Any responsible business owner would do well to understand taxation and how it impacts their business. More than just the regular filing of tax returns, you should also know what business practices will put you under the radar of the Australian Taxation Office (ATO). With the ATO becoming stricter year after year, businesses and taxation accountants in Australia should adhere to set standards at all times. If you want to ensure that your company won’t commit blunders that can land it in hot water during tax audits, here are the pitfalls that you need to avoid:
1. Having Incomplete and Missing Tax Invoices
Never underestimate the importance of tax invoices. These are crucial if you want to maintain a good record of all your transactions. For any purchase of more than $82.50, you need to have a tax invoice if you’re claiming it as a business expense. What’s more, it’s also crucial that you keep a complete record of them for at least five years. It would be quite troublesome if you get caught by tax authorities trying to claim something that you don’t have any records of.
2. Treating Employees as Subcontractors
Many small businesses try to pay their employees as subcontractors, as that allows them to avoid superannuation, sick leave, holiday pay, and payroll tax. This is one shady business practice that no sane business owner should ever follow. Any employee under you shouldn’t be treated as a subcontractor, especially if they:
Work under your direction and control;
Have standard or set hours;
Have an ongoing expectation of work and;
Don’t bear financial risks for the work they do
These people need to be treated as employees and not someone you hired as a consultant or a contractor.
3. Using Unreported Cash Sales to Fund Personal Expenses
One big no-no that any business owner can do is to mix their business expenses with their personal expenses. A business is a separate entity from its owners, and it must be treated that way, especially when it comes to finances. Suppose you make a cash sale, which you have not yet recorded, and you use that money to buy something for yourself, it creates loose ends that could eventually come back to haunt you. Every sale should be recorded, accounted for, and used only for the business, not for personal use.
4. Maintaining Inadequate Record-Keeping
One of the most common mistakes businesses make is not having a system in place to record all transactions and activities related to their business operations. You need to maintain a distinct level of discipline with your record-keeping if you want to keep up with the standards of the ATO. Even the smallest of mistakes when handling eCommerce bookkeeping and accounting tasks can lead to severe lapses in your records.
These same lapses can result in the ATO levying severe penalties on your company once it finds out any discrepancies in your records. If you want to avoid these kinds of headaches, consider investing in accounting software or hiring a professional eCommerce account to help you with your financial and tax records.
If you need to rely on someone to assist you in keeping up with your finances, The Ecommerce Accountant is here to help. Whether it’s accounting, bookkeeping, or tax preparation, our team of highly skilled industry professionals can help you stay on top of your records and your tax obligations. Book a free strategy session today and talk to a professional eCommerce accountant!