Insight on Filing Taxes for Your Online Business
Posted on: 2 December 2020
E-commerce has become the gold standard business model in recent years. Whether you're selling merchandise or providing a service, doing it online increases your customer base while reducing costs. However, you shouldn't forget about proper tax management.
Many e-commerce businesses fail to understand their tax obligations, thereby forgetting to file proper returns. Others don't report the correct figures, which exposes them to fines from the ATO. Here's what you need to know about fulfilling all tax obligations as you set up your online business.
1. Understand sales tax rates
Sales tax is perhaps the biggest factor to consider for your e-commerce business. All foreign online retailers who sell products in the country are required to pay a 10% goods and services tax. Furthermore, other municipalities may have additional taxes on various types of goods sold. You may need to register with the ATO to report these sales and pay taxes due every year.
Depending on your volume of sales, keeping track of these taxes can be challenging. A tax accountant has the knowledge and experience to inspect your books and reconcile your annual tax bill. In this way, you can ensure that all sales tax obligations are met on time. If you own commercial properties such as a warehouse or factory, you should also enquire about property taxes. These land rates will vary depending on the location, size, and market value of the premises.
2. Use the proper tools for bookkeeping
As an online business, you'll need to develop a strategy for recording transactions, balancing accounts, and creating an audit trail. There are many tools that you can use to ensure proper bookkeeping. Such software automatically records and reconciles transactions in an interactive interface for your employees. You can also activate different features based on your scope and needs.
For example, different departments may have varying tax requirements depending on their operations. A tax accountant can help you explore the wide range of features available before picking the best software for your business.
3. Avoid common mistakes
Many e-commerce businesses tend to make tax filing mistakes. From delayed reporting to incorrect entries, you can easily accumulate fines with the ATO due to seemingly minor mistakes. Other common issues include sales tax rate changes, which tend to evolve frequently over time. You should be prepared to keep up with relevant tax laws so you can avoid costly mistakes.
4. Have a tax professional by your side
Finally, consider working with a tax accountant to help you meet filing obligations. Depending on the goods you sell, the size of the businesses, and other variables, you may encounter varying tax obligations that need to be fulfilled.
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