Tax shock: When it comes to tax record keeping, the shoebox isn’t dead

Article by James Thomson, http://www.smartcompany.com.au/tax/050022-tax-shock-when-it-comes-to-tax-record-keeping-the-shoebox-isn-t-dead.html

Australia’s SMEs might appear to have embraced the internet age and cloud computing, but it seems that when it comes to tax, at least one very analogue device is crucial.

A survey of 1,000 small business people conducted by Galaxy Research for American Express has found a staggering 39% of small businesses keep their tax receipts in a shoebox rather than lodging them electronically.

The smaller the business and the younger the entrepreneur, the more likely it is that the shoebox will be used – entrepreneurs aged 18-34 years were the most likely to be shoebox users (46%), while 49% of those with businesses turning over less than $50,000 use the cardboard filing system.

The survey suggests that the use of the shoebox is counterproductive. Not surprisingly, 83% of small business owners find tax reporting stressful, with the biggest concerns including keeping track of receipts and invoices (43%), worrying that they will make a mistake (41%) and ensuring they are claiming the appropriate business expenses (40%).

Petrol and stationery receipts are the most likely to get lost, the survey found.

Tax expert and author Adrian Rafferty, who owns the brand Mr Taxman, says the findings shocked him.

“It’s a joke. If you are serious about business, you’ve got to have your systems in place.”

“These guys are not doing themselves any favours. If they were a just a bit smarter and took advantage of systems and technology then they would be a lot better off.

“Imagine getting two hours a week back in terms of recording keep. Just imagine what you could do with two hours a week. Could you spend those two hours winning over more customers?”

Two-thirds of small business owners are directly involved in their tax reporting, with half doing it all themselves and half getting the assistance of a colleague or accountant.

External accountants and tax specialists are the most common providers of tax support, with just 9% of small businesses employing an in-house accountant.

Rafferty says small businesses that are struggling with their tax obligations need to take action.

“A lot of them are still afraid of technology and don’t realise how easy it is. Get your systems in place; utilise the resources that are out there. And get some help where you need it.”

The survey also found that just 13% of small business owners were completely up to date with the tax concessions available to small business; this increased to 21% when the business owner was in charge of their own tax affairs.

With a raft of new tax concessions starting on July 1 – including the instant writeoff for assets under $6,500; a new $5,000 writeoff for vehicle purchases; and new, higher depreciation rates – the low level of tax concession knowledge suggests some SMEs may miss out.

Rafferty also doubts many SMEs are across the new carry-back loss rules coming into place in the new financial year.

“Very few of these guys even know they can claim a $1,000 concession right now, let alone the new concessions coming through.”