Navigating Tax Returns with an ABN: A Comprehensive Guide

Owning an Australian Business Number (ABN) comes with several responsibilities, especially when it comes to lodging your tax returns.You will need to have some understanding of the requirements for your tax return. This guide will walk you through the essentials of completing your tax return under an ABN, including the necessary business schedules and the ATO’s tracking mechanisms.

Contents

1. Understanding Your ABN Obligations
2. Preparing Your Tax Return
   • Business Schedule
   • GST Reporting
3. Key Tax Return Labels
4. The ATO’s Tracking Capabilities
5. Tips for Compliance
6. Conclusion

1. Understanding Your ABN Obligations

An ABN is a unique 11-digit identifier that the ATO uses to track your business activities. It’s essential for:

• Registering for Goods and Services Tax (GST)
• Claiming GST credits
• Dealing with other businesses and government agencies
• Lodging business activity statements (BAS)

Not everyone who has an ABN needs to be registered for GST.  If your turnover is less that $75,000 in a year, then GST and BAS obligations are not required. You also have no need to charge an additional 10% on your invoices.  Nor can you claim the GST credits.

2. Preparing Your Tax Return

A. Business Schedule

When lodging your income tax return, you must include a business schedule.  The business schedule details your business income and expenses, helping you calculate your net profit or loss. Here’s what you need to include:

• Income: Report all business income, including sales, fees, and other earnings.
• Expenses: Deduct allowable business expenses such as rent, utilities, wages, and materials.
• Depreciation: Include deductions for depreciating assets, following the simplified depreciation rules if applicable.
• Other Deductions: Claim deductions for eligible business-related expenses like home office costs, vehicle expenses, and professional fees.

The Business Schedule is included in the Gotax Online Tax Return system for individuals.

B. GST Reporting (if required)

If your business is registered for GST, you must report GST collected on sales and claim GST credits for purchases. This is done through your BAS, which needs to be lodged either monthly, quarterly, or annually depending on your business’s turnover.

3. Key Tax Return Labels

The ATO has identified several key tax return labels that are under scrutiny, particularly for the 2024 income year. These include:

• Contractor and Sub-contractor Expenses: Ensure correct classification of workers to avoid issues with PAYG withholding and superannuation obligations.
• Fringe Benefits: If you provide fringe benefits to employees, make sure to report these accurately and consider lodging a ‘nil’ FBT return if no FBT is payable.

4. The ATO’s Tracking Capabilities

The ATO uses various methods to track ABNs and ensure compliance:

• Data Matching: The ATO matches information from various sources, including banks and other government agencies, to verify the accuracy of your reported income and expenses.
• Audit Activity: The ATO identifies businesses for audit based on discrepancies in reported information. Key areas of focus include contractor expenses, motor vehicle expenses, and fringe benefits.
• Penalties: Failure to comply with reporting requirements can result in penalties, including fines and interest charges. For example, not withholding PAYG amounts correctly can attract penalties of up to $3,130 per infringement.

5. Tips for Compliance

• Keep Accurate Records: Maintain detailed records of all business transactions, including receipts, invoices, and bank statements.
• Use Accounting Software: Consider using accounting software to streamline your record-keeping and reporting processes. We recommend eCashbooks for small and micro businesses.  It's simple to use and you'll get all the information you need without the hassle of complex accounting systems. Check it out.
• Seek Professional Advice: Consult with a Gotax tax professional or accountant to ensure you meet all your tax obligations and take advantage of available tax deductions.

6. Conclusion

Lodging a tax return under an ABN involves several steps and requires careful attention to detail. By understanding your obligations, accurately reporting income and expenses, and staying informed about the ATO’s tracking capabilities, you can ensure compliance and avoid penalties. For personalised advice, consider seeking assistance from a Gotax tax professional who can guide you through the process and help optimise your tax position.