With a couple of days to go before the end of the 2015-16 financial year, new research has revealed that more than one in five Australian small businesses admit to lodging their tax returns late and 10 percent say they run out of time.
The study conducted by Xero, a global leader in cloud accounting software, found that found that 40 percent of small business owners are unsure of the business deductions they are able to claim, showing a lack of financial literacy among some business owners.
The managing director of Xero Australia, Trent Innes, is often in contact with small businesses to see what they are doing and discussing what they use to help with their tax time obligations.
“It blows me away how hard this segment of the economy works. It’s not easy being a small business. They’re very passionate, they work very hard and they don’t typically go into business to do accounting and compliance work. They go into it to follow a passion or a dream or to make a living and yet they spend an exuberant amount of time doing compliance work,” said Innes.
The survey showed that 54 percent of Australian small businesses either directly manage their own tax time obligations or work with their accountant to manage them. But owners and operators trying to do it themselves don’t have the time to focus on things such as deductions and that’s why many are missing out.
“It is still a reasonably complex area and you need to understand it quite well. So one of the things we always recommend wherever possible is a small business owner connecting with a bookkeeper who can help them through that process,” said Innes.
The second annual Xero EOFY Survey provides a snapshot of Australian small business owners’ attitudes to the end of financial year period, revealing that many find the time stressful and difficult to navigate.
“The survey also showed us that two thirds of them are quite stressed at this time of year as well so as it gets down to having to meet all of their obligations they start to get a bit stressed and it’s probably because they run out of time and leave it to the last minute.”
“Businesses should be trying to get organised as early as possible to try and take some of that stress away in order to be as prepared as possible.”
When asked what could be improved, half of Australia’s small business owners indicated that easier government compliance requirements would make tax time less stressful, over a third suggested an easier way of doing taxes, and a fifth would like less paperwork to complete.
Last year, the 2015 Xero EOFY Survey found nearly 60 percent of small businesses were planning to take advantage of the immediate asset deduction. However, this year’s research revealed that only 46 percent had done so to date.
“Half of Australian small businesses that we surveyed stated that easier government compliance would make tax time less stressful. And we clearly understand that the Federal Government in the last budget had discussed this point of making it easier. But that’s not translating down into small business at the moment where they’re definitely looking for more help in this area,” commented Innes.