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Focus on the foundations: Tax, financial and business basics

When it comes to building a house, if you don’t have a proper foundation, it can compromise the stability and safety of your home. It’s the same when building a business – you won’t always know everything when you first start, but having a strong grasp on tax, financial and business basics can make all the difference. And the ATO wants to help strengthen that foundation so your business can thrive.

 

 

Essentials to strengthen your small business

The ATO has recently released it’s new online learning platform Essentials to strengthen your small business.

It’s a flexible and free online training resource for small businesses, educators and tax professionals to share and use with their staff, students and clients. It contains short, free courses to help you get your tax and super basics right and improve your financial, record keeping and business knowledge. There are 21 self-paced courses covering:

  • business lifecycle stages – idea, start-up, day-to-day, change and exit
  • reporting obligations – for example, what to do if you have employees or need to report GST or fringe benefits tax
  • learning needs – find out about good record keeping, improving cash flow or growing your business
  • other circumstances – for example, help setting up a business, checking if your business is viable or you need to close.

These courses were designed for the needs of small businesses and cover key business topics that are important for small businesses.

The courses allow you to choose what you want to learn and when.  You can customise your learning pathway based on what’s right for you and your business depending on its lifecycle stage, structure and industry.  And when life gets busy, you can login to save your progress and return when you have more time.  Find out more: smallbusiness.taxsuperandyou.gov.au 

 

 

Know what is what

How you manage your finances is just as important as how you manage other aspects of your business.

While you’re running a business, there’s money belonging to you and money you collect on behalf of the government and your employees. When it’s all in the same account, it can be hard to distinguish between the two.

Consider setting up a separate bank account for:

  • GST you collect
  • pay as you go (PAYG) withholding
  • your employees’ super entitlements.

This will help you pay your obligations in full and on time, which will help you avoid penalties and interest charges, and keep it separate from your businesses’ cash flow.

You may also want to consider a separate account for your private expenses or use different debit/credit cards to help you separate them from your business expenses.

 

 

Split the bill

Setting aside your obligations for GST, PAYG withholding and super is just one way you can prepare for your tax and super obligations. PAYG instalments is another.

Pay as you go (PAYG) instalments allow you to pay regular amounts to the ATO throughout the year to avoid a large tax bill when you lodge your tax return. The way it works is the instalments you pay during the year are offset against your tax when you lodge your return. This leaves you with little or no tax to pay at the end of the income year. If your tax works out to be lower than what you paid, you will be refunded the excess.

You can voluntarily enter in PAYG instalments, or the ATO may enrol you automatically if your income is above the entry threshold.

Find out more: ato.gov.au/payg-instalments

 

 

Broken records?

Although, the ATO has their ‘good record keeping’ message on loop, it’s not a broken record. It’s a reminder for you to make sure your record keeping habits are up to scratch.

There are 5 basic rules to record keeping:

  1. Keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and super affairs.
  2. Don’t change information in your records. You must store records safely to protect information from being changed and prevent damage.
  3. Keep most records for 5 years and know which records to keep longer. You’ll need to keep records longer if they’re connected to a future, corrected, or amended return, or records about depreciating or capital gains tax assets.
  4. Be able to show us your records if we ask for them.
  5. Ensure your records are in English or can be easily converted to English.

If you don’t already keep digital records, consider if you should. Digital records can help you streamline your accounting practices so you can focus on your business. It can also help keep your records safe from flood, fire or theft and they’re easier to back up.

If you want to double check you’re doing the right thing, we have a record-keeping evaluation tool on our website at ato.gov.au/recordkeepingevaluation

Find out more: ato.gov.au/recordkeeping

 

 

We all need a little help sometimes

When focussing on your business is 24/7, you may reach out for help to support your business.  This can look different for everyone. When you reach out for support it’s important to remember:

  1. When you appoint or change agents, you’ll need to nominate them in Online services for business. This is a part of the client-to-agent linking process that will help you protect your account and information. For now, this applies to all types of entities with an ABN, excluding sole traders.
  2. You’re still responsible for what you report and claim in your lodgments to the ATO even if you seek support from a registered tax or BAS agent.
  3. If you do authorise someone to access your ATO accounts, make sure to keep their access and contact details up to date. It’s especially important to make sure you update and remove access as your authorised contacts change.

Find out more: ato.gov.au/OSB

 

 

About the author 

Emma Tobias is an Assistant Commissioner for the Australian Taxation Office in the Small Business line. Her focus is to help support small businesses by leading and influencing their experience across the tax, super and registry systems. Emma collaborates with small businesses, industry partners and government agencies to drive an improved small business experience and digital services. Her area also helps small businesses manage cash-flow and digital readiness, assisting them as they look to recover and succeed after the challenges of the last few years.