SOLE TRADERS – Avoid Costly Mistakes At Tax Time

We get it, when you’re a small business owner, it’s hard to be across everything. Especially when it comes to tax.

However, ignorance isn’t bliss when it comes to the ATO. Most small businesses do the right thing, however there are some common mistakes reported by the ATO which can leave sole traders with a costly bill to pay if you don’t understand how to claim correctly.

It may sound dramatic, but getting it right can be the difference between a successful business and going bankrupt.

Common Mistakes

The ATO reported that common mistakes include:

• Omitting income, such as a salary or wages earned outside of their business
• Incorrectly claiming expenses, for example, claiming for the portion of an expense related to personal use or overstating the cost of sales and other expenses
• Incorrectly calculating business losses
• Incorrectly applying non-commercial loss rules to offset a loss against other income
• Incorrectly claiming PAYG withholding credits

Consequences

When claiming expenses, ensure you can back them up with receipts and proof of how they were used for business purposes. If the ATO isn’t happy with your explanation, they can re-issue you with a tax assessment based on their calculations. This can come with hefty penalties if the ATO deems you were reckless with the claims you made, or if the ATO finds you haven’t declared all income.

As a sole trader, you wear many hats. You’re an expert in your business, and we’re an expert in ours, which is why we take pride in helping sole traders with managing their accounting.

We can help you avoid mistakes with information on business income and deductions, we can help you get it right and avoid amendments down the track.

Top Tip: Putting Tax Aside

Set up separate bank accounts for the taxes you might have to pay, such as income tax or GST. If you collect GST, remember, you must register as such. That money isn’t yours to spend, it’s tax you’ve claimed on the government’s behalf from your customers, so it must be paid to the ATO.

There’s a lot to unpack and our experts can look at factors specific to your industry to guide you along the correct path. As qualified tax agents and accountants in Mackay, Whitson Dawson has the knowledge and skills to help you handle tax season. Get in touch with our team today to learn more.

Choose Whitson Dawson for accounting you can trust

Looking for friendly and trustworthy accountants in Mackay? Look no further than Whitson Dawson. We’re a family-owned business that prides itself on delivering outstanding services to our wide range of valued clients. From consulting and taxation advice to estate planning and auditing, you can trust us for honest, professional service exceeding expectations. Contact us today on (07) 4957 2985.