One of Australia’s top tax officials has identified three common mistakes that small businesses make with their tax returns.
ATO assistant commissioner Peter Holt said some small businesses were:
- Failing to report all their income
- Failing to keep records to prove expense claims
- Claiming private expenses as business expenses
Mr Holt said small business owners should remember three rules about claiming deductions:
- Expenses must be for your business, not yourself
- If you use something in both your business and private life, you can only claim the portion that is related to your business
- You need records to prove expenses
These fact sheets have practical examples of how tax rules apply to small businesses, from home-based photography studios to someone who travels regularly for their business.
Mr Holt’s top tip for small business owners is to maintain up-to-date records.
The ATO has noticed that small businesses that operate well usually get the basics right, according to Mr Holt.
“They keep good records, they run their business with the help of technology – such as point-of-sale software and accounting systems – and they seek advice from a tax professional when they need it,” he said.