then the item will need to be depreciated. Plus, you can tack on the cost of keeping the unit working, such as repairs, batteries and so on. Diaries, log books, and other stationery that essentially provides the same function are also deductible. Talk to your tax agent about how to make sure everything gets included on your return.
In business, one of the most important things you need to do is make every dollar count, and a really great way of doing this is to become tax efficient. There are plenty of ways every business can become more tax efficient and take the edge off preparing the year’s tax return, and doing so can save your business a lot of money. The following are just some of the tax tips every entrepreneur should know about.
Find a trustworthy tax advisor
One of the first things every business needs to do is establish a strong relationship with a trustworthy tax return accountant and advisor. There are so many small tax tricks out there that you could benefit from, and an advisor that can show these tricks to you is worth their weight in gold. Additionally, make sure your current tax advisor is able to keep up with your changing needs. All too often, businesses continue on with the same advisor, failing to recognise that the needs of a growing business include upgrading the level of advice they get.
When it comes to keeping your finances in order and getting your taxes done, it’s not worth taking any risks, so if you want to ensure you don’t end up on the wrong side of the tax man, you should get your taxes done by a registered tax professional. The following are just a few of the reasons why it can prove to be so important.
Get the right amount back
There is no point having your mate do your taxes for you and tell you that you’ll be getting a massive return, when the truth will be something quite different. Not that friends can’t be a huge help when it comes to doing your taxes, but unless they know exactly what they are doing, you are likely to end up with an amount for your tax return that isn’t correct. Registered tax professionals are far more likely to know all of those unlikely places to look for an extra few dollars, which your well-meaning mate may have missed and left unclaimed for you.
When it comes to tax time, having all of your receipts is vital to being able to get what you are owed and avoid running into trouble with the taxman. As a general rule, keep everything, and keep your receipts in the best condition that you can. Don’t let the government keep money that is rightfully yours, and check out the following tips so you can keep all the right receipts and get back every cent you are entitled to.
Anything that is related to you being able to do your job properly can often be at least partially claimed on your taxes. Clothing, shoes, car repairs, petrol, phone bills, and anything that you need for work can be considered a work-related expense — as can at least part of your rent and utilities costs if you do any of your work from home. Keep all of your receipts just in case it can be claimed on your tax return. On average, Australians claim just over $1,900 per person in work-related costs every tax year.
Along with shares, investing in residential property is one of the most favoured ways to build wealth in Australia. For many Australians, property investment forms an important part of their plans for financial security and retirement. These practical strategies will provide some useful insights for new property investors, although it’s advisable to consult accountants in Sydney or your local area for specific advice on tax and optimising your investment strategy.
Capital Gains Tax Discount
Capital Gains Tax (‘CGT’) applies to property acquired after September 20, 1985. However, there are many exemptions to this rule. For example, the main residence is not subject to CGT, and a 50 per cent discount to the CGT applies when the property is held for at least 12 months, subject to some limitations. CGT will have significant implications for investors who are intending to sell their property in the near future.
As your business expands and grows, you’ll need better financial advice and knowledge about compliance. If you’re a busy individual, why run the risk of delay by getting your tax return wrong? When it comes to accountants Sydney may have a lot of qualified professionals, but it’s important to find a firm that will provide you with unbiased advice, be able to serve individuals and businesses of any size, explain it all to you in plain English, and act as a one-stop point for all your accounting and finance needs. These are the top reasons you should see an accountant.
Getting it right the first time may not only save you time but also help you with staying on the right side of the law. Whether it’s your tax return Sydney, financial advice, record keeping and compliance issues, there’s no need to waste time and precious resources by getting it wrong.
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