Avoid Tax Payment Penalties by Keeping Accurate and Sufficient Company Records
Many people love the idea of starting their own business ventures, however, turning such a dream into a successful enterprise isn’t always smooth sailing. In fact, soon after starting a business, many new business owners realize that they are in over their heads. They see that there are a number of obstacles that need to be overcome as well as knowledge that needs to be gained. Knowledge regarding company taxes and tax payment penalties is critical because for a company, understanding payment requirements will help to avoid potential penalties.
Complex Taxation requires Specialised Knowledge
Tax payments can require specialised knowledge, and in order to stay current with local, state and federal taxes, many businesses hire the services of a tax expert to deal with their tax and help them understand business owner obligations and how to keep the right records. In Australia, after the financial year ends, tax returns can be filed until 31 October, and the ATO or Australian Taxation Office might well apply a penalty for failing to lodge your tax return on time.
Failing to pay on time will result in a business being sent a default assessment warning letter or a DAWL which informs you when you need to file the late tax return if you want to avoid tax payment penalties. The Australian Taxation Office provides a tool on their website to determine whether you need to lodge a tax return or not; because there are certain exceptions. They also make it easy for you to complete your tax return online quickly and easily.
How to Avoid Non Tax Payment Penalties
The Australian Tax Office is open about stipulating that taxation is not simple and that businesses need to contact their local council in order to establish what rates apply to their particular business in the area they are operating. This is because different tax rules apply to different business structures. The penalties which are exacted by the Tax Office are designed to ‘encourage taxpayers to take reasonable care in complying with their tax obligations’.
There are a number of things companies need to do to avoid having to pay a penalty. A few of the most important aspects are:
- keeping accurate records of activities
- declaring all their income
- making sure the business is registered for all taxes
- ensuring taxes are paid on time and the right amount
- making sure the business uses legitimate structures. This is because being a partnership, a sole proprietorship, a corporation, a trading trust or a limited liability company will have an impact on how much you pay in taxes, the amount of paperwork involved as well as the personal liabilities the company faces.
Make Sure you Pay Enough and On Time
The way to avoid tax payment penalties is to be sure you’ve paid enough tax and at the right time. In Australia there are penalties for late filing, penalties for late payment and penalties for failing to notify liability to pay tax. Criminal prosecutions are Australia’s harshest strategy for dealing with those taxpayers who deliberately seek to evade their lawful obligations to the tax office. Australian taxation is complex and more and more individuals and companies hire the services of tax agents to achieve the best tax outcomes.
The Australian Tax Office warns about tax agents being used deviously by companies to lodge fraudulent returns. The job of the tax agents is to ensure that new clients are legitimate. Agents should decline to lodge any tax returns if they are unable to establish authenticity of the client.
What Happens if You Breach Tax Laws?
The courts can impose among others, community service orders, security bonds, fines and non tax payment penalties and in some instances, prison sentences for breaching tax laws. One of their project’s in previous years, known as Project Wickenby, and which involves the ATO as well as a number of federal agencies, collected hundreds of millions of dollars since its inception in 2006. The Australian government has also allocated millions of dollars to continue these projects aimed at tracking down companies dodging paying tax.
Every Area of Taxation Explained
Almost every business in Australia is required to register for GST (goods and services tax) which is currently 10% on the value of the taxable supply. If any GST is outstanding and payable, the amount of penalties and interest charges are based on the length of delay of non-payment of GST. Very small businesses with an annual turnover of less than $50,000 don’t need to register.
Fortunately the Australian Taxation Office website offers full details and information as well as assistance to individuals and businesses in every area of taxation with information on tax reform, superannuation, e-tax and rebates etc and also offers a legal database with legal and policy material to help with interpreting taxation law. Their business portal provides excellent information on how to manage your business tax affairs and can actually use the portal to communicate with the taxation office, update details on your business, view your statement of account as well as prepare and lodge reports.
Directors of Companies are Responsible for Submitting Tax Documentation
The Australian Tax Office makes directors of companies personally responsible for unpaid superannuation amounts as well as withholding PAYG amounts, but they make provision for directors to get off the hook if the company pays up the amount or is put into administration within 21 days of it being issued with a director penalty notice.
For a director of a company, failure to file the required statements to avoid attracting the attention of the Australian Taxation Office won’t put off or delay the problem of non-compliance. There are also companies who look for ways around the law that ultimately create rewards for employees but when found out, penalties will be in place.
Don’t Jeopardise Your Company’s Tax Deduction Opportunities
Failing to submit tax returns may also result in tax payment penalties, but not only that, as a business, failing to comply with your tax obligations may also jeopardize your chances to claim the deductions that your company may be entitled to. There are companies who knowingly breach a tax obligation and they actually provide false or incomplete information. Extensions for income taxes also don’t entitle a business to pay their taxes later, and in fact the extension only grants an extension of time for filing tax returns, and businesses are required to estimate their income taxes and pay them when filing tax extensions.
The Australian Taxation Office advises all businesses that understanding and complying with tax obligations will help the company save money and be entitled to exemptions and most importantly, to avoid unnecessary non tax payment penalties. The ATO should receive credit for being fair, and if you are dissatisfied with a penalty they have imposed, you can even contact them to have it reduced or cancelled.