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Top 7 Common Myths on Hiring Accounting Services, Debunked

Accounting business services are often shrouded in mystery, with many people believing some myths about them. In reality, however, accounting business services are vital to any business and can provide some benefits.

You may have heard a lot of myths about accounting firms on the Sunshine Coast. Here are some of the most common myths:

Myth: Accounting Firms Exclusively Handle Tax Preparation and Accounting

Contrary to common belief, it is untrue in practice. Professional small business tax accounting in Australia considers your organisation’s health in addition to addressing your taxes. 

Make sure you generate enough revenue and effectively handle the accounting processes.

They are responsible for some tasks. Accounting is used for more than just tax accounting. 

Financial accounting, the creation of financial statements, cash management, auditing, and assurance services are other key accounting characteristics. These features require some activities and processes.

Myth: Manual Bookkeeping Might Result in Financial Savings

Nobody would choose to forfeit money in favour of foolishness. Some accounting firms in Australia provide cost-effective corporate accounting services to assist small and medium enterprises with their accounting and tax requirements.

Therefore, there is no rationale for performing every task by hand, as doing so would make things more difficult. 

With cutting-edge software solutions like XERO, QuickBooks, etc. Many top accounting companies in Melbourne can assist you in automating all financial management tasks for your business.

Myth: Small Firms Don’t Require the Assistance of Accountants

Regardless of the company’s size, we must make every effort to ensure its financial stability. The most important enterprises are little ones. Melbourne’s small companies have suffered greatly due to the pandemic’s effects, such as lockdowns and market restrictions, as well as its sudden arrival.

Three alternatives are left for small business owners and startups: do it yourself, hire someone, or outsource it to an accounting service provider. The greatest choice among the alternatives for small firms is to hire an accountant on Sunshine Coast. 

Myth: Using A Third-Party Accounting Firm Costs a Lot Of Money

This is completely untrue. When you manage to account internally, you must pay for an expensive specialist resource. In addition to perks like paid time off, insurance, and payroll taxes, they also receive a paycheck from you.

However, you must make a project-based or hourly payment if you outsource your accounting requirements. By doing this, you pay for your efficient and helpful services. Additionally, it allows you more time to concentrate on tasks that increase your revenue and clientele.

Myth: Employing an Accountant Can Boost Output

Professional accountants on Sunshine Coast, QLD on staff full-time would undoubtedly increase productivity and help firms save money. The best option is not to hire someone to supervise accounting operations and use accounting software to check the accuracy of the job generated.

You can experience pressure if you have a small team of accountants and a limited quantity of time. Hiring a full-time employee costs money, and expanding your staff does not ensure faster business success.

Myth: Companies Should Give Accounting First Priority Throughout Tax Season

The tax season causes a significant rise in stress for many business owners. The unfamiliar may become lost in the sea of taxes, exclusions, rules, deadlines, and compliance.

While paying close attention to your money daily is required to maintain a strong financial position for your company, it is crucial. Businesses often utilise accounting services to spot irregularities and prepare for unforeseen financial problems.

Myth: It’s Challenging to Choose the Best Accounting Partner

Small firms are sustained by their ability to manage their finances and preserve market competitiveness successfully. This occasionally calls for hiring anybody who comes your way.

The best accounting firms aim to give you more control over your employment choices. With the help of these suggestions, you may streamline the procedure and be ready for the most challenging parts of choosing an accounting firm.

Conclusion 

There are many myths surrounding accounting and business services. However, these myths are often unfounded and based on misinformation. With the right information and guidance, businesses can save time and money by outsourcing their accounting and business services needs.

SMB Accounting offers services for individual tax returns, small-business accounting using a variety of small-business accounting products, SMSF audits (self-managed super funds), and an accounting firm based on the Xero accounting software. In addition, we provide audits for trust accounts, nonprofit organisations, special needs audits, audits of financial statements for specific purposes, and more. Hire our accountants on Sunshine Coast QLD today!

