The Commonwealth Bank has urged small to medium sized businesses to better prepare for the end of the financial year and begin their tax preparations.
Figures released by the bank suggest that nearly one third of SMEs (29 per cent) have not even started the groundwork to fulfill their tax obligations.
The research suggests that 30 per cent of SMEs did not take full advantage of the chance to reduce their tax liability last financial year. While 40 per cent failed to prepare early enough, another 36 per cent were not sufficiently up to date with all of the available tax minimization strategies.
While approximately 79 per cent of small businesses use an accountant to help them prepare for the end of the financial year, 41 per cent had not yet had discussions with them.
Executive General Manager for Local Business Banking at the Commonwealth Bank, Adam Bennett, said while June was often a busy time, it was important to set aside time to speak with an expert.
“With the end of the financial year fast approaching, we encourage businesses to act now to take advantage of the tax strategies available to them,” he said. “Some businesses are spending more than 40 hours preparing for tax time, so we understand this can put undue pressure on internal resources.
“By taking a number of simple steps and speaking with a professional adviser early, businesses can ensure they are using this time effectively and can potentially improve their financial position for the year ahead.”
While there is an awareness of tax minimization strategies, not all businesses plan to take advantage of the options available to them. While 78 per cent of businesses are aware they can write-off or write-down obsolete plant and equipment, only 53 per cent of SMEs plan to use this strategy.
Tax Counsel at the Tax Institute, Stephanie Caredes, told Dynamic Business that small businesses needed to start gathering their paperwork now for their tax returns. Ms Caredes said it was always worth sitting down with a tax agent ahead of time.
“A little bit of time and effort now will save a lot of time later when it actually comes to working out your tax for your business as you will have already organised everything for yourself. It will also save you time when it comes to sitting down with your tax agent to work out what needs to go into your business’ return,” she said.
She said small businesses also needed to bear in mind key policy changes.
“With the impending repeal of the minerals resource rent tax, it is proposed that the instant asset write-off concession amount of $6,500 for small businesses that was to be funded by this tax drop back to $1,000 effective 1 January 2014 as well as accelerated depreciation for motor vehicles costing more than $6,500 ceasing to be available to small businesses from 1 January 2014.
“Also, the loss carry-back measure, which would have been most beneficial to smaller businesses run through companies that have losses, will no longer be available to apply in the 2014 tax return if all these changes do pass through Parliament. Though the changes are still pending, taxpayers who may have relied on these concessions already should be aware of these potential changes and how they might impact on their business’ tax position.”
Executive director of the Council of Small Business of Australia, Peter Strong, urged smaller operators to prepare for their tax returns ahead of time. “Contact your accountant or whoever’s doing your tax and have a talk to them,” he told Dynamic Business.