Tips to get your eCommerce business ready for tax time

The last few years have been a very challenging time for businesses, with coronavirus (COVID-19), bushfires and drought taking an unprecedented toll on many.

While tax and super may not be on the top of your mind during these times, these 7 tips will help you get tax-ready for the end of the financial year.

Most businesses use a tax agent to prepare and lodge returns – you can also reach out to them if you need help.

1. Take advantage of small business concessions

You may be able to reduce your tax bill if you are eligible for concessions such as instant asset write-off or immediate deductions for prepaid expenses. You may also be able to save time by estimating the value of your trading stock instead of doing a stocktake. You can learn more about the different types of concessions at the ATO’s concessions at a glance page.

2. Follow three golden rules when it comes to claiming deductions

You can claim a deduction for most of the costs of running your business. But it’s also important to remember the three golden rules so you only claim what you’re entitled to:

• The expense must have been for your business – not for private use.
• If the expense is for a mix of business and private use, you can only claim the portion that’s used for your business.
• You must have records to prove the expense and show how you worked out the business portion of an expense.

3. Work out your motor vehicle expenses the right way

The method you use to calculate your motor vehicle expenses depends on your business structure and the type of vehicle. For example, if you operate your franchise as a sole trader or partnership and the vehicle is a car, you can use the cents per kilometre method or the logbook method. However, if you operate your franchise as a company or a trust, you can’t use either of these methods and can only claim the actual costs based on receipts. 

4. Claim home-based business expenses

If your home has been your main place of business (for example, if you have used your home as your main place of business because of coronavirus), you can claim deductions for the portion of expenses that relate to running your business. Your business structure also affects how and what you can claim.

5. Keep track of losses so you can claim a deduction for them later

It has been an extra challenging year and many businesses may find themselves making a loss for the first time. If your business makes a loss, you can generally carry forward that loss and claim a deduction for your business in a future year. Chat to your tax agent about how to do this.

6. Check that your records are complete and accurate

It’s important that you understand what records you need to keep and ensure that they are complete and accurate. You need to keep most records for five years, store them in a safe place, and they must be in English (or easily converted to English).

You can also use this record-keeping evaluation tool to help you check how well you’re keeping your business records so you can make improvements in the future. 

7. Get expert help if you’re having trouble with cash flow

Good cash flow means having enough cash at the right time to pay bills and meet your tax, super and employer obligations. You can prepare a cash flow projection to help you see your likely cash position at any time. You can also talk to a registered tax professional about managing your cash flow and they can help you work through our cash flow coaching kit.