SMALL businesses risk substantial losses and penalties by the Australian Tax Office due to long-held tax myths and a lack of understanding around reporting requirements.
American Express recently conducted a survey of more than 1000 small businesses and found that the understanding of tax reporting requirements varies enormously depending on the length of time in business and the type of business.
According to the research, 57 per cent of Queensland small business owners have no idea about the write-offs that home-based businesses can claim for equipment purchases, and 43 per cent are in the dark when it comes to tax-breaks for asset purchases under $6500.
Over 60 per cent believe that businesses with a turnover greater than $50,000 are required to register for GST, despite the threshold changing to $75,000 in 2007.
Around 45 per cent of Queensland business owners believe they are entitled to claim more than they are allowed to or else have no idea about the tax deductions they can legitimately claim for entertainment expenses.
“Knowing your obligations and knowing what to claim and what not to claim is the key, however there exist some long-held misconceptions based on tax myths that continually trip business owners up,” says tax author Adrian Raftery.
“When operating a home-based business it is important to keep clear and separate records of expenses that relate to the running of the business, and not to confuse them with the everyday expenses related to running a household.
“Business owners should be getting their advice from credible sources, and if in doubt, they can always ask the ATO. Contrary to popular belief, asking the ATO for clarification does not put the owner on a ‘watch list’, it only serves to ensure they don’t make a mistake in the first instance.”
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