9 ways for small business owners to keep the taxman happy
When Benjamin Franklin said that the only things certain in life were “death and taxes” most people didn’t consider that they may be closely linked.
But problems with taxes can lead to the death of your small business unless you take steps to keep the taxman off your back.
With sales meetings, recruitment, salaries, cashflow issues, marketing, suppliers, and a whole string of other things for small business owners to worry about, there’s no need to add the taxman to the list.
A robust financial system that keeps the tax authorities happy should be the foundation that underpins your business - allowing you to focus on the multitude of other issues that require your attention.
The specific requirements set out by your tax authority will differ by location but many of the basics remain the same wherever you are.
And most authorities are currently tightening the rules and clamping down on tax cheats and tax avoidance.
Nine of the most important general guidelines are detailed below: wherever you’re located, whatever your business size, and whatever industry you’re in, these will help you identify red flags in your tax setup:
1. Understand all the tax requirements - or find someone who does
Do you think your tax affairs are simple? They’re probably not. Ninety-nine percent of small business owners don’t fully understand tax legislation - so it’s important to seek specialist help.
The temptation a business owner is to try to look after everything yourself. With tax, this can be a false economy: not only can it take ages to get to grips with what you need to do; it’s likely that you’ll miss something important. And the taxman will be on your back!
2. File returns on time
The general rule is to file tax returns within twelve months of the end of your accounting period but this may vary with location.
Good planning in your business will ensure that you’re ready for the process; you know when it’s coming, have scheduled time to do it each year, and don’t end up scrambling around at the last minute to avoid penalties.
3. Keep consistent & accurate records
You should already understand the importance of accuracy and consistency: quite apart from generating the management reports to make good business decisions, the tax authorities love you for it too.
Being consistent and accurate will help you flag any changes that affect your tax liability and explain any changes that raise questions from the tax authorities.
If you have some bookkeeping experience, you may be able to manage this yourself with user-friendly cloud software like Xero and Quickbooks Online. Otherwise, it’s best to have a certified bookkeeper or accountant keep your accounting records up to date.
4. Keep the ‘evidence’ together
Keep the receipts and invoices for business expenses together. Most business owners know they should do this but it’s surprising how many find themselves scrambling around looking for receipts when the time comes to do tax returns.
And even when they do find the receipts, they don’t know what they relate to.
Keep it organised. All tax authorities want to know that there is sufficient documentation to justify business expenses. Receipts don’t have legs. Your own inefficient system is responsible for losing them or causing confusion about their origin.
One of the benefits of using a cloud computing app such as Xero is the ability to take a photo of a receipt with your smartphone to ‘scan in’ an expense receipt straight into Xero; or you can use specialist apps that integrate with Xero such as Receipt Bank or Expensify.
5. File business & personal expenditure separately
It’s easy to confuse business and personal expenditure. Unfortunately, it’s one of the quickest ways to get offside with the tax authorities.
By keeping them separate, you can see at a glance what you can deduct and what you can't: that means two separate (probably electronic) filing systems. Don’t be tempted to think “I’ll sort them out when the time comes for my tax return”. You’ll forget or cause delays.
6. If you’re a cash-based business, take extra steps
For small business owners such as tradespeople, who often get paid in cash, take extra steps to keep things transparent. You can guarantee that you will be on the taxman’s radar at some point.
For income, keep additional records to back up bank deposit records, such as cash register printouts or manual records of daily sales that can be matched to the bank records.
One of the benefits of moving your accounting systems to the cloud, is the ability to do things faster and easier with paperless processes. For example, trades-based businesses can use apps like ServiceM8 to quote and invoice in the field and even take electronic payments on site.
If you’re thinking, “I prefer to be paid in cash,” the ‘cash economy’—where a business does not declare all its income in order to reduce profits and therefore tax—is not such a great idea. Your business will be more valuable when it comes time to sell it if you have always shown all your sales revenue ‘on the books’.
7. Create a clear policy for employee reimbursement
Tax auditors want to know that you’re following the regulations with regards to employee reimbursement for travel, mileage, personal expenses, etc. They also want to know that expenses are appropriately signed off within the business to indicate that the business accepts liability.
Document a clear policy that determines what employees can claim for and how they go about claiming it. Make sure that this is clearly communicated to all employees.
8. Plan for your tax bill
There’s no room for surprise tax bills on the path to success. Tax is generally predictable and consistent. This means that you can - and should - plan for it in advance.
Sit down with your tax professional, understand what’s coming and when, and create a fund that can be used to pay the bill when it arrives. Maybe lock away a set sum every month. That way there are no nasty surprises ahead.
9. Never avoid the letters
Just because your tax authority writes to you asking questions or requesting records, it doesn’t necessarily mean the worst. Never avoid or delay answering these questions, as they don’t go away.
Answer in a timely fashion - there will normally be an expected response date detailed on the letter. Don’t go beyond this.
Take some tax advice and answer the questions to the best of your abilities. Most tax issues can be solved relatively easily if they are dealt with before they spiral out of hand.
Don’t get caught out by non-compliance with tax or it can cost you and your business. Get the right tax advice from the start and follow the tips above to keep the taxman happy.
If you need any specialist tax advice for your business, contact one of our advisors to talk it through.
Need help with your accounting?
June is zooming by! Here’s another handy checklist for business owners—let’s get you sorted for EOFY and tick off those to-dos.
