It’s that time of year again, time to file last year’s tax returns. ATN sat down with tax expert Mark Chapman to discover how transport businesses can make the most out of their returns and what they should be looking out for.
If there’s one thing transport workers and heavy vehicle drivers need to know about it’s tax deduction claims for business expenses.
It’s important that heavy vehicle drivers understand the many types of expenses they can claim when completing their tax returns. Anything used for their work, such as meals and uniforms for example, can be claimed if there is documentation.
Mark Chapman, Director of Tax Communication at H&R Block says this time of year is very important for business owners.
“As we get to the end of the financial year its important sole traders do everything, they can to get their records in order.
“It’s also a great time to undertake some future tax planning,” Chapman says.
Chapman is quick to point out the importance of understanding business expenses.
“The cost of uniforms, meals while on the road and even sunglasses that need to be worn while driving can be claimed as a tax deductable work expense. Provided you have substantiation and are not being reimbursed by someone else for the expenses,” Chapman says.
Another key piece of information for this year’s end of financial year (EOFY) is the expiry of the temporary full expensing deduction.
The temporary full expensing deduction will expire this year on the 30th of June.
Chapman says the deduction allows a business owner to claim an immediate deduction for any eligible capital asset, this can include the cost of trucks, IT equipment, tools etc.
“This deduction is really valuable for business owners at the moment however it is about to disappear so there are about two months left for people to claim it,” Chapman says.
Chapman also says for any operators with spare cash might want to consider making a voluntary super contribution as they’ll be able to deduct that contribution from their tax return.
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Mark Chapman is the Director of Tax Communication at H&R Block.
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“You can contribute up to $27,500 into super. Business owners can use this opportunity to boost their retirement and ease their tax bill too,” Chapman says.
Tax returns are complicated documents, and they can be difficult to complete accurately.
The one piece of advice Chapman gives to sole traders and businesses owners planning on completing their own tax return, through the government my tax portal for example, is not to embellish their expense claims.
“Absolutely go ahead and claim anything you are entitled too but do not try to claim any more than that.
“Don’t try to claim more than you spent or claim things that are not strictly work related.
“Some expenses can be tricky to claim such as home internet use or mobile phones and this is where a tax agent can come in handy and help someone to figure out how to properly make these sorts of claims,” Chapman says.
Embellished deductions can result in a penalty/investigation from the ATO and is not worth the risk. Chapman says it’s always best to simply stick to what you’re entitled to claim as the ATO is paying especially close attention to these types of deductions this year.
“If you can’t substantiate your expenses the ATO may reject those claims.
“The ATO is focusing very heavily, this year, on work-related expenses,” Chapman says.
Sole traders and business owners might want to re-consider completing their own tax returns in the first place though and weigh up whether it’s worth their time.
Hiring a professional tax agent to complete your tax return is a way one can aim to maximise their return.
Chapman says the cost of having an agent complete your returns can easily pay for itself in a larger tax return. Not only this, but tax professionals are trained to be able to understand the tax laws and forms and help you to claim the deductions most appropriate to you.
“The cost of a tax agent can potentially be repaid several times over in additional deductions. Not to mention taking away the stress of trying to work through these forms yourself.
“Agents can read and understand the laws and can tell an employee which deductions are available to them,” Chapman says.
However, completing your tax is one thing, getting the correct documentation ready to begin with is another. Tax accountants can only help someone with their return if they have the right documents to work with.
“It is very important people have their records straight before they see their agent, otherwise they might not be able to claim all their deductions.
“Accounting software simply makes life easier for sole traders,” Chapman says.
When it comes to properly organising your documents Chapman says simple common-sense rules apply. This means having receipts and evidence for all appropriate business expenses organised chronologically ideally.
Chapman admits that they still do occasionally see clients show up with a shoebox full of paper, but for the most part digital documents are far more common nowadays.
Chapman says the deadlines for filing a tax return are very generous and someone would be particularly lax to miss them. However, if they were to miss the deadline then the ATO can impose a late fine of $270 for every month that it is not filed with a cap of five months, or $1,280.
If someone still doesn’t make a tax return, then the ATO is able to declare that year’s return null and will actually complete their own return by estimating a company’s revenue based on previous years. Chapman says this scenario rarely works out well for the business.
“While they are able to estimate revenue fairly accurately, what they cannot account for are businesses expenses and deductibles.”
Chapman says tax time needn’t be stressful and that it can be an opportunity to take stock of a business’s operations and figure out which direction it should be heading in for the second half of the year.
Finally, remember to tread carefully around deductions and only claim expenses you can back up with proper documentation.