Tax Time tips for Sole Traders
When you’re busy running a business there’s many balls to keep in the air and understanding the tax rules can take a backseat to other priorities you have.
Small businesses work hard to get things right; however sometimes mistakes happen. Some common mistake areas for sole traders are:
- reporting income – income earned outside of your business is generally not taxable, although non-monetary payments or payments in kind should be converted to a cash value & be reported as income.
- claiming expenses, including
- claiming for the part of an expense related to personal use (personal use or private expense portions of expenses are not deductible & need to be omitted from the business expenses you claim)
- overstating the cost of goods sold and other business expenses
- calculating business losses
- applying non-commercial loss rules to offset the loss against other income
- claiming PAYG withholding refunds
- reporting or failing to report personal services income (PSI).
You can avoid mistakes by checking out the ATO’s new Tax Time toolkit for small business. It includes links to information such as business income and deductions, to help you get things right.
You can also use the ATO app to manage your tax and super. The app has a myDeductions tool that helps you capture expenses as they occur.
If you have any questions relating to sole traders or small business advice, don’t hesitate to get in touch with us at STS Accounting.