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5 Ways to Avoid Triggering Small Business Tax Audit

Running a small business is hard enough without worrying about the possibility of being audited by the tax authorities. However, it is important to understand the process of a small business tax audit in Australia, as well as the triggers that can lead to an audit, in order to be prepared when your business is picked for an audit.

The Australian Taxation Office or ATO is responsible for conducting tax audits on small businesses. The ATO has a risk assessment process that it uses to select companies for audit, and a number of factors can trigger an audit.

These triggers include things like a business having a large number of cash transactions, not declaring all of its income, or claiming excessive deductions. Here are some ways that can avoid triggering small business tax audits in Australia:

1) Rightly Declare Taxable Income 

All businesses in Australia are required to declare their taxable income to the ATO. This means reporting all of the revenue that your business earns. If your business is picked for an audit and the ATO finds that you have not declared all of your income, you may be liable for penalties and interest charges. Thus, find the accountants that make the right declarations.

2) Perform Within Industry Benchmarks

When your business is performing better than most businesses in your industry, it is likely to draw the attention of the ATO. Benchmarks are set by the ATO for companies in each sector and are based on a variety of factors, including turnover, profitability, and cash flow. If your business is performing significantly better than the benchmarks, it warrants an audit.

3) Match BAS Items to Annual Tax Returns

If the items on your Business Activity Statements (BAS) do not match up with those on your annual tax return, it will trigger an audit. This is because the ATO uses the BAS to reconcile the GST that businesses have collected with the GST that they have reported. Any discrepancy may be an indicator of GST fraud.

4) Avoid Late or Underpaid Superannuation

When you have a history of late or underpaid superannuation, you are likely to be audited. The ATO is cracking down on superannuation compliance among different small businesses, so you must make sure that all of your employees’ super is appropriately paid on time and in full.

5) Have On-Time ATO Lodgements

If you have a history of late or non-lodgement of returns, you will be a prime candidate for an audit. The ATO will take this as an indication that you are trying to avoid paying taxes or hiding something from them. To avoid an audit, lodge your returns on time and in full.

6) Claim Appropriate Deductions

Businesses can claim deductions for various expenses, such as business travel and marketing. However, the ATO may disallow deductions if they are unreasonable. Businesses can claim excessive deductions are more likely to be underreporting their taxable income. To avoid this, make sure that all deductions are necessary and can be supported by documentation. 

Conclusion

In conclusion, it is pretty important to understand the triggers for a small business tax audit in Australia to avoid any potential penalties. By being aware of such triggers, you can minimise the risk of being audited.

Seeking a tax professional to avoid small business audit triggers? SMB Accounting in Australia does individual tax returns, small business accounting, SMSF audits, and more. Get in touch with us today!

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Handling Late or Previous Year Tax Returns

Being a business owner means staying organised and on top of your taxes. This can be incredibly challenging during the off-season when business is slower. If you are behind on your late or previous year’s tax returns, don’t worry – there are ways to handle it.

Check out these few tips we’ve listed below to help you get started.

How Much Do I Have to Pay as a Penalty for Not Lodging My Tax Returns?

It is necessary to recall that the tax system is in place to help ensure everyone contributes their fair share. If you don’t lodge your tax returns, you may be penalised. The penalty cost will depend on several factors, including how late you are in lodgment, whether you have a history of non-compliance and the severity of your case. 

If you lodge your returns late, you may still be eligible for a remission of the punishment. The ATO has various solutions available, so it’s essential to get in touch with them  as soon as possible to discuss your situation.

Can Penalties Be Deferred?

While it’s essential to stay on top of your tax returns and pay any tax debts you may have, the ATO understands the fact that life can sometimes get in the way. 

If you notice yourself in a position where you have missed the lodgement deadline, they are likely to waive any penalties if you have a good history of lodgement and payment. However, if you have multiple returns outstanding or an account of non-payment, they are less likely to be lenient. 

In these cases, a tax professional can assist you in getting back on track as soon as possible is essential to avoid further penalties and interest charges. Taking care of your tax obligations is critical to being a responsible adult, so make sure you stay on top of it!

