Yep, it’s the end of the financial year. Getting ready for tax time when running a trade business can be quite a daunting task. You might not know what’s due, when it’s due or what’s needed from you. When it comes to the end of the financial year (and even throughout), your accountant will be your saving grace. It’s their job to understand exactly what your ATO obligations are.
The following obligations have been advised by our own accountant (and whilst they will apply to most trade businesses), you should still follow your accountants lead!
So, let’s get into it:
ATO
Lodge on time
It’s important to remember that if you’re lodging your own tax return, you need to have it lodged by 31 October. If your accountant is lodging it for you, they can normally do it after this date (this isn’t an excuse to leave it until November!).
If you have employees, or pay yourself as an employee, you also need to lodge your PAYG Withholding Payment Summary Annual Report to the ATO by 14 August.
Failure to do so can result in financial penalties (something which I’m sure everyone wants to avoid!). The penalty is calculated at the rate of $210 for each 28 days the PAYG Withholding Payment Summary Annual Report(s) is overdue (to a maximum of $1,050).
GST obligations
Unfortunately, if you run a business with an annual income of over $75,000, you will have Goods and Services Tax (GST) obligations.
Why? First and foremost it is a legal tax obligation. By paying GST, you also have the ability to claim back any GST you have paid over the past year.
You should be providing the ATO with monthly or quarterly activity statements throughout the whole financial year. BAS, or a business activity statement, reports all your tax obligations to the ATO including GST, fringe benefits tax instalment, PAYG tax withholding and Income Tax Instalment. You then pay according to this BAS statement as you go.
The good news for your business when it comes to GST? You can pass the costs onto customers.
Your business
Tax deductions
Yes, in case you didn’t know, you can actually benefit from completing your tax return through tax deductions!
Anything that has been bought through the business throughout the year (for business purposes only) can be claimed as a deduction.
However, you shouldn’t use this as an excuse to start buying things left-right-and-centre. You can’t deduct the whole of every single expense, if you cannot prove it 100% for business.
As a tradie, you can claim business assets that cost less than $20,000 including machinery, vehicles, and all other equipment required in your trade. All other business material expenses can also be claimed. If you are a new trade business, you can claim all of your start-up costs (as long as you have records!)
Ask for help
The ATO isn’t really ‘the bad guy’ you may think it is!
If you’re having trouble with your current business finances and tax debt, the ATO can actually help you out by organising payment plans and decreasing (or eliminating) interest on these payments.
Your employees
PAYG
As an employer, you must collect tax from your employees (weekly, fortnightly, monthly) salary/wage to help them meet their tax liabilities.
At the end of each financial year, you need to provide all employees and contractors with a payment summary that shows them a) how much you paid them, and b) how much tax you withheld from their pay. You are required to do this by 14 July.
The end of financial year creates work for you and your business. It also means the start of a new financial year, and a chance to start fresh. Think of it as a chance to ‘spring clean’ your business!
Learn the exact questions and steps you need to undergo to secure the right accountant for your business.
What’s next?
- Join our Kick-Ass Tradies Facebook Group, for access to trade business specific conversations, tips and resources, plus a like-minded community of tradies.
- Book a 15-minute Game Plan Call with Andy, owner of Dr. DRiP plumbing and co-founder of Lifestyle Tradie, to clarify your priorities and get clear action steps.
