The dreaded tax time is almost upon us, and for franchisees, this can spell stress and trouble. But fear not, there are some franchisee tax tips for 2019 that will help new business owners get the most from their return.
If this is your first time preparing for end of financial year as a franchisee, you may already find yourself in a scramble to recover old receipts.
In the rush to meet the July 1 deadline, it can be easy to come a cropper, but don’t fall into the trap of mis-reporting your income. The consequences of trying to scrounge out a few extra dollars can be dire, so it’s important to be accurate and timely.
Peter Holt, assistant commissioner of the Australian Taxation Office (ATO) said the government body understands that small business owners have a lot on their plate.
“That’s why we’re focusing on addressing common issues we see when small businesses lodge their returns so that we can support them to get it right,” Holt said.
The ATO has identified that the three biggest issues facing franchisees and small business owners at tax time are;
- failing to report all their income,
- not having the necessary records to prove small business expenses claims, and
- claiming private expenses as business expenses.
So, if you’re looking to enter the 2019-20 financial year without the looming threat of tax concerns, it pays to be prepared. Here’s five franchisee tax tips for 2019.
1. Instant asset write-off
One of the coalition government’s key promises at the recent federal election was an increase to the instant asset write-off threshold.
The $5000 boost saw small business owners and franchisees with the ability to instantly deduct business assets with a cost of less than $30,000, but what exactly does that mean?
Effectively, franchisees can now claim a deduction for an asset in the same income year that it was purchased. This is particularly relevant for business owners that require tools, vehicles or industry specific equipment.
Dominique Lamb, CEO of the National Retail Association said the increase allows business owners to strengthen their operation without incurring the stress of increasing expenses.
“We expect this will encourage many business owners to make purchasing decisions that might otherwise have remained in the planning phase until next financial year,” Lamb said.
2. Single touch payroll
The second of our major franchisee tax tips for 2019 is the implementation of single touch payroll (STP).
STP is a government-led initiative that involves real-time reporting, and post July 1, the move will become a business requirement.
Essentially, every time a business pays a worker, the salary information is then passed to the ATO.
The means streamlined claiming for employees, with wages, deductions and super information reported immediately, negating the need for Pay-As-You-Go activity statements.
The reporting is usually done through digital payroll systems, such as Xero or MYOB, meaning that for a number of franchisees, the transition may have already begun.
If you haven’t already rolled out STP in your franchise business, it is crucial that you set up the process prior to the July 1 deadline.
3. Make use of the ATO resources
If you’re a franchisee preparing for end of financial year, it’s crucial you have a firm understanding of what you can and can’t claim, and who better to consult than the ATO?
The government body has released a number of fact sheets and online resources for small business owners and franchisees.
From motor vehicle costs, to business travel, to home-based business expenses, the ATO’s fact sheets detail the stringent rules around claiming.
Holt suggested that all franchisees consult the ATO’s online resources before lodging any claims.
“They have practical examples of how these rules apply to everyday small businesses – from home-based photography studios to someone who needs to travel quite a bit for their business. Our priority is to make it as easy as possible for small businesses to get it right,” he said.
4. Consult a tax accountant
Of all of our franchisee tax tips for 2019, this one should be common knowledge. Consulting a tax account is one proven method for ensuring that records are up-to-date, accurate and compliant.
Businesses that regularly engage with a business tax accountant have a higher chance of maintaining financial standards across their business.
Even if you believe that you have tax time sorted for 2019, it’s always a good idea to make the investment and consult a professional.
5. Keep accurate records
While it may be a little too late to get your records in order for the 2018-19 financial year, now is as good a time as any to get started on next year.
Make sure that your record keeping is up to date and complete, in order to meet your tax obligations and gain a deeper insight into your operations.
Holt said when businesses are operating well, it’s because they get the basics right.
“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,” Holt said.
“In addition to making it easier to meet tax, super and salary obligations, good records mean that businesses can measure their performance against the ATO’s small business benchmarks.”
Franchisee tax tips for 2019
If you have found end of financial year 2018-19 a stressful experience, it’s time to reconsider your approach to taxation. Save yourself the hassle next year and start preparing early.
Holt said it’s easier than ever to get tax right, particularly with new technology implementations and innovations.
“Our tools also help small businesses keep accurate records,” he said.
“For example, sole traders can use the myDeductions tool in the ATO app to keep records of their income and expenses. Then, at tax time, they can send a copy to their registered tax agent or upload their data into their tax return.”
Remember, tax time doesn’t have to be overwhelming. The most important of all our franchisee tax tips is being prepared.