Getting a tax refund
Small Business Guides
5 min read
Getting a tax refund can make a big difference to small business owners. Try to be strategic in what you do with the cash. Whether you invest it in the business or outside of it, do something meaningful.
A tax refund can boost your business
Getting a tax refund can be a nice bonus to cap off your tax year. It could be worth thousands of dollars, which gives you a lot of investment options.
So how do you maximise your chance of getting a tax refund? And if you get one, what should you do with it?
Understanding the tax system
Preparing and submitting a tax return can be daunting but the ATO has a lot of useful resources. If you’re not sure where to start, take a look at:
- the ATO YouTube channel for a range of how-to videos
- small business newsroom for short articles on tax and super
- small business assist, which is like a search engine for your tax questions
- the ATO app to answer tax questions and check your refund on the go
- calculators and tools to make sure you're meeting your tax obligations
- webinars on topics like ‘an introduction to tax basics’ and ‘income tax deductions’
Double-check your dates
You may be required to make pay as you go (PAYG) instalments throughout the tax year. This will help you avoid getting a big bill at the end.
When you’ll get your refund
If you’re a sole trader, the ATO will issue a notice of assessment to tell you if you’re getting a tax refund – or if you still owe money. Other small businesses will find out from their tax adviser.
Refunds are generally available:
- within 12 business days, if you lodged online
- within 50 business days, if you lodged a paper return
Your return may take longer to process if:
- you’ve recently lodged for previous years
- you have a debt with the ATO
- the ATO needs to verify your information with other government agencies
Treat your tax refund as an investment opportunity and ask how that lump sum can best serve you – whether you put it back into the business or not.
Seven ways to use your tax refund
If you’re getting a tax refund, consider how best to use it. The cash injection could upgrade your business, make it more resilient, or contribute to your retirement.
- Create an emergency fund
Put some money aside so you can ride out unexpected costs or dips in revenue. It’s not the most exciting use of spare cash but you’ll thank yourself if:
- your most important work tools need replacing
- a big customer stops using you
- a low-cost supplier goes out of business or raises prices
The amount you should save will depend on your business – and whether you’re a startup or a going concern. Speak to your accountant or bookkeeper to decide on an appropriate amount for your emergency fund.
- Pay off your debts
It’s always good to pay off debts. Getting a tax refund gives you that option. Audit your debts to see which charges the highest interest, then pay it down. The interest saved will probably outweigh the interest you’d earn if you banked the cash.
- Invest in your business
Your windfall might deliver more value if you put it back into the business. Getting a tax refund could allow you to:
- buy or lease new equipment
- upgrade your website or ecommerce platform
- subscribe to a business app, like a customer relationship management system (CRM)
You know the roadblocks to your business. Getting a tax refund could help resolve one and unlock business growth.
- Plan for retirