Getting Ahead of Your Next Tax Return
The 2021-22 Financial Year is already several months old now (if you can believe that), and by now many taxpayers have their ducks in a row to lodge their tax return for 2020-21. But while that’s happening, clever business owners and salary earners are putting down the groundwork to make next years’ an absolute breeze. The good news is, anyone and everyone can do the same – throughout the course of this financial year, follow these practical steps to ensure a stress-free tax time in 2022, and potentially even minimise your tax obligations while you’re at it).
Leverage Apps and Other Technology
There is no one-size-fits-all solution, particularly when it comes to business, but it is no secret that the development of technology and apps has made operating your own business much more efficient. Thankfully, such advancements have also made tax compliance simple and accessible for all taxpayers. Throughout this financial year, keep an eye out for apps and programs that can make records maintenance and day-to-day operations easier. Receipt management tools like Dext are a popular choice for many small business owners and salary earners who purchase work-related items. Its integration with accounting software such as Xero and MYOB further increases their appeal and dramatically reduce the amount of time required manually entering data at tax time. Come tax-time next year, you’ll have your business-related expenses present and accounted for (literally) without having to dig through a stack of paperwork. AutoEntry is another handy tool, which automates data entry to increase productivity.
Remember, though, that while these apps alleviate some of the stresses around being a time-poor business owner, it is still important to drive that process yourself. Put simply, you still need to be responsible for making tax time 2022 easier, but leveraging these programs goes a long way to supporting that goal.
Maintain Travel Logs for Your Tax Return
You may be aware of what many people consider to be “standard travel deductions” – where people simply go ahead and claim a certain amount of business-related travel on their tax return that falls below the ATO’s threshold for maintaining a logbook (i.e. 5,000km per car, per year). Not only are such standard deductions really not standard at all – you have to actually undertake work-related travel to be able to claim the deductions for it – but the ATO’s investment in data-matching means that the chances of getting away with this sort of thing get slimmer each year. What’s perhaps even more pertinent is that it is entirely unnecessary – if you do genuinely incur costs as a result of using your car for work, claiming those expenses is really easy.
Revisiting the previous section for a moment, there are several great logbook apps which simplify the record-keeping process. If your total kilometres travelled are less than 5,000 you can use the cents-per-km method but note that you may still need to provide evidence if the ATO request it (e.g. your work diary/calendar). For those travelling more than that, the logbook method is required, so it is critical to maintain that all year round to stay off the ATO’s radar when you lodge your next return. Remember that you only need to maintain a 12-week logbook once every 5 years unless your percentage of work travel varies by more than 10%. You’ll also need to keep closing odometer readings every 30 June to the end of the 5-year period.
Keep on Top of Changes & Updates That Affect Your Tax Return
Changes to legislation and deductible expenses often catch people out at tax time, which can result in a few headaches when it comes time to lodge. The ATO are fairly consistent in releasing information about important changes that affect taxpayers and business owners, but you’ll likely need to know to go looking for the info in the first place. We recommend checking in on the ATO’s website periodically to see if there’s anything you need to be taking on board proactively to get ahead of your next tax return. It may not only make your next return easier, but you may also find further deductions to claim that could legally minimise your tax obligations – leaving more money in your pocket!
How MP+ Can Help With Your Tax Return
We know how time-poor business owners are, particularly given everything that’s going on in the world at the moment. At McKinley Plowman, part of the work our tax team undertake is to maintain regular contact with the ATO on updates and changes, and our ongoing commitment to excellence means our clients enjoy year-round tax compliance that puts them in the best possible tax position to help them reach their business and personal financial goals.
To see how we can make this years’ tax return (and those still to come) simple and stress-free, give us a call on 08 9301 2200 (Joondalup) or 08 9361 3300 (Victoria Park); or contact us via our website.
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