However, if you have more than one return left and a bad history of paying tax debts, chances are slim that they will relieve your penalty.

What’s the Danger of Failing to Lodge Tax Returns?

The ATO imposes a failure to lodge a time (FTL) penalty for each income tax return (including activity statements) that is late. The ATO uses an automated system to calculate and issue FTL penalties.

You may be subject to a late filing penalty if you’re late filing your return late. The fine is $222 of the unpaid tax for every 28 days the return is late. The ATO may also issue an administrative penalty of up to $5,000 for each return lodged late if it believes the late lodgment was deliberate or careless.

If you cannot lodge your return on time, you should contact the ATO as soon as possible to discuss what to do with your situation.

Conclusion

There are a few distinct approaches that you can handle your taxes if you end up filing them late or from a previous year. You can file an extension, which will give you more time to file your taxes but won’t necessarily waive any penalties or interest that you may owe. You can also file your taxes electronically, which can help to speed up the process.

If you own a lodge and have filed your taxes late or have previous year’s tax returns, it is strongly recommended that you hire an accountant and tax consultant. A tax advisor or Sunshine Coast accountant from SMB Accounting can help you ensure that you are compliant with tax laws and regulations and can also help you maximise your deductions and tax benefits. Book a meeting with us today!

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7 Common Tax Mistakes Small Businesses Must Avoid This 2022

This year, the tax office says it would focus on resolving a variety of common issues with small-business tax filings, such as ensuring small firms distinguish between private and commercial activity.

Taxation is a headache for all small businesses and self-employed individuals. You want to be out there working and making money. Instead, you’ll need to spend time calculating costs and earnings, filling out BAS forms, and dealing with whatever other paperwork comes your way.

It’s critical to have your tax under control so you can avoid potentially harsh fines and ensure you’re not paying too much tax. Unfortunately, small businesses make a lot of mistakes. Among the notable examples are:

1. Having Incomplete and Missing Tax Invoices 

 

The ATO says that it’s important to have complete and accurate tax invoices to support your deductions. This means ensuring that your tax invoices include all the necessary information, such as the name and ABN of the supplier, a description of the goods or services, the date of the supply, the amount paid or payable, and the GST amount.

2. Failing to Account for Private Use of Business Funds or Assets 

The ATO says you can’t claim a deduction for any private use of business funds or assets. This includes using your business car for private purposes, or claiming a deduction for the interest on a business loan used to purchase a private asset.

3. Failing to Keep Stock Records 

If you’re in the business of selling goods, the ATO says you need to keep accurate stock records. This includes keeping track of the quantity of stock on hand and the cost of purchasing the stock.

4. Failing to Record Sales Through a Cash Register 

If you have a cash register, the ATO says you need to ensure that all sales are being recorded through it. This includes sales of goods and services, as well as any refunds or voids.

5. Not Keeping Track of Changes to Tax Laws 

The ATO says it’s important to keep up to date with any changes to tax laws that might affect your business. This includes changes to GST, fuel tax credits and other taxes that might apply to your business.

6. Not Getting Help From Tax Specialist

The ATO says it’s important to get help from a tax specialist if you’re unsure about something. This could be a registered tax agent, accountant or the ATO itself.

A tax specialist can help you accomplish a bunch of things. They can:

  • help you understand your obligations
  • complete your tax return
  • advise you on how to structure your business
  • help you minimise your tax

7. Not Making the Most of Tax Incentives

There are plenty of tax incentives available to businesses and individuals. You could be missing out on valuable tax deductions or incentives because you don’t know they exist or don’t understand how they work. If you are a small business owner, make sure you understand the small business tax incentives available.

Conclusion

There are a few key tax mistakes commonly made by small businesses. These include failing to file quarterly estimated taxes, not taking advantage of available tax deductions, and not keeping good records. By being aware of these mistakes and taking steps to avoid them, small businesses can save themselves a lot of money and hassle come tax time.

SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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Self-Employment Tax Beginner’s Guide: What You Need to Know

When you are self-employed in Australia, you need to take special care to manage your taxes correctly. There are many opportunities to minimize your tax burden and take advantage of deductions, but you need to plan carefully and know what you are doing. Without professional help, it is easy to miss out on some of the benefits you are entitled to, or to end up with an unexpectedly large tax bill. Interest charges and fines can also be a problem. However, if you take care of your money matters, you can enjoy the benefits of being self-employed. This is easier said than odne as managing your taxes can be rather tricky, especially if you have little to no experience doing this. To help you out, we thought it would be useful to put together a brief article about this subject. If this is something that you’re interested in learning more about, read on for a beginner’s guide to taxes for the self-employed.

Manage Your Cash Flow

Self-employed people usually have a good income, but the money doesn’t come in regularly. To help with this, only buy things that you can afford and have saved up for. It’s also a good idea to have some money saved up in case of an emergency. Since self-employed people don’t get paid holidays or sick leave, they need to save up money so they can still have a life outside of work.

Keep Your Personal and Business Money Separate

Basically, you want to make sure that you are keeping your personal finances separate from your business finances. This means having a separate bank account for your business and only using that account for business expenses. This will help you to keep track of your business expenses and income, and it will also make it easier to see how profitable your business is.

Maximise Your Super

Superannuation is a way of saving money for retirement. The money you contribute is taxed at a lower rate than your income, so it can be a good way to reduce your overall tax bill. If you’re self-employed, you can make your own super contributions and claim a tax deduction for them. You may also be eligible for the government super co-contribution, which is a payment the government makes into your super account if you meet certain criteria.

Conclusion

We hope this guide proves to be useful when it comes to helping you gain a better understanding of how taxes work for the self-employed. While it may seem difficult at first, the information that we’ve laid out above should go a long way into helping you navigate this process. Be sure to keep everything you’ve learned here in mind so that you can make the most informed decisions regarding your finances.

If you’re looking for a tax consultant, then you’ve come to the right place. SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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How Do I Know if I Need to Lodge a Tax Return?

Do you need to file an Australian tax return? This is a question that many people ask, and the answer is not always straightforward. In this article, we will provide some general information about tax returns in Australia, and we will also provide some advice on how to determine whether or not you need to file a return.

Do I Need to Lodge a Tax Return?

The first step in determining whether or not you need to file a tax return is to determine your residency status. Australian tax law distinguishes between residents and non-residents for tax purposes. In general, residents are taxed on their worldwide income, while non-residents are taxed on income earned in Australia only.

There are a number of factors that are used to determine residency status, including:

  • Your domicile or permanent place of residence
  • The length of time you have spent in Australia
  • The nature of your activities in Australia
  • The intention of your stay in Australia

If you are a resident for tax purposes, you will need to file a tax return. If you are a non-resident, you may still need to file a tax return in some cases. For example, if you have income from Australian sources, you will need to file a return.

What Types of Income Are Actually Taxable in Australia?

Income that is taxable in Australia includes:

  • Employment Income
  • Business Income
  • Investment Income
  • Rental Income
  • Capital Gains
  • Retirement Income
  • Other Income

When Do You Not Need to Lodge a Tax Return?

Generally speaking, if you are an Australian resident for tax purposes and you earn income from employment, investments, or other sources, you will need to file a tax return. However, there are some circumstances where you may not need to file a return, and these include:

  • If your only source of income is from a job or jobs, and your employer withholds tax from your wages.
  • If your only source of income is from government pensions or benefits.
  • If you earn less than the tax-free threshold. For the 2021-22 financial year, the tax-free threshold is $18,200. This means that if your income for the year is less than this amount, you do not need to pay any income tax.
  • If you are a foreign resident for tax purposes, and all of your income is from Australian-sourced investment income, such as interest, dividends, or rent.
  • If you are a foreign resident for tax purposes, and your only income is from Australian employment, you will still need to file a tax return. However, you may not have to pay any tax on this income.
  • If you are a foreign resident for tax purposes and you receive a working holiday visa, you may be able to claim the tax-free threshold.
  • If you are an Australian resident for tax purposes and you have a spouse who is a foreign resident for tax purposes, you may be able to claim a tax offset.
  • If you are an Australian resident for tax purposes and you have a dependant who is a foreign resident for tax purposes, you may be able to claim a tax offset.

