Small Business Owners Baffled by Tax Concessions

Small Business Owners Baffled by Tax Concessions

A nationwide survey has found that confusion reigns among small business operators over what tax concessions they are able to access, prompting experts to warn that thousands of business owners may pay too much tax this financial year.

A survey by American Express among more than 1,000 small business owners found that just 13% of those surveyed said that they were completely up to speed with the existing tax breaks for small businesses. The number was slightly higher at 21% among those businesses that prepared their tax returns without the help of an accountant.

Jason Fryer, Head of Small Business Services at American Express said: 'It's clear from the research that many small business owners may be missing out on concessions that may assist their business in the next financial year. Depending on the size and activity of the business, the value of these concessions could be quite substantive. Understanding what tax concessions are available is just as important as being familiar with reporting obligations."

Taxation expert and author, Adrian Raftery, added: 'From my experience one of the most common questions I get asked from small business owners is: -Is there something that we are missing out on in our tax?' This research supports my belief that there are thousands of Australian business owners out there who are paying too much tax simply because they are not aware of what rebates and concessions they are legitimately entitled to.

'Learning what can be claimed as a business tax concession does not need to take up a lot of time, but it could save business owners a significant amount of money which could be ploughed back into the business.

'Some small business concessions that are available include the simplified depreciation rules which allow small business owners to immediately write-off many depreciating assets that cost less than $1,000 (rising to $6,500 from 1 July 2012), the entrepreneurs tax offset and the 45% R&D tax incentive for research and development expenditure," said Raftery.

End of financial year – as taxing a time as ever for small business
The survey results also show that tax reporting continues to be a source of stress for small business owners, with 83% of business owners citing it as a stressful task. In fact, as many as 64% would prefer to keep themselves busy with other chores within the business such as catching up with filing (37%), chasing up outstanding invoices (25%) or even cleaning out the office fridge (24%).

As small business owners gear up for their end of financial year obligations, they cited several causes of stress related to tax reporting. Topping the list were:
Keeping track of all receipts and invoices (43%);
Worrying about inaccurate reporting (41%);
The amount of time tax reporting taxes (35%); and
Getting tax reports in on time (31%).

'End of financial year tax reporting is always going to be an arduous task but there are many ways it can be made easier: use software to help collate receipts and record transactions or use a business charge card to separate business and personal expenses and to provide GST compliant itemisation for ease of reporting," said Fryer.

Tax reporting – don't be a -shoe-boxer'
According to Adrian Raftery it pays to be organised when it comes to tax reporting. 'Keeping receipts in a shoe box is not recommended but this is the system employed by 39% of small business owners. It's not surprising that the majority of small business owners admit to losing those pesky petrol (34%) and stationery (31%) receipts."
'Ironically, another survey result which I find quite staggering is that younger tech-savvy entrepreneurs are among the most likely to keep their receipts in a shoe box (46% of those aged 18-34 years)," said Raftery.
'Small business owners in this age category are more likely to be stressed about tax reporting when it comes to claiming appropriate business expenses (51%) and keeping track of receipts (50%)."
Four-in-ten entrepreneurs log their receipts electronically as they go, while around one-in-three use specialist accounting software to manage their tax reporting. While 60% of 'shoe-boxers" are worried about staying on top of their receipts, those who log their receipts electronically (40%) or use specialist software (36%) feel much less stressed.

New financial year resolutions: get organised
Looking towards the new financial year, most small business owners (78%) are committed to improving the efficiency of their tax reporting. As many as 44% of small business owners say their -new financial year resolution' is to be more organised in filing their receipts and collating information throughout the year. Over one quarter (28%) are confident they can improve their tax reporting with the help of their accountant or a business mentor.

'Even small measures can help make tax reporting more efficient, accurate and less stressful. I encourage all small business owners to stick to their resolution, stay more organised and seek the help of experts when they need it," said Raftery.