Ensure your small business is tax compliant

Beware the ATO’s tax deductions crackdown

Ensure your small business is tax compliant

At this hectic pre-Christmas time of year, tax return time is thankfully all over and done with. For most small business owners, your annual tax deductions are the furthest thing from your mind. Unfortunately, the ATO is set to change that. Having led a successful and high profile campaign against big business tax avoidance, the ATO is now directing their attention towards small business.

Mind the gap

  • The ATO wants to try and minimise the tax gap.

The tax gap is the difference between the total amount of tax revenue the ATO actually receives, and how much would have been received if all individuals and businesses met their tax obligations in full compliance with the law.

  • The ATO estimate that there is a tax gap of more than $2.5 billion on work-related expenses alone!

Work-related expenses in the spotlight

  • The ATO believes that of the $22 billion typically claimed each year for work-related expenses, a significant portion isn’t legitimate.
  • They say that the over-claiming is a combination of simple mistakes and carelessness in some instances, and blatant fraud in others.

Dodgy tax deductions are being targeted

  • They are warning small business owners of an upcoming focus on dodgy tax deductions.
  • Whether you prepare your own business tax reporting or have your accountant take care of it for you, ensure your tax deductions are all above-board.

Small business in the firing line

  • Australia’s commissioner of taxation claims that many small businesses are being opportunistic with regards to tax deductions.
  • The ATO has announced that they will be reviewing the claimed deductions of many small businesses with great scrutiny.
  • An investigation into the underground or ‘Black Economy’ has identified several key tax-related areas that the ATO will be focusing on.

The areas of concern

In their investigations into potential tax fraud amongst small business, the ATO plans to place particular emphasis on these target areas:

  • hidden or undeclared income
  • investigations to uncover wealth and tell-tale lifestyle factors amongst both individuals and small businesses
  • incorrectly claiming private expenses as being business related
  • unpaid superannuation guarantee contributions
  • focus on flushing out potential fraud within cash-only businesses, or those with low usage of merchant banking facilities
  • over-claiming on work-related expenses such as vehicle and laundry costs

Want more info?

  • Be sure that your small business is playing by the rules. You don’t want to get caught out and have all your hard work be wasted for a silly avoidable mistake.
  • For a handy guide to what tax deductions your small business can claim, check this guide from the ATO.

Need a cash injection to pay your small business tax bill?

  • If your small business needs access to fast, flexible finance, talk to City Finance Business Lending.
  • We’re one of Australia’s oldest and most experienced names in unsecured finance, and we understand first-hand the challenges small business can face.
  • Our experienced Business Loan Specialists can answer any questions you have and help tailor a business loan option to suit your business needs.
  • Call us on 1300 10 10 77, or email us at business@limbaloans.com.au.