With the end of the financial year just around the corner, almost one third (29 per cent) of Australian small and medium enterprises (SMEs) have not yet commenced their tax time preparations, according to research released by the Commonwealth Bank.
The research also revealed 30 per cent of SMEs did not maximise the opportunity to reduce their tax liability last financial year. The most common reasons for not maximising reductions were not planning for the end of the financial year early enough (40 per cent) and not keeping track of all tax minimisation strategies available (36 per cent).
The survey found SMEs refer to a range of external resources to help them prepare for the end of the financial year, with the majority of businesses using an accountant (79 per cent), a bookkeeper (22 per cent) or the ATO website (19 per cent). Interestingly, of those businesses that use an accountant or bookkeeper, 41 per cent have not yet had discussions with them regarding tax time preparations.
Adam Bennett, Executive General Manager Local Business Banking, Commonwealth Bank, said while the lead up to the end of June is often a busy time for businesses, setting aside time to speak with an expert and review business financials before the end of the financial year can put you in good stead for tax time.
“With the end of the financial year fast approaching, we encourage businesses to act now to take advantage of the tax strategies available to them.
“Some businesses are spending more than 40 hours preparing for tax time, so we understand this can put undue pressure on internal resources. By taking a number of simple steps and speaking with a professional adviser early, businesses can ensure they are using this time effectively and can potentially improve their financial position for the year ahead,” said Mr Bennett.
The research also found there is a general level of awareness amongst SMEs regarding most tax minimisation strategies, however, there appears to be a disconnect between awareness and those businesses that plan to use these strategies. For example, 78 per cent of businesses are aware they can write-off or write-down obsolete plant and equipment, however, only 53 per cent of SMEs plan to use this strategy.
“It’s encouraging to see many businesses are aware of the available tax strategies, however, when compared with usage levels there appears to be a noticeable gap. While not all tax strategies are suitable for every business, it’s important for SMEs to understand which strategies apply and starting discussions with an accountant or bookkeeper is a good first step,” said Mr Bennett.
Tax tips for small businesses*
* Outlined above are a range of tax concessions that are available to businesses at the end of the financial year. Once you’ve established which suit your business, make sure you consult your accountant and check your specific eligibility.
About the Commonwealth Bank EOFY Research
A total of 507 businesses with an annual turnover of less than $10 million were surveyed from 23 – 27 May 2014 by independent research company, ACA research.