Small business owners opt for dinner with the in-laws over doing taxes

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Are you a tax time procrastinator? Turns out you’re not alone. With end of financial year looming, we asked small business owners how they’re preparing for the peak tax season.

Our survey of 500 Australian small business owners found that when given a choice, the majority (69%) would choose having a meal with their partner’s parents over working on their taxes. This was followed by working on the weekend (65%) and cleaning the entire house (58%).

Why are small businesses so prone to procrastination? Many owners said they didn’t think it needed to be done immediately (48%) while others (19%) cite being busy at tax time due to the season. Some (17%) admit to holding off because they hate doing it.

Xero Australia’s Head of Industry, Matthew Prouse says tax time can be intimidating for anyone, and for small businesses, it can make having dinner with the in-laws sound like fun.

“When you aren’t a finance expert (and most small businesses aren’t), decoding tax jargon to understand business obligations can feel overwhelming. A shocking 42% of small businesses told us they don’t understand the terms used in tax forms — for these owners, going at it alone is like tackling a new language, only harder as the rules are constantly evolving. However, the more a business procrastinates from taking a good hard look at the numbers, the more challenging tax time can become.”

Mistakes not uncommon for first timers

For first timers, the end of financial year is not just stressful; it’s often full of errors. One in four small businesses (25%) admitted that they made mistakes lodging their first business tax return. The same group say that it’s their lack of knowledge rather than not understanding requirements is the leading causes of tax time errors.

“It was challenging doing my tax return and BAS for the first time,” says Libby Gardner, Founder of The Platter Project. “I realised the majority of my expenses were tax free so I couldn’t claim as much GST when completing my BAS. I had to manually go through all of my receipts to make sure I wasn’t claiming too much GST. That took a while! Since then I have learnt that everything should always be double-checked to ensure the business is running properly and the numbers are correct.”

Improving the tax time experience

More than half (52%) of small business owners see tax time as one of the most stressful times of the year. First timers are most likely to be hard hit, with one in three (34%) respondents believing their first annual tax time experience was one of the most stressful times they’ve encountered running their business.

Despite the stresses of tax time, many small business owners still choose to go it alone each year, with more than one in three (37%) admitting they do all the work themselves with no external support.

Prouse says: “A critical mistake that business owners make at tax time is burying their head in the sand and trying to do it all alone. Heading into end of financial year blind, without a solid understanding of regulation and obligations, can be a recipe for disaster and lead to serious errors and potential fines.”

Small businesses seek advice

An overwhelming majority (98%) of small business owners said seeking support through a qualified accountant or tax professional made tax time much less stressful for them

“Our first tax time was nightmarish,” said Bree Pagliuso, co-founder of Twosix Wellness. “It was a source of deep-seated fear as we had little understanding of what needed to be done, what we could claim, or how BAS worked.”

“We turned the situation around by bringing onboard a bookkeeper, who’s helped us streamline our admin and back end, with the help of technology like Xero. The transformation has been incredible – we now pay our taxes months in advance, which allows us to predict our cash flow ahead of time.”

Key findings:

69% of small business owners typically complete their annual tax reporting within three months, although 19% wait longer than six months.
67% admit it’s easy to make unintended mistakes at tax time. The biggest potential pitfalls being poor record-keeping of income and expenses, not setting aside sufficient funds to meet tax obligations fully, and not seeking professional advice early.
84% of small business owners believe that technology helps them save time and effort at tax time.