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Business

20 November, 2020

Tax Basics for business

Tax can be a very boring or interesting topic, depending on your perspective.

By Dr Ray Hamey

The tax system is designed to collect money from you and when you get a refund from the Australian Taxation Office (ATO), well, it was really yours to start with. The ATO doesn’t give you anything unless it’s a bill!

The best way to get a bigger refund or to minimize the tax bill is to keep good records. Have you heard that before?

Now let’s take a case of a typical man who gets a receipt for work related expenditure and files it. Just where do most receipts end up? In the glovebox, the tool box, the pockets or in the washing machine. Terrific!

The ATO will not accept washed out or faded receipts. The taxpayer must be able to prove the deductions and it is not a game to claim all sorts of expenses without the documentation. Do not get too clever with the ATO as this is serious. It must be noted that not all expenses are tax deductible.

Record-keeping may not be your forte, but you need to file receipts to prove expenditure. Bank statements, credit card statements, and receipts are very valuable items to record your income and expenditure for tax purposes.

Many people think that if they make it up, their chances of being caught out are fairly well minimal. This is true to a certain degree, but it pays not to get too clever. It is essential for businesses to have appropriate accounting software to record income and expenditure.

Now the other thing to think about is that the employer must have payroll software to pay staff. There are no more paper-issued certificates as it is all now electronic. Every payday, the employer is to electronically file with the ATO, listing the details of the gross income, tax withheld, and superannuation.

The ATO is checking to ensure employers fulfil their obligations and the ATO cross-checks the superannuation that is paid. Unfortunately, many employers have not paid superannuation and this is a sure fire way for the ATO to monitor such.

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