Are you a freelancer, contractor or sole trader business? Do you start to stress as the calendar creeps closer and closer to tax time? I am what they call 'numerically-challenged'; i.e. I'm a real dummy when it comes to book-keeping, tax returns, anything to do with numbers. However, even I am now able to do my own book-keeping and make sure my tax returns are lodged on time and if I can do it, anyone can. If you are feeling daunted by the idea of organising your tax return and meeting with your accountant, read on.
Some freelancers and contractors and sole trader businesses complete their own tax returns. However, if you are anything like me (i.e. hopeless at maths and tax), you'll need to pay an accountant to complete your tax returns. If you already have an accountant whom you trust and is doing a good job, stick with them. If you're not 100% happy with them, find another one.
And, speaking from experience, find an accountant who you have been referred to by people you trust. You won't look back.
Don't be afraid to ask your accountant for a quote prior to them completing your tax return although be prepared: they may not be able to give you much of an estimate before looking at or actually completing at least part of the work. As a general rule, if you're organised, have done your book-keeping correctly and your tax return is relatively simple, you'll be charged less. If you're disorganised, your book-keeping has holes all over the place that the accountant has to fix up, and your tax return is more complex, you'll be charged more.
If you're using an accountant to complete your tax return, at the end of the financial year you need to:
Hopefully, your book-keeping has all been completed on a suitable accounting program and there are few mistakes. Even so, it's likely the accountant will find something that needs to be fixed, that you've forgotten or that has to be updated or improved, so after meeting them they usually have to do a bit more work before they send you the tax return for sign-off and lodge it for you.
I always try to get my tax return completed and finalised as early as possible after each financial year.
In my line of business (online transcription, business writing and editing) there is usually a bit of a lull in July so July is a good month for me to spend that extra time needed to get my book-keeping up to date, gather all the documents I need to present to the accountant, meet with the accountant and do any follow-up they ask me to do. That is, doing it in the quietish month of July is less costly to my business than, say, completing my tax return in September or October which are always busy months.
Your business may not have a slow patch in July so it might not matter whether you complete your return in July, August or September. But there is another advantage to completing your tax return in July or soon thereafter:
Once your tax return has been lodged, you'll either receive your payment from the tax office (yay!) or pay the tax office (ouch!) and, of course, you'll also need to pay your accountant.
ATO staff are generally very friendly and welcoming, even when you are ringing them up to ask for more time to pay your bills. If you are going to find it hard to pay the ATO on time, you can usually negotiate a longer deadline for payment with those very nice ATO staff. If you are finding it hard to pay but don't let the ATO know, and don't pay on time, they may not be so nice. So if you are a bit tight for money, give the ATO a call. They are the sort of people you want to stay friends with.
This article is based on my own experiences since starting On Time Typing as a small (sole trader) online/onsite scribing business in 2002 which has become an online transcription, scribing, writing, editing and proofreading business.
Stay posted for future articles about book-keeping, BAS statements, tax and managing an online business.