Hey there! The most popular question about tax is often “what can I deduct to maximise my tax return?”. Well, “It depends.” It depends on whether we are talking about business tax or personal tax, it depends on what segment of what industry you work in and how you work and deliver your services. It depends on what you have invested in and how you have distributed money. It depends on even more than that.
So, if I’m not giving you the answer, why read on? Well, tax season is here again, and it’s important to expand your knowledge, understand your obligations and tackle the challenge head-on.
Whether you’re crunching numbers between client appointments or after a long day at the clinic, I understand that dealing with taxes can feel a bit overwhelming. But don’t worry, I’m here to help simplify things for you. Let’s have a look at Business tax, Personal Tax and some great Tips around Tax in general. Whether you’ve been in the Allied Health Business game for years or are just starting out, getting your taxes right is crucial for keeping your business in tip-top shape.
Business Taxes Made Simple
Let’s dive into the basics of business taxes. When you’re running an Allied Health Business, there are a few key things you need to keep track of:
- Goods and Services Tax (GST): If your business turns over $75,000 or more (Which is highly likely), you’ll need to register for GST. This 10% tax is added to most goods and services sold in Australia. Now some Allied Health related disciplines don’t have GST attached and this is related to the activity. Remember though, you’ll need to report your GST through regular Business Activity Statements (BAS).
- Company Tax: As of now, the company tax rate for small businesses in Australia is 25%. It’s a flat rate applied to your net revenue, which is your total revenue minus allowable deductions (Don’t confuse this with your Gross Revenue from your P&L). Keeping accurate records is key here to ensure you can claim everything you’re entitled to. Speak to your accountant and/or bookkeeper as to what deductions are allowed.
- Payroll Tax: This tax applies to slightly larger businesses. If your total wages exceed a certain threshold, you may need to pay a tax based on the size of your payroll. It’s something to keep in mind as your practice grows and you bring more staff onboard.
Personal Taxes for Business Owners
Shifting gears to personal taxes. As a business owner, how you pay yourself can affect your personal tax obligations:
- Sole Trader or Company Director? If you’re a sole trader, your business income is treated as your personal income, and you’ll pay tax based on individual tax rates. But if your business is structured as a company, you might pay yourself a salary, dividends, or both, which can impact how much tax you owe. Either way, you will need to pay personal taxes based on your earnings.
- Super Contributions: Don’t forget about your superannuation. Contributions you make can be tax-effective and help reduce your taxable income especially as Super is taxed at a lower rate than your standard income tax. Plus, planning for retirement through super is always a smart move.
- Deductions: There are plenty of deductions that business owners can claim to reduce their taxable income. Things like home office expenses, professional development courses (Speak to your accountant about making your Nacre Consulting business coaching a tax deduction!), and even some types of insurances. Make sure you’re keeping track of all your receipts and any expenses related to running your business.
Ten Tips for Tax Time
Here are a few tips to keep in mind as you navigate this tax season:
- Stay Organised: Keep all your financial records in order, from receipts to bank statements. This not only helps with filing taxes but can also be a lifesaver if you’re ever audited.
- Understand Deductions: Know what deductions are available for both your business and personal taxes. This can significantly lower your tax bill.
- Plan Ahead: Use tax planning strategies to manage how much tax you pay. For example, you might purchase necessary equipment before the end of the financial year to claim a deduction. Work with your accountant proactively throughout the year not only in June.
- Get Professional Help: When in doubt, consult with a tax professional. Great bookkeepers and accountants are worth their fee in tax management gold.
- Review Regularly: Don’t just think about taxes once a year. Regular reviews can help you adjust your strategy to better manage liabilities and maximize returns. Once again, meet with your financial team at least quarterly throughout the year.
- Know Your Dates: Keep track of key tax dates to avoid penalties. This includes due dates for lodging your BAS, tax returns, and any payments due.
- Leverage Technology: Consider using accounting software like Xero to streamline your tax preparation. Many solutions can automate aspects of the process, reducing errors and saving time.
- Know the Specifics for Your Industry: Every industry has different taxation requirements and available deductions. Ensure your accounting team specifically know your industry.
- Keep Your Records: The current legislation mandates that you need to keep your tax records for 5 years. This includes a copy of all those receipts, thank you technology!
- Don’t Panic!: The ATO is very accommodating if you just pick up the phone and talk to them. (Or your accountant does for you). It’s ok if you are a little behind, they want to help you pay and have various plans available. Better to plan rather than panic as they say.
Managing your taxes effectively is not just about staying compliant; it’s about making smart decisions that can enhance the financial health of both your business and personal life. So here’s to mastering your taxes, having a successful Allied Health Business and focusing on what you do best—caring for your team and serving your clients.
In case you’re stuck in the deep end managing your business while juggling taxes, our team of coaches are ready to have a quick chat with you. Book a Power Call with us through here to navigate these difficult yet necessary conversations together.
