Three tips to make the last-minute tax time rush feel less…last minute

Tax word and 2020 number on calculator. Business and tax concept. Pay tax in 2020 years.

Australian small businesses will have likely spent much of the last few months pivoting, recovering and responding on an almost daily basis just to survive. The challenge posed by the Coronavirus pandemic has been so severe that many business owners will have – very understandably – found that the end of the financial year crept up on them. If that’s you, and you’re trying to understand where to start – or even if you’re already on top of tax time but want a little peace of mind – here are a few tips and considerations to help you ensure that now, and every year thereafter, the process is as stress-free as possible.

1. Understand new deductions

Unless this is your first EOFY as a small business owner, you’ll likely have a good understanding of the various deductions and schemes you can benefit from or be subjected to. This year, however, it’s important to be aware of policies that have been introduced or updated in response to the Coronavirus pandemic. The first is the shortcut method for calculating additional expenses incurred while working from home – something many small-business owners will have found themselves doing more often recently. Business owners can now claim 80 cents per hour for additional expenses incurred – including electricity, phone and internet, stationary and home office equipment – from 1 March 2020 until at least 30 June 2020.

In addition, the instant asset write-off threshold increased from $30,000 to $150,000 for eligible businesses from 12 March 2020 until 30 June 2020. Eligibility has also been expanded to cover businesses with an aggregated turnover of up to $500 million. It allows for immediate deductions on the business portion of the cost of an asset in the year it is first used, or installed ready for use. So, if you own a pilates studio, for example, and invested in a set of new reformer beds in recent months, include it in your tax deduction.

2. Make good habits second nature

Gathering information is half the battle when it comes to tax, so ensure your records are accurate and up-to-date. Good reporting habits will not only help you complete and lodge your tax return, but in the new financial year will help you manage cashflow and understand how your business is performing in real-time. Collate your reports in one digital location, or consider implementing accounting or invoicing systems to streamline the process.

With technology at our fingertips, it’s never been easier to capture and organise expenses the moment they’re incurred. Take a photo of each receipt on your phone while you’re out, and save it alongside important expense details such as the date and the client or project. If you haven’t yet developed this habit, why not consider making it a new (financial) year’s resolution?

3. Eliminate the paper trail

During the run-up to 30 June, if you find that you’re still frantically searching through boxes of crumpled receipts, post-it-notes and diaries, it’s time to embrace technology when the new financial year rolls around. Thanks to digital tools, everything from your income and expenses to your financial reports and customer details can now exist online, helping to streamline your admin responsibilities so you can spend more time doing what you do best. After all, time is money for small businesses, so ditch the paper trail and the ground running in the new financial year.

If tax time has typically struck fear into your heart, don’t be daunted. By developing good habits, befriending small business technology and understanding new and evolving deductions and schemes, you can remove the financial headaches and ensure that, after this year, the last-minute EOFY rush becomes a thing of the past.

Disclaimer: Invoice2go does not provide tax, legal or accounting advice. This article has been prepared for informational purposes only, and is not intended to be relied on for tax, legal or accounting purposes. You are strongly encouraged to consult your own tax, legal and accounting advisors to determine how the information may relate to you or the specifics of your business.

Mark Bartels, Chief Financial Officer, Invoice2go