While small and medium business owners have benefited from government initiatives during the COVID pandemic, and with FY21 less than a month away, they need to not only focus on their tax planning but also be mindful of the increased scrutiny and data matching programs from the Australian Tax Office according to business and tax expert Ben Johnston, from Johnston Advisory.
Mr Johnston explains, “With tax time looming, it’s imperative that small business owners take time out of their busy schedules to plan for any year end actions that they may need to take to ultimately reduce their tax payable.
“While Governments are doing all they can to encourage business growth, SMEs including contractors alike need to review their options carefully.”
One big change that impacts small business is the lowering of the tax rate to 25% from 1 July 2021.
Mr Johnston warns: “While this looks good for companies, many small business owners that pay dividends to themselves will have to pay higher tax personally as they will incur top up tax. This is the difference between their marginal rate and the small business tax rate. This will catch people out both in this year and also moving forward.”
Mr Johnston details his 5 best tips for small businesses leading into tax time:
The ATO has announced an audit initiative and data matching programs that are looking into small business and the black economy alike.
“If you think they are polar opposites in terms of ATO focus you need to think again. In fact, if you own a car valued at over $10,000 in your business name the ATO has you in their sights and it’s something that will change the game when it comes to big brothers’ approach and the sophisticated way in which the government is undertaking audits,” Mr Johnston said.
Tips to assist in avoiding ATO scrutiny and dealing with your motor vehicle FBT obligations:
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