When the tax man comes knocking and you’re not prepared, the aftermath ain’t gonna be pretty. The ATO has stung over 250,000 contractors with more than $2.3 billion in tax bills for avoidance of income tax and GST obligations, and this is just the beginning. With June 30 on the horizon, we’ve put together a list of bona fide ways for electricians to keep the tax man sweet.
Are you a SME?
Before you kick things off, make absolutely sure that your electrical business qualifies as a small business entity. Needless to say, if you’re cashing in on SME benefits and don’t actually class as a SME, you’re in the serious bad books. Basically, your aggregated turnover must be less than $2 million.
Keep watertight invoice records
If the tax man decides to get really fierce you could find yourself at the centre of an audit. If this scenario rolls around, you’re going to want quick and easy access to your invoices. Make things easy for yourself by keeping meticulous records of every payment you process throughout the year.
Our advice? Take it to the cloud. When you go digital you eliminate the risk of losing files to fire, theft or just sheer disorganisation. Instead, you can unlock access to your entire database from anywhere, at any time.
Trust us, when you’re using your laptop to scroll through your invoice records at midnight from the comfort of your own home, instead of trawling through papers in a dark locked up office, you’ll thank us.
Understand key changes
Last year saw some pretty big changes rolled out by the Australian government, with a host of perks and incentives for SMEs. Understanding what’s on the table will help you cash in on the benefits, and stay compliant. Here’s a quick rundown of what’s new:
- Now, SMEs with an annual turnover of $2 million or less are able to claim up to $20,000 on asset purchases. Read more via the official ATO guidelines.
- For unincorporated SMEs, current tax rates are now discounted by 5%, to a maximum of $1000. This is issued as a tax credit when the returns are filed. For incorporated SMEs, the rate now sits at 28%.
- Did you fork out big time on start-up fees such as accounting, legal and professional advice in the 2015/16 tax year? If so, all expenses can be claimed in full as a tax deduction. Work-related portable electronic devices issued to employees can also be claimed as fringe benefit tax exemption expenses.
Integrate with your accounting software
Streamline your number crunching and record keeping by investing in Job Management software that brings an intelligent edge to the accounting side of your business. As a purpose built tool for tradies, Tradify integrates seamlessly with both Xero and MYOB. The result? Tidy books, a beaming accountant and zero time wasted manually transferring data.
Stay on top of super
Do you pay employees superannuation? It can be a drag, but it’s critical to get your contributions in order come June. The federal government’s got a pretty strict SuperStream program in place, which requires contributions to be issued electronically in a standard data set. Confused? Learn more about the national super scheme here.
Report your cash earnings
Ready for a chuckle? Have a squiz at this quote from a recent Sydney Morning Herald article titled ‘How much tax do tradies pay.’
Tradies have a bit of a reputation for under declaring earnings, with some critics going as far as 25-35% of turnover. We get that it’s all too easy to not declare cash jobs but remember, there’s no avoiding the consequences of a pissed off tax man.
If you’re declaring everything, keeping all your systems and records in tip top shape and leveraging the services of a great accountant or bookkeeper then you’ll be going a long way towards keeping the tax man on the christmas card list this year.
- See more at: https://tradifyhq.com/6-easy-ways-electricians-can-keep-the-tax-man-sweet/