EOFY is almost here — are your finances ready? Our guide covers top deductions, super contributions, SMSF essentials and a 30 June checklist to help you maximise your return. Read it here.
Not sure what you can claim as a landlord this EOFY? From loan interest to depreciation, we break down the most common (and overlooked) rental property tax deductions. Read the full guide.
One of the most powerful decisions you can make with your superannuation is whether to run your own self-managed super fund (SMSF) and whether to invest in property through it. Most people know it's possible to use super to buy property. Far fewer know how to do it well. The following seven tips are designed to help you make the right decisions. 1. You Can Borrow Money to Purchase Property in Superannuation. Don't have enough in your SMSF to buy an investment property outright? Since 2008, superannuation held in a self-managed super fund can be used to borrow money for property purchase. This is done through a 'limited recourse loan' using a Bare Trust as the Custodian entity. You can't borrow the total value of the property—typically it's up to 80% for residential properties and 60% for commercial properties, with the required deposit held in the SMSF as security. The SMSF then makes the loan repayments, with rental income received by the fund and property expenses paid by the fund. Importantly, if there is a default on the loan, your other assets in the SMSF are generally protected from standard debt recovery and bankruptcy proceedings. The lender only has recourse to the property itself. Upon completion of the loan repayment, ownership of the property transfers legally to the SMSF. 2. Follow These 8 Steps to Set Up Your SMSF Setting up an SMSF properly can be a complex process. It’s best to set up an SMSF with the assistance of a qualified superannuation advisor, like us! We can assist with both the initial setup and the ongoing management of your fund. There are eight core steps to SMSF set up: Select the appropriate structure and name Sign the trust deed that covers how your SMSF is set up and run (it can have up to four members) Establish a trust for the SMSF by investing assets into the fund Register your SMSF with the ATO Set up a separate bank account for your fund Submit your tax file number (and those of any other trustees) Obtain an electronic service address to receive employer contributions into your fund (if applicable) Roll over funds from your existing superannuation account into your SMSF 3. Keep a Liquidity Buffer If you're buying property through superannuation, make sure you plan to keep a liquidity buffer of cash and/or shares in your fund. Lenders will check for this before lending to you—it should be at least 10% of the value you intend to borrow. But beyond satisfying the bank, it's simply good risk management. Property is an illiquid asset. Having accessible funds in the SMSF means you're not caught short if repairs are needed, the property sits vacant, or an unexpected expense arises. Because superannuation is central to most Australians' retirement security, the government has carefully regulated what can and can't be done with it. They don't want people gambling their retirement away on poor investments or incorrectly using their superannuation fund. 4. Use the Rental Income to Repay Your Loan You cannot live in the property you purchase through your SMSF until after retirement. Most people purchase an investment property and use the rental income generated to repay the loan—which makes excellent financial sense. The key is selecting a property that rents easily and delivers a strong rental return. Your purchasing criteria may look a little different to buying a home you'd live in yourself. For example, proximity to public transport, local amenities, and average rental rates in the area matter more than personal preference. 5. Get It Right and Enjoy Significant Tax Efficiencies One of the most compelling reasons to invest in property through superannuation is the tax efficiency on offer. These benefits can significantly improve the long-term return of a property investment compared to holding it in your own name. Key tax benefits include: No capital gains tax or tax no yearly investment earnings if under super caps. Salary sacrifice advantages if you're sacrificing salary payments into super, loan repayments are effectively tax deductible. Capped tax on investment income—the maximum rate of tax on income after expenses is 15%. Any capital gains on investments held for 12 months or more, is taxed at 10%. Standard investors outside super can pay up to 47%. 6. Follow the Same Due Diligence Rules as Any Property Purchase Buying through superannuation doesn't mean relaxing your standards. If anything, the rules governing SMSFs mean you need to be more rigorous, not less. Property is likely one of the most significant financial decisions of your life. Research, not emotion, should drive your choices. The same rules apply whether you're buying in or out of super: Visit and compare multiple properties Know the values of similar properties in the same area Get all property checks performed by the right professionals Shop around for the right loan structure and lender Don't abandon good investor habits just because the structure is different. 7. Always Get Quality Professional Advice Nothing comes without risk—but the right advice significantly mitigates it. The key is understanding what you're getting yourself into: making informed decisions based on accurate data; keeping a diversified superannuation portfolio that doesn't place all your eggs in one basket; and not underestimating how complex buying property in superannuation can be. Sound Simple? It’s all in the details. If the above tips have made it sound straightforward, know that the detail is where the complexity lives. Getting professional advice from the start helps ensure you make the best possible decisions for your future. When selected according to rigorous property-purchasing criteria, property can be an excellent way to grow your superannuation and increase your chances of building a retirement fund that supports the lifestyle you want. Ready to Explore Property in Your SMSF? Whether you'd like to discuss whether an SMSF is right for you or need help setting one up, reach out to Ascent Accountants . If you want assistance managing the property within your fund, contact the Ascent Property Co team .
June 30 is closer than you think. Learn what tax strategies are still on the table, how to keep more of what you earned this year, and how to get your payroll ready for Payday Super from 1 July 2026.
Is your business structure still working for you? This EOFY, learn how to read the signs of growth, rethink your strategy, and build a real plan from the numbers that actually matter.
