With tax time fast approaching, the Australian Taxation Office (ATO) has issued a warning to small businesses about common tax errors. These errors include improper income reporting, misunderstanding of tax deductions, and issues with GST reporting.
According to Yahoo, the ATO is particularly concerned about businesses failing to maintain accurate records. The tax office emphasises the importance of compliance to avoid penalties and ensure smooth operations.
Small businesses are urged to adopt proper tax practices to avoid unnecessary scrutiny and complications during the tax season.
Key Concerns Raised by the ATO
The ATO has identified several key areas where small businesses often get it wrong. Contractors, in particular, have been flagged for misreporting their income, sometimes using cash payments to hide business revenue.
Additionally, small businesses are facing challenges with the correct application of GST and tax deductions, especially regarding capital gains tax concessions.
“These are areas where we are concerned small businesses are getting it wrong, being opportunistic or deliberate on an ongoing basis,” ATO deputy commissioner Will Day said.
The ATO is also focusing on mixed business and personal income and is concerned about businesses incorrectly claiming deductions or misreporting their income. The office is particularly looking into industries such as taxi, limousine, and ride-sourcing services to ensure compliance.
New Reporting Requirements for Small Businesses
Starting 1 April, the ATO will implement changes to improve tax compliance, including shifting approximately 3,500 small businesses from quarterly to monthly GST reporting. The tax office believes that this change will help businesses build better financial habits and improve cash flow management, reducing instances of late payments and incorrect reporting.
Small business is serious business and by sharing these concerns with you early, we want to help you set up good habits to get it right and stay on track – Mr Day stated.
Encouraging Self-Amendment and Using Digital Tools
In a bid to assist businesses, the ATO is encouraging small business owners to self-amend any errors in their tax returns. The tax office has also highlighted the benefits of using digital tools and business software to streamline record-keeping and reporting. The ATO aims to help businesses stay on track and avoid costly mistakes.
This will help build good business habits and improve cashflow – Mr Day added.
Focus On Non-compliance and Future Efforts
The ATO is not just focusing on income misreporting and GST errors but is also looking into non-commercial business losses, mixing business and personal income, and issues surrounding GST registration.
The office will continue to scrutinise businesses for compliance and is committed to providing guidance to improve overall tax practices.
We will also continue our focus on non-commercial business losses, small business capital gains tax concessions, business income is not personal income, and GST registration and income of taxi, limousine and ride-sourcing services – Mr Day said.
With tax time approaching, small businesses are urged to review their financial records and seek professional advice to ensure compliance with all tax requirements. The ATO’s proactive approach is designed to help businesses make necessary corrections and foster a culture of compliance.