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Latest research - tax time takes its toll on small business owners

Jun 16, 2011

The end of financial year is an anxious time for Australia’s small business owners bewildered by the complexity of tax reporting and stressed by the amount of paperwork involved, according to the latest American Express Tax Time Survey.

New small business owners are more prone to worry, with 91 per cent revealing they do not have a thorough
understanding of their annual tax obligations and 84 per cent admitting they are unsure about what can be claimed as a business expense, according to the survey conducted by Galaxy Research for American Express.

Small business owners' doubts about their ability to understand and comply with GST and financial year reporting is causing anxiety, with many saying they fear the consequences of making an unintentional mistake.

“Setting up your own business can be like jumping into the unknown. Our Tax Time Survey shows that completing the business tax return for the first time is often fraught with anxiety,” said Jason Fryer, Head of Small Business Services at American Express.

“The research shows that almost all new business owners wonder at some stage if they have complied with the latest tax legislation and whether they will fall foul of the tax office if they make a mistake.” 

The American Express study found that three-quarters (74 per cent) of small business operators find tax reporting and the completion of their Business Activity Statement (BAS) a burden, with more than a third (35 per cent) identifying these tax requirements as a cause of stress. This result places tax-related issues on par with cash flow management as the greatest area of stress for small business owners.

The nationwide survey of more than 500 businesses, conducted as Australian businesses gear up for their end-of-financial-year reporting obligations, found that the most stressful aspects of tax and BAS reporting are ensuring accuracy (39 per cent), access to supporting documents such as receipts and invoices (38 per cent) and reporting deadlines (36 per cent).

Taxation expert and author of 101 Ways to Save Money on Your Tax – Legally!, Adrian Raftery says, “The American Express research reveals considerable uncertainty among small business owners about tax reporting and what they can and can?t claim, which contributes to negative feelings about completing tax returns.”

“In fact, the two most common questions I am asked by small business owners at tax time are, “What is the likelihood of my business being audited?? and “Who are the ATO targeting this year?? – demonstrating the level of concern among business owners.”

Two thirds of small business owners would have liked more advice when starting their business, with most identifying advice on tax and BAS reporting (30 per cent).

Small business owners also believe that preparing annual tax return and quarterly BAS statements is very time-consuming, with many compiling them during the evenings and on the weekends. Almost half (47 per cent) say they find it difficult to allocate time to prepare the necessary paperwork, 42 per cent find it hard to consolidate all the information and 35 per cent struggle to enter all of the transactions.

Recognising the issues faced by small business owners, American Express suggests some time-saving tips to get
ahead: 

  • Keep on top of receipts and records by entering them into the company?s reporting system regularly;
  • Look into accounting software and other financial products that will help to minimise time spent collating receipts and recording transactions;
  • Consider the time-saving benefits offered by business charge cards – for example, the American Express Business Card displays monthly expenses on a single statement with ATO approved, GST compliant itemisation, which can be quickly and simply downloaded into leading accounting software packages, eliminating the need for manual data entry and itemisation of receipts;
  • Always keep business and personal expenses separate – using a dedicated business card is an ideal way to do this;
  • Familiarise yourself with the various tax concessions and small business reporting obligations for small businesses by attending the ATO?s free national seminar program for people who are new to business; and
  • Speak to an accountant for their advice on the best solutions for your individual business as well as the latest regulatory and legislative changes.

About the Tax Time Survey

Undertaken by Galaxy Research, the study was commissioned by American Express, with the input of Adrian Raftery, author of 101 Ways to Save Money on Your Tax – Legally!, and included 509 small business owners across Australia with businesses generating an annual turnover of up to $2 million. The research was conducted between Thursday 26 May and Friday 27 May 2011. 

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