Maximise cash flow with tax accountant advice

When you own and operate your own business, time is a scarce resource, which often means that paperwork gets pushed to one side - a costly issue when tax time comes around. But there are ways of saving money and time with your tax.

The first step is understanding your obligations, which is where tax accountants can help.

What sort of tax should you be paying?

A common problem among owner-operated businesses is not knowing that there are two types of taxes, says Mohamad Sibai, principal tax accountant at Sibai & Associates.

"Business owners must differentiate between GST and income tax," he says. "GST is based on the goods and services you provide, whereas income tax is calculated on your net profit."

Turnover versus profit

Understanding the difference between profit and turnover helps you understand your tax obligations, says Mohamad. Each dollar that comes into your business is counted in your annual turnover, but only a percentage of that is profit.

"Turnover is the total of the transactions the business conducts and profit is what remains after you have paid your expenses," he says. "When you know your profit for the accounting period you can then calculate your tax."

Tax reporting options

According to Mohamad, most owner-operated businesses elect to report on their GST quarterly, whereas income tax is completed annually.

"GST is fairly straightforward," says Mohamad. "Many owner-operators can do it without the help of a tax accountant, but it depends on the size of the business."

However, when it comes to lodging an annual income tax return, Mohamad advises that owner-operators will most likely need to employ a tax accountant.

Minimising your tax

Owner-operated businesses can benefit from a large number of concessions, deductions and rebates. Tax accountants can help identify which you are eligible for, including:

• bank costs
• travel expenses
• depreciation of business assets
• some utilities bills
• the cost of any fringe benefits provided and fringe benefit tax incurred
• advertising and marketing expenses
• equipment hire
• interest on loans
• car, transport and freight expenses
• phone expenses

Tax concessions

Alongside tax deductions, your business may also be eligible for tax concessions.

"For example, if you're a sole trader and your turnover is less than a certain amount, the government gives you a tax concession of 4%," says Mohamad. "It's called the entrepreneur's tax offset."

Others include concessions on capital gains tax for business assets you sell after owning them for more than 15 years, simpler depreciation and trading stock rules, and paying your GST in quarterly instalments, the amounts of which can be varied.

The bottom line

Tax accountants can provide invaluable advice to owner-operated businesses on how to better manage their tax affairs. With knowledge of bookkeeping and accounting, as well as up-to-date information on changes in tax law, a tax accountant will save you money today.

Contact a tax accountant in your area to discuss how you can manage the tax responsibilities for your business: