Small businesses are running serious financial risks due to their lack of knowledge about the tax system.
A study of more than 1000 Australian small business owners showed that 69 per cent struggle to navigate the tax system and find tax reporting increasingly complicated.
In particular, small business owners are unsure of their GST responsibilities, tax reductions and write-offs. These uncertainties resulted in owners missing out on concessions and making expensive errors. Young entrepreneurs are significantly more at risk with 51 per cent not being aware of the mistakes they are making in their tax returns. Small business owners were also often unaware of changes in the tax system, such as their ability to claim taxes paid last year based on losses made this year.
Under this initiative, companies are able to carry-back up to $1 million of losses against profits made in the previous tax year. Small business owners who are unaware of this change could miss out on a refund of up to $300,000 of tax paid in the previous year.
Another problem that small business owners face was general calculation errors in their tax returns. Owners who did not use accounting software had an increased risk of making a mathematical mistake.
The ATO’s data matching and analysis systems increases the chance of small business owners who make errors in their tax returns being caught, even if it’s an honest mistake. The interest charged on missing tax, as well as the penalties, could cause serious financial damage to a small business.
It is important that small business owners are aware of the current tax landscape to ensure that they do not incur any financial penalties that could threaten the stability of their business. Contact Leenane Templeton today if you would like to discuss this article further.