Startup or sole trader? Sage on surviving small business tax time
Michael Smith
Director – Accountants, Sage Software Australia
How to not feel like you're going through tax time alone when you're a startup or sole trader.
Whether it's your first year submitting a business tax return as a startup or your tenth lodging as a sole trader, it can still feel like it's just you and your receipts. To find out some ways to make tax time seem like less of a burden, we sat down with Michael Smith, director – accountants at business software and service provider Sage.
The first problem that startups and sole traders often run into, according to Smith, is waiting until tax time.
"Don't wait until the end," Smith says. "Start from the beginning of the financial year. The most common mistake is just ignoring things, not doing anything, and then waiting until the last second when there's a mad panic and invariably getting it wrong."
There are some clear benefits to using an online accounting platform to help any sort of business, whether a startup or sole trader or even a larger business, get organised from the start of the financial year. But how can those businesses find the right software?
But how can those businesses find the right software?
"Pick a product and definitely get advice. Get advice on setting up your bills and your product properly, learning how to yield it properly, understanding what the features are, what the pitfalls are, and actually generating a good set of usable information to run the business and remain compliant at the same time."
Smith also says that while there is a move to DIY accounting he is very much in favour of advising people to use an accountant.
"You need a two-pronged approach. The way that we get information is from the accountant. You know, every accountant would know the rules and what's available for their client. And the reality is that using your software, using your accountant, finding out what's available to you, can pay for itself in multiples of tens, if not hundreds."
It's one thing to get their advice. It's another thing to use it.
According to Smith, using an accountant outside of tax time can also help startups and sole traders cope with the "multitudes of challenges" that they face.
"Accountants are the most trusted advisers for small business in particular. You know, these are businesses that don't have a lot of ready-made resources. They have to go out and find resources, and they're tired of it. A good accountant is just worth their weight in gold."
One example Smith gave is the $20,000 tax break. The tax break was one of the most sought after inclusions in this year's budget, and when the budget was announced it was not only included but extended.
Businesses with an annual turnover of $10 million will be able to take advantage of the $20,000 instant tax write-off until 30 June 2018 – a five-fold turnover increase. Smith says it's tax breaks like these that accountants can advise businesses about and help them take the most advantage of.
"Just knowing that [the $20,000 instant tax write-off] and knowing that it's not just available at tax time, it's an event that's available throughout the year, I think is valuable to small businesses."
But getting the advice of your accountant is only one part of it: "It's one thing to get their advice. It's another thing to use it."
For Smith, a clear way forward for sole traders and startups is adopting a digital accounting platform that meets their business needs.
"The real benefit with digital platforms is that the whole requirement for light infrastructure is so important. You don't need to invest in big pieces of hardware."
"You talk about getting headaches out of business. Digital platforms that are around to really make that happen. Things like backups are taken care of. The products are always up to date"
"Digital is absolutely not the way of the future but the way of the present."
DISCLAIMER: This article is general advice. It does not consider your own personal circumstances and may not be applicable to you. You should obtain professional advice and consider your own situation before acting on anything contained in our article.Latest articles on small business tax
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