Small businesses rely on your professional assistance. Your advice to clients throughout tax time is vital to avoid common errors.

When talking to your clients, highlight the benefits of regular contact with you and remind them to let you know when their circumstances change to avoid mistakes.

The most common errors small businesses make when completing their tax returns are failing to:

  • declare all income
  • account for private use of business funds or assets
  • keep all required records or have adequate record keeping systems.

To avoid these common errors this tax time, use these questions in your client discussions. Ask if they have:

  • told you about all their income, including cash and online sales, dividends, interest, capital gains or one-off transactions such as selling equipment or other capital items
  • created a clear distinction between business and personal services income (PSI)
  • split their income appropriately – for example, where the PSI rules apply, income is only attributed to the individual performing the work
  • kept all source documents
  • undertaken reconciliations on a regular basis
  • accounted for stock taken for private use
  • accounted for directors’ fees or drawings
  • used loan accounts in an appropriate way consistent with ATO view
  • correctly apportioned expenses where an expense is for both private and business use (for example, motor vehicle expenses or rent expenses).

If your clients are claiming business losses, they may need your assistance to understand how to correctly claim current and prior year losses.

See also:

Last modified: 24 May 2021

QC 65738