In the past few years, and especially after the Covid-19 virus shattered numerous people’s prospects for economic success Many many thousands of Australians have altered their way of work and have started their own ventures to supplement the earnings they earn through your “day job” or to leave the rat race of employment completely to experience the freedom of becoming their own boss.
A lot of them have entered the retail market which has a myriad of new, custom-designed retail stores opening up, selling everything from clothing antiques, cosmetics and antiques stationery and gifts.
The issue is that many individuals who have made the switch didn’t think about the tax consequences. To ease the burden, H&R Block has provided tax guidelines for new owners of retail businesses should be aware of:
Declare your income
The first and most important thing is that the all income you get through your business is tax deductible and should be reported when you file your taxes. You may believe that your small shop is only a hobby, however the ATO will be different!
Claim what you’re entitled
You can get deductions for all costs you are required to cover as part of managing your business.
This includes the costs of inventory, the rental of the shop, and costs for travel to get products or attend trade shows.
Administrative expenses are tax-deductible, which includes costs for legal, accounting and other costs and other expenses required to manage your business, which includes water, power and cleaning expenses. If you manage the administration part of your business from your home do not forget to claim the appropriate percentage of the expenses associated with your home office including internet-related fees and landline or mobile phone charges, the cost of workplace furniture etc.
If the expenses are linked to a mix of private or domestic use, ensure that you only be able to claim the business part.
It’s your own right now.
Particularly, if you’re moving out of an paid position, then you’re likely familiar with getting your taxes taken directly from your pay package by your company. Now that you’re in the business of your own, and you have to be able to manage your cash flow in order to put money aside for taxes. It may seem simple, but putting money aside in order to pay taxes is one of the most common mistakes that businesses that are new get into.
It is also possible to sign up to register for GST. For the majority of businesses, you only need to sign up for GST when your income from your company (combined with the other businesses you manage) is greater than $75,000.
It is possible to can additionally claim back GST that you have paid on business purchases. You will have to document your GST purchases and sales at least every quarter by filing the business Activity Statement (BAS) with the ATO.
Thus, operating your own business has additional tax obligations. You’ll need to manage your tax obligations (and possibly your personal super). But operating your own business has tax advantages. For example, you have access to all tax benefits that small-sized companies can avail and include the full-expensing of capital assets that is valid until the 30th of June 2023. This means that you can immediately take deductions for the cost of fixtures and fittings as well as motor vehicles and tech products (such as desktops, laptops and POS equipment, as well as the security system) you use in your company.
Keep out of trouble by using the ATO
To keep your taxes stress-free, pay an appointment with your H&R Block accountant. Many people find it easier to hand all their data to a tax representative and let the agent to prepare their tax return and BAS and be secure in knowing that the work completed will be precise and thorough.
A knowledgeable agent will typically be adept at snooping out those tax deductions you did not know you can claim, so they can frequently pay for themselves many times over. Most important of all is that the tax agent’s fee is also tax-deductible.