Conclusion

It’s essential to understand whether or not you need to file an Australian tax return, as not doing so may result in penalties and interest. The best way to determine whether or not you need to file a return is to use the Australian Taxation Office’s (ATO) tax return lodgment tool, which can be found on the ATO’s website.

SMB Accounting is fast becoming one of the leaders in Australia when it comes to providing accounting services. As an accounting firm serving Brisbane, Sunshine Coast, and Fraser Coast, we help clients by providing business advice, taxation, and XERO/MYOB/Quickbooks consulting. Whenever you need help managing your income tax returns or keeping your finances in check, SMB Accounting is the one to call. Contact us today to get started.

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7 Australian Tax Incentives You Should Know About and Use

Over the past couple of years, the federal and state governments have provided a lot of support to help businesses navigate through the troublesome time caused by COVID-19. However, there are many other tax incentives that you may not be aware of that are available, and knowing what they are can allow you to enjoy more savings in your effort to grow!

So, what are those incentives, you ask? Let’s find out together:

1. R&D Incentives

As the name implies, research and development incentives motivate companies such as yours to engage in R&D activities. This is done by helping you offset costs that pertain to eligible R&D activities, and the amount is equal to 30% of the corporate tax rate for big companies and 25% for smaller companies. 

Additionally, companies with an annual turnover of less than $20 million will also receive an 18.5% premium! Companies with more than $20 million in annual turnover are eligible for a premium of up to 8.5%.

2. Patent Box Regime Incentives

Normally, corporate income is taxed at either 25% or 30%. However, this incentive is aimed toward Australian medical and biotech patents, lowering the tax income on those down to just 17%. That’s nearly half the tax previously imposed, which is a huge incentive for companies that are struggling and do not want to deal with higher corporate income tax.

3. ESIC Incentives

ESIC, short for early-stage innovation company, is aimed at startups and brand-new businesses. It offers a non-refundable carry-forward tax offset for any amount invested into them, with the max cap being $200,000 a year.

4. FEDA Incentives

Full expensing of depreciating assets is a type of incentive that helps businesses make more investments. Any business that is eligible for it and has an aggregated turnover of less than $5 billion can fully deduct the cost of eligible assets that are depreciating.

5. Loss Carry-Back Incentives

The main goal of loss carry-back incentives is to help companies enhance their cash flow by using their losses up to the 30th of June, 2023. For companies with less than $5 billion aggregated turnover can carry back their tax losses from the current income tax year to offset taxed profits as far as 2019!

6. Digital Games Tax Incentives

Specifically for the digital game industry, this incentive is aimed at helping international companies come to Australia to develop digital games. These companies are offered a 30% refundable tax offset for Australian qualifying games with a minimum investment of $500,000.

Note that certain games are excluded from this incentive, such as games that utilise gambling features.

7. Brewers and Distillers Tax Incentives

As the name implies, this incentive is aimed at supporting Australia’s alcohol manufacturing industry. This enables eligible brewers and distillers to receive up to 60% of any excise paid on the alcohol produced. This number is capped at $350,000, a much higher figure than the previous $100,000.

Conclusion

As you can see, there are a bunch of incentives out there that you can use to boost your cash flow, save money, and more to help you survive and even thrive during these troubling times. That said, there are still plenty more incentives out there, and there can be plenty of changes and additions to be made to the current incentives. So, always be sure to reach out to a professional accountant for help to stay up to date on these things and to also make the most out of these incentives to benefit from them!

SMB Accounting offers various small business accounting services to help companies stay on top of their taxes and more. If you are looking for an accountant in Caloundra to assist you, get in touch with us today!

