It's really not the end of the world. There are solutions.
Understanding procrastination ... and avoiding it
Taxes are very much an unavoidable part of our working professional life and the whole act of sorting out taxes, filing and declaring can get one into quite a spin. Which is probably why procrastination is the arch enemy of taxes.
We procrastinate on something not out of laziness or a lack of civic-mindedness. It's often because we feel an inability to deal with an issue or situation and we are filled with dread even just thinking about it, much less to get down to business and do something about it.
At CATS4TAX while we may love working with numbers, we also understand why the whole process of getting one's finances in order and then submitting the numbers to the authorities can be frustrating, intimidating and overwhelming. And it's just one thing out of a hundred other things you need to focus on and get done.
The antidote to procrastination is to take it one tiny step at a time and not doomsday the scenario of being late on your tax returns.
Treat facts as just that ... facts.
Facts don't bite. See them for what they are, and then take the next best step.
So let's start with the fact that all your bookkeeping, BAS returns etc. have as much importance in your business as other things like attending to customers, providing your service, doing your marketing etc. Which means you need to give this section as much of your attention as the others.
The next fact is, we all know that if we don't get our numbers in order and are therefore late on our tax returns (or even forgetting to do them) there is literally a price to pay. And the stress of it is often the pricier bit.
Which takes us on to the next step. Breathe. Now you are clear on the facts and what needs to be done. We don't have to get wound up. The upside is, regardless of the size of one's business or even if we're talking about personal taxes, you don´' have to do this alone. That is what professional bookkeepers and accountants are here for.
So what are some of the things you need to know about being late on tax returns and what to do about it?
Common situations
There are a few possible explanations why some years may see a business or an individual having an unusual tax return situation.
This is the basic and most typical one. The latest tax return was due a while ago, and we forgot it, we missed it, we couldn't get our numbers done in time to submit it. These are your overdue tax returns.
Some things may be best forgotten but taxes are definitely not one of them. We may have missed a tax return from a few years ago and with each passing month and year procrastination sinks its claws in and we hide under a denial blanket, hoping the tax authorities would get selective amnesia. These are our missed lodgements.
If the business revenue is under the threshold ($18,200 - this may vary over the years so make sure you check what the quantity is every year), you don't need to lodge a tax return but you still need to send in a non-lodgement advice form.
Ok I'm late this year, now what do I do?
The first situation of overdue tax returns is not the end of the world. In fact, the best thing we can do is to get it sorted out as soon as possible. Yes there may still be fines or penalties even if we are just a few days overdue, but they very much depend on how big our business is, how much taxes we owe and whether we have been behaving in previous years. Basically, we do not want to be blacklisted in any way by having a negative track record over the years.
Speak to a registered tax agent or your accountant as soon as possible and focus on damage control. The tax office was not created with the sole purpose of punishing people, if anything, as long as businesses try their best to sort out the situation, something can be done.
CATS4TAX has spent years building up a trusted relationship with the Tax Office. Both businesses and the Tax Office actually have the same objective, to have our numerical ducks lined up in a row so to speak. If you have overdue returns, Keep Calm and Speak to your Tax Agent, and trust that the Tax Office is there to help find the best solution for everyone.
Can't I let bygones be bygones?
Not when it comes to tax returns.
When you realise you have a tax return from a few years ago that has not been filed, it does not mean you are on the Tax Office's Most Wanted List. Believe it or not, this situation can still be rectified with the Tax Office (that's why we say they are not there waiting to catch or punish people).
This requires a little more work, so we recommend you speak to a Registered Tax Agent and get their help with this.
So the basic point here is you can still submit a missed tax return form. There are two ways to do this.
Do it online for tax years 2016 onwards at myGov portal.
If this is for tax years before 2016, then you have to go back to the good old-fashioned pen-and-paper style where you fill out a paper form and post it to the Australian Tax Office. Download the relevant year´s tax pack from their website. You can also call them and they will post it to you. (Another example of how the Tax Office is helpful every step of the way.)
If you do not have the financial knowledge and experience to go on to the next step, talk to a Registered Tax Agent who will review your bookwork, sort out the forms, make sure you have filled out the right ones and they can lodge on your behalf.
Another really important plus point of leaving this in the hands of a Registered Tax Agent is they can speak with the Tax Office and arrange a more manageable payment plan or even penalty reductions where applicable. Your Tax Agent will also be able to find out exactly which tax returns are missing and ensure you claim all your deductions.
A little human understanding goes a long way
Small businesses can have an especially difficult time because a business can start off as a one-man show, where the owner has to do everything. And we know it is not possible to be everything and have all the expertise in one single person. It is not necessary to do it all, which is why getting a trusted professional to handle your finances and numbers can go a long way to ensuring your business can have a clean financial record and keep going for a long time to come.
Those who have been in business for some time may find themselves in a situation of lost receipts, or if they still have them the ink may have faded. Some bank statements may not even be available online. A Registered Tax Agent is familiar with such situations and knows how to guide you through the financial labyrinth and retrieve relevant documents.
Cash flow is a huge challenge for businesses. You may be surprised to know this, but your Tax Agent can actually help negotiate with the Tax Office to give you an affordable, realistic and manageable payment plan to soften your tax debt.
The past year has seen businesses face new difficulties in the form of natural catastrophes and the pandemic. Some business owners may have had to deal with unfortunate illnesses or other private difficulties. Your Tax Agent can liaise with the Australian Tax Office and negotiate a reduction in penalties and also include a manageable payment plan based on your personal situation.
Just remember, business owners, Tax Agents, the ATO...we are all humans and have a shared experience and are willing to help.
At the end of the rainbow
Something that motivates us at CATS4TAX is seeing the relief in our clients when their finances are sorted out and tax returns are cleared and properly filed. They enter our doors with stress, anxiety and confusion about their tax returns, and we are delighted to say goodbye to our clients when their tax returns are happily sorted out with the Tax Office. It is the lifting of a burden, knowing that they do not owe the Tax Office anything, and can start their next financial year clean and fresh.
Bottom line is, it does little to bemoan a missed tax return whether it is one from this year or years ago. Sitting on it has never solved the problem. Taking action and speaking to a Tax Agent is a helpful first step. And the relief at the end of it is absolutely worth it.
