A nationwide survey by American Express of more than 1,000 small business owners has found that the understanding of tax reporting requirements varies enormously depending on the length of time in business and the type of business.
Many businesses subjected themselves to substantial losses and the risk of being penalised by the Australian Taxation Office (ATO).
According to the research, one-in-two small business owners has no idea about the write-offs that home-based businesses can claim for equipment purchases, and 40 per cent are in the dark when it comes to tax-breaks for asset purchases under $6,500.
Additionally, the majority (65 per cent) of small business owners mistakenly 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. '
GST and registration for GST is an area that often creates confusion in small business. The rule is that businesses with a turnover greater than $75,000 must register for GST with the ATO.'
The research also identified that almost half (46 per cent) of small business operators incorrectly believe they can claim $300 worth of deductions without receipts.
Furthermore, 44 per cent of 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.
Charles Younis, director at Younis and Co, an accountancy firm based in Parramatta says smaller businesses often look to save costs on their accounts and don’t perceive themselves to have the time or capacity needed to obtain professional services to make informed taxation decisions.
