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Tax Tips To Maximize Your Sole Trader Tax Return

A sole trader is a person who is the owner of a business who is going to keep all the profits after paying tax and is responsible for losses alone. The people who run this business are self-employed; there are several kinds of sole traders such as freelancers, including copywriters, photographers, marketers, consultants, or self-employed traders such as plumbers, electricians, and plumbers. There are a lot of perks to the sole trader business structure, but taxes are still an inevitability. To ensure you’re the sole champion of taxes this season, we’ve collected tips to help you understand the sole trader tax return, get as many tax deductions as possible, and be one of the most tax-wise business owners around.

As a sole trader, you’re required to pay tax like any other business or individual. The rate you’ll pay is the same as a personal income tax return. Exactly what you pay depends on how much you earn each year and is worked out by the Australian Taxation Office (ATO).

No matter how much you earn as a sole trader, you will still need a tax file number (TFN) and an Australian business number (ABN), and you’ll have to submit an annual income tax return. If you earn $75,000 or more each year, you’ll also need to register for goods and services tax (GST) and submit a business activity statement (BAS) either monthly or quarterly.

The Several Advantages And Disadvantages Of Being A Sole Trader

There are several advantages as well as disadvantages of being a sole trader. A person likely becomes a sole trader if the business is small and has no major investment. Some advantages of sole trading are-

  • One gets to keep all the profits
  • They are the boss of their business
  • The costs for start-ups are low
  • Starting and operating a business becomes simpler
  •  The legal structures of the business can easily be changed

Disadvantages of sole trading are-

  • The amount of liability for debts become huge
  • There is limited capacity to raise capital
  • The entire responsibility of the business is upon the owner
  • It is not easy to take a day off
  • The survival of the business becomes difficult

Read More:- How to Find the Right Expat Tax Services in USA

Tips To Maximize Sole Trader Tax Return

The end of a financial year may be full of stress for many business owners, especially during tax returns. With some advanced planning and help, tax time-stress can easily be reduced while improving the chances of tax returns. Some tips to improve chances of tax returns are-

  • There should be separate business and personal expenses 

For a sole trader tax return, having a single bank account and credit card could be a problem, affecting tax returns. A business account needs to be set up if a sole trader does not have one. All business expenses need to be paid through a business bank account and a committed credit card. This will help in never missing any tax deductions. If one has to pay for something related to the business with cash, then reimbursement is needed from the business bank account to keep a record. 

  • Rules should be known for expense claims.

If a Sole Trader Tax Returns pays money on things that help make money in the business, it will be partially or fully deducted. One should only claim the portion that is useful to the business. E.g., if a person has only a single mobile phone for work and personal use, then only a certain percentage of the bill should be claimed as a business deduction. For expenses like mobile phones and home internet, one should keep a diary for a four week period that shows the usual pattern of use that can be applied for a year. 

  • Digital copies of work-related receipts should be kept.

There are many confusions regarding the need for receipts as per experts. Many business owners don’t own a receipt if the expense is over $82; this is only for GST and not for tax-related matters. One cannot claim a tax deduction for an expense if one does not possess a receipt. 

People are required to keep records for at least five years, and as paper receipts are easily changed, it is advisable to have a backup in case of an audit. Receipts can be kept digitally by using Receipt bank or MYOB capture app. 

  • Don’t save tax planning and returns for the last minute.

As per experts, it is always best to discuss tax planning strategies before 30 June, and this allows one to get in touch with different tax deduction strategies that might not be used after some time. A good Sole trader tax accountant is beneficial during the tax planning stage of the financial year. Instead of completing tax returns for a later part of the year, it is advised sole traders complete their returns before the due date. At times the range of the bills could be higher and trouble many sole traders, and if there is no tax debt and no funds available, one can contact the ATO to arrange the payments. 

  • Hiring an accountant 

Help is needed whether one is planning to submit a previous year’s tax return or planning to do so for the next year. When an accountant is enlisted, they can help save time and money and give insight into the business. When there is an accountant, they can produce the profit and loss statements, and returning tax return accountant is the best way for tax to be lessened. 

A good business accountant can help achieve a company’s business and personal goals. An accountant can help compare the business results of their client to that of a competitor and can also help in setting budgets and charge rates. Accountants are always considered an important part of a business team and if you are still living under a rock and questioning yourself ‘how can I find a certified public accountant near me?’, you need to check out Ageras.com. Ageras is a free online marketplace that connects accountants, tax professionals, and business owners. Ageras can help you find a professional accountant to assist you with important financial matters including taxes.

  • Errors to be avoided

Sole traders make some mistakes during tax time; some of the mistakes are-

  1. Not clearing received incomes
  2. To claim expenses that are not a part of the business
  3. Neglecting the number of private expenses
  4. Not keeping a logbook that can create problems in motor vehicle claims
  5. Not being interested in loans related to vehicles and business
  6. Claiming loan repayments in the form of leases
  7. Not claiming expenses paid for personal use

Other Tax Time Tips 

Some steps could be taken to remove stress during tax time-

  • Keeping a good record with online accounting software will help keep an eye on the entire year’s numbers.
  • Set the taxes aside throughout the year to avoid shocks at tax time. A good accountant can help calculate the amount to be kept apart. 
  • Hiring a good accountant is necessary; they can help relieve stress and consider every option available to reduce the tax rates. 

Hiring The Best Tax Accountants For Sole Traders 

Tax seasons can run well if one has sufficient knowledge in this field when one is a sole trader. To make most of the tax returns, one needs to know the basics. But many sole traders do not have time to deal with taxes; this is why they could hire the Tax return accountant Perth. A tax accountant can be useful for traders who panic during tax times. Accountants can help bring out the best business plans and strategies for tax reductions. 

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