How small businesses can avoid tax time terror
As a start-up, tax time can be particularly overwhelming. Doug MacDougall caught up with successful start-up founders and Telstra Business Awards Alumni, from The Marketing Box and The Game Changers for their advice on how to survive return and avoid the pain next end of financial year.
We are now well into the new financial year and you can no longer ignore it – it’s tax time. Right now you’re probably spending your evenings drowning in a pile of receipts, wishing you’d kept better track of things throughout the year.
Life at home and work is changing; we increasingly have to run our lives like they’re businesses. Many new businesses are structured as sole traders, and part-time work is increasing in the labour force. Come tax time you need to report your taxable income (or loss). As a sole trader, you alone are responsible for any tax your business must pay, but you don’t have to be.
Avoid the stress
Barry Magliarditi is the co-founder of Australia’s leading coaching and consulting company, The Game Changers, a business focused on providing high quality coaching, education and consulting to businesses seeking stable, sustainable and profitable growth. Over the years they have coached small and large companies such as CBA, Louis Vuitton and The Entourage and have helped many businesses scale to six, seven and eight figures.
Barry is no stranger to the stress that tax time can bring.
“We know that tax time can be quite stressful for a lot of businesses out there, particularly small businesses, he says.
“The key is to realise that stressing out is not going to change the situation. It is more beneficial to channel that energy elsewhere and leave the tax to an accountant.”
Don’t do it alone
While start-up founders are familiar with wearing a lot of hats, Barry believes you don’t have to do it alone when it comes to tax. “Utilise what is already working well for someone else, rather than trying to do it on your own,” he says.
“Use this time to reflect on where you want to go with the business, acknowledge where you were 12 months ago, what has changed in the last 12 months, what has worked, and what hasn’t.
“Like a GPS when you’re driving a car, if you don’t first acknowledge where your business is currently operating from, it is very hard to get to where you want your business to be.”
Adelaide business The Marketing Box, offers marketing solutions to small and medium sized businesses across a wide variety of industries and sectors. Its founder, Julie Lawrie also found herself managing the business finances on her own in the early years to keep costs down, with just a yearly review from her accountant, but she says business owners should recognise how much their own time is worth.
“Tax is an important thing to understand and stay on top of, but it was a drain on my time – accounting isn’t my primary skill-set,” she explains.
“As a new start-up I held the perception that having a bookkeeper or accountant to help on a regular basis was costly, and could lead to a loss of control. The reality was, that I wasted many hours doing things that could have been outsourced, which would have ultimately freed me up to do more consulting work and generated more income.
These days, Julia has the tax/life balance on track, with a bookkeeper who reviews her financials regularly and an accountant who manager her taxes annually.
“This gives me peace of mind that I’m recording and managing everything that I’m required to, while still providing me with control over my finances. In the day-to-day running of The Marketing Box, I feel confident in my accounting systems, and that I’m setting my business up well – especially in an area that I’m not an expert in!”
Put deductions in perspective
Since 12 May 2015, small businesses can now immediately deduct assets costing less than $20,000. The instant asset write-off threshold (up from $1,000), allows you to immediately deduct the business use portion of a depreciating asset. Julie recommends using the increase as a great incentive to purchase items for your business that you’ve been putting off, which can provide ongoing benefits for staff.
“Knowing that the deduction will revert back to $1,000 at the end of the 2016/ 2017 financial year, has also helped to put the benefits of spending now, into perspective,” she says.
“We’ve used the deduction to purchase more ergonomic office furniture and technology (including a laptop and a larger desktop monitor) – which ultimately contribute to efficiency and general happiness levels when working.”
Invest in your growth
When working with clients, The Game Changers, works with its clients in investing in their own growth, and at tax time, this can mean looking at deductible assets.
“Our key areas of investment are in coaches and mentors that have experience in the areas they wish to grow in. The small investment in their own personal growth can have exponential effects in the rapid growth of the business, often far beyond what is imagined,” explains Barry.
Streamline your work
Julie is a big fan of streamlining work and processes.
“Mainly because I want to have a life outside of my business” she says.
“In addition to having a bookkeeper who checks in regularly, and my accountant who manages my finances at tax time, I use software for the day-to-day management of The Marketing Box’s finances.”
She says she has found the learning curve quite easy. “Possibly the best part of using this software is the time saving. It helps to eliminate human error, it links with our bank accounts and it helps me to keep a record of our purchases so that I can simply submit everything at tax time.”
While tax time can be stressful, it doesn’t need to be. With the right professional advice and some solid business planning, it can be a great time to set goals and work towards setting your businesses ‘GPS’ to the next destination.
Find out more about how Telstra can hep your small business.