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Your Beginner’s Guide to Australian Tax Deductions

Tax deductions may seem complicated at first, but they’re actually pretty straightforward if you know what you’re doing. To make things easier for you, we thought it would be useful to put together a brief article about how tax deductions work. If this is something that you’re interested in learning more about, read on for a beginner’s guide to Australian tax deductions.

How Do Tax Deductions Work?

When submitting a tax return, anyone who is employed can claim deductions for any expenses they paid while working. To be able to claim deductions, the taxpayer is required to have met the following criteria

  • You must have documents to prove it.
  • You must spend the money yourself.
  • The expenses must not have been reimbursed.
  • The expenses must be work-related.

Keep in mind that if the expense you are claiming is for both work and private purposes, you can only claim a portion of the costs that were utilized for work.

What Are the Different Types of Deductions?

Business travel expenses are typically tax-deductible. You are entitled to deduct the work-related travel expenses that correspond to the business-related costs of using your car to do your job. You must be able to prove the use of your car for business travel in order to deduct any car expenses.

Do you have to wear a suit to work, or is a uniform required? Or do you need to wear clothes that bear the logo of your company? Maybe you work at a shop that sells clothes, and you need to come in wearing clothes from that shop. In any case, you have to dress according to the dress code at work, and this expectation might carry over into your interactions with the taxman when it comes time to file your taxes. If you wear clothing that is specific to your occupation, you can claim the cost of purchasing and laundering it. Otherwise, you cannot. (For example, chef’s pants.) You can claim the cost of special clothing that you wear to protect yourself from injury or illness, such as a uniform for construction workers that protects them from dust and sun. (For example, sun protection can be claimed if you work outdoors.)

If you carry out all or part of your employment activities from home, and you have a designated room set aside as a home office, then you can claim a tax deduction. Ideally, you should have a room set aside as a home office, but if you don’t have one, or if you are using a dual-purpose room (e.g. dining room), you can still claim expenses for the time that you have exclusive use of the room.

As with anything tax-related, record-keeping is critical for a home office deduction. You may be entitled to deductions for equipment used for work (e.g. computer, phone), general repairs and maintenance on your house that are work-related (e.g. electricity), and some other costs (e.g. Internet connection). Note that as a general rule, you can only claim for expenses in proportion to the area of your home that is used for work.

Conclusion

We hope this article proves to be useful when it comes to helping you gain a better understanding of how tax deductions work. While it may seem complicated at first, the information that we’ve outlined above should help make things more manageable. Feel free to reread this article if you need a quick refresher on tax deductions.

SMB Accounting has knowledgeable tax consultants who can help you get started with taking care of your tax refunds. We make sure that our clients use their tax refunds wisely, and we also offer other services such as accounting and business advice. Contact us today for a consultation!

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6 Helpful Advantages of Internal Audits for Small Businesses

Small businesses benefit greatly from internal audits, and there are many more advantages than you might realize. In actuality, internal audits are relied upon by the majority of small businesses today. Hiring a specialist to conduct the internal audit is typically helpful for small organizations that have their hands full in various departments. 

The short answer would be that working with auditors is a cost-effective way of seeing where your company needs to make financial improvements. For a more in-depth look at the help that internal audits offer to your small business, the following are some of its most helpful advantages:

1) Gain Valuable Insight

The first benefit of an internal audit is that it supplies you with useful information. An internal audit allows you to examine your firm and identify areas for improvement. The audit will also assist you in determining whether there are any dangers to the company’s existence, and you can use it to track your company’s financial success.

2) Achieve Better Compliance

The internal audit will determine whether or not you comply with applicable laws and regulations. This will ensure that you are always running as effectively as possible. Compliance with regulations and legislation is necessary to avoid fines and penalties. No need to fret because internal auditing will assist you in accomplishing this.

3) Raise Efficiency

If you have never performed an internal audit, you should do so as soon as possible. The main goal is to achieve and maintain efficiency within the organization. You may not be aware of the progress your organization is making, but an audit can be seen as an eyeopener. This is because it will allow you to make sure everything is running smoothly, ensuring and raising efficiency in your operations.

4) Have Better Overall Control

Whether you have a larger company or a small business, you need to have sufficient control over everything that goes on. By conducting an internal audit, you will have better control over your company. If you are just starting, then you need to take precautions to make sure your business is secure, and the best option is to perform an internal audit.

5) Secure Processes

The main advantage of doing an internal audit is that it allows you to secure your business procedures. Internal audits can be quite beneficial to small businesses. A standard internal audit will ensure that everything financial is handled correctly and that the processes are completed. This is an excellent technique for small businesses to ensure everything is going well.

6) Prevent Business Risk

Internal audits will enable you to keep your firm safe from any unnecessary risks that can plague you throughout your operations. You will have a better chance of detecting possible issues if you have already identified them internally. These audits will also highlight flaws in your organization, allowing you to take corrective action.

Conclusion

 In conclusion, whether you are a large corporation or a small business, conducting an internal audit makes sure that everything is running smoothly. Readers should have a pretty good idea of what an internal audit is and how valuable it is for a business, so execute it now.

Looking for an audit of your processes? SMB Accounting does small business accounting with various packages available,  self-managed Super fund audits and Xero accounting software. Get in touch with us today!

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Essential Tips to Avoid a Huge Tax Bill as a Sole Trader

If you find yourself with a bigger tax bill than anticipated, don’t panic. With a little bit of planning, you can avoid this common issue for sole traders. All you need are a few software tools and a basic understanding of your tax schedule. Use our practical tips to better manage your income and taxes, and you’ll be on your way to avoiding a massive tax bill down the road.

Essential Tips to Avoid a Huge Tax Bill as a Sole Trader

1 – Be Knowledgeable About Your Tax Bracket and Tax Rates

Your effective tax rate is the tax rate you pay on your taxable income. The more you earn, the higher your tax rate will be. Your tax bracket is determined by your filing status and taxable income.

Certain expenses are deductible, meaning they will lower your taxable income and lower your tax liability. However, they’re only deductible if they’re business expenses. You’ll need to keep track of all your expenses, including mileage and travel, to ensure that you’re getting the most tax savings possible.

2 – Separate Business and Personal Accounts

A large tax bill usually occurs when your business and personal accounts are mixed together. Your business accounts and credit cards should not be used for personal items. Try to keep as much of your money in business accounts as possible.

Keep your business and personal finances separate and organized. Use separate checking accounts and business credit cards. If you’re self-employed, open your own business bank account. Then, once a week, transfer any money you earned that week into that account. This will help you keep track of your income, and it will also help you identify where you’re spending your money so you can keep a better eye on it.

3 – Anticipate Your Tax Bill

The easiest way to avoid a huge tax bill is to plan for it. Keep track of your income for the year. Try to anticipate what your final tax bill might be before it’s time to pay it.

If you have a home office, keep good records of your home office expenses. If you have a second car, keep a good track of how many miles you’re driving and what you’re driving it for. If you’re planning a big purchase, like a car or a home, consider how it will affect your taxes. Planning ahead will help you avoid a big tax bill.

4 – Hire a Tax Professional

The best way to avoid a huge tax bill is to hire a tax professional. A good accountant will make sure you’re doing everything properly and taking advantage of everything the government allows to lower your tax bill.

Good accounting firms will offer pre-filing tax services, year-end tax planning and tax preparation services. Those services can help you keep an eye on your business income and expenses as they happen throughout the year, which will ultimately help you minimize your tax bill.

Conclusion

A big tax bill can be stressful and overwhelming. A big bill could be in the thousands, and that money could have been used to pay bills, pay down debt or save for retirement. Fortunately, if you’re prepared, you can minimize your tax bill and avoid an unexpected tax bill.

If you need an accounting firms on the Sunshine Coast to help with your taxes, contact SMB Accounting. Our business does Individual tax returns, small business accounting with various small business accounting packages available, SMSF audits (self-managed super funds), as well as a Xero accounting software-based accounting business. We also offer the following audits: trust account audits, audits of non-profit organizations, audits of special purposes financial statements, special needs audits, and more.

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