Tax Worries for Small Business Owners

New figures indicate small business owners are anxious about tax time.

A massive 91 per cent of new small business owners have very little understanding of their annual tax obligations, while 84 per cent are unsure of the things they can claim as a business expense. This was revealed by the American Express Tax Time Survey.

According to Jason Fryer, head of small business services at American Express, understanding GST and the consequences of making a mistake cause a lot of worry amongst small business owners.

“Setting up your own business can be like jumping into the unknown. Our Tax Time Survey shows that completing the business tax return for the first time is often fraught with anxiety,” he said.

“The research shows that almost all new business owners wonder at some stage if they have complied with the latest tax legislation and whether they will fall foul of the tax office if they make a mistake,” Fryer added.

From the more than 500 Australian businesses that were surveyed by Galaxy Research, it was found out that 74 per cent of operators find it a burden to complete their business activity statements. The results further revealed that aside from cash flow management, tax related issues are also considered stressful for many business owners.

Taxation expert and author Adrian Raftery says, “The American Express research reveals considerable uncertainty among small business owners about tax reporting and what they can and can’t claim, which contributes to negative feelings about completing tax returns.”

“In fact, the two most common questions I am asked by small business owners at tax time are, ‘what is the likelihood of my business being audited?’ and ‘who are the ATO targeting this year?’ – demonstrating the level of concern among business owners,” he added.

American Express suggested to help relieve taxation stress of business owners that they should keep receipts and use one business card in order to keep personal and office spending organized.

Source: The Shout »

$5000 Tax Write-off For Australian Small Businesses

Realizing that small business operators are going through tough times with this current economy, the Australian government is giving an instant tax write-off of the first $5000 of any motor vehicle purchased from 2012 to 2013. This offer is intended for small business operators. This is because small businesses comprise 96 per cent of Australian businesses and are the backbone of the Australian economy as stated by Treasurer Wayne Swan.

Of Australia’s 2.7 million small businesses, it is the motor vehicle that is the main capital item. This offer will certainly improve cash flow and help business owners expand and reinvest.

This measure is seen as a part of the government’s tax reform programs that are to be introduced in 2012 to 2013 that will provide a write off on all assets that are valued at below $5000. The measure is estimated to cost $1.7 billion over the forward estimates.

Currently there are two depreciation pools with different depreciation rates. There is also planned a reduction in company tax rate to 29 per cent for small businesses.

These tax reforms will be available to all types of small businesses including sole traders. Businesses operating through trusts, partnerships, and companies are also eligible.

This new measure replaces the Entrepreneurs Tax Offset. It was recommended to be abolished by Australia’s Future Tax System Review (AFTSR) due to its high compliance cost and poor targeting. It concluded that the ETO is a disincentive for small businesses.

Since the ETO was only available to small business with turnover of less than $75000, there are 2.3 million small businesses that were not able to utilize the of benefit.

News and Image from: International Business Times »

Accounting Software Helps Prevent Tax Errors

Every business can bring about happiness, contentment, and income for its owner. When it is managed effectively, the returns can be very rewarding. These benefits do not only go to the owners. In addition the businesses provide income to the government in the form of taxes and to employees in the form of wages.

Businesses pay their taxes annually. This task is taken care of by the bookkeeper and the accountant. These two employees make sure that the taxes remitted by the company are accurate and remitted on time. If not, the company acquires losses from miscalculations or they get penalized by the government for incorrect or late reporting.

These circumstances should be avoided by companies. This can be achieved by using up to date accounting software. According to Karla Dennis, accountancy expert and author, in her article submitted to the Entrepreneur Magazine, many business owners and accountants are committing avoidable mistakes in bookkeeping. She sees that the reason for such mistakes is that people usually rely on their memories in making calculations of expenses.

"When tax season arrives, you might find yourself estimating your expenses only to arrive at a number that is either far above or below the reality," she added.

Her suggestion to business owners is to use an accounting software package that is suited to the nature of their business. The software must meet the requirements and needs of a particular company. Another thing that one can do is to hire the most effective, experienced and efficient accountant and bookkeeper. This is because they are the ones who are going to best operate the accounting software and overall process.

Investing in accounting software is a necessary part of running a business. Since starting the business already requires a significant amount of time and money, the additional cost is relatively small to ensure accurate accounting and informed decision making.

News Source: CodeStone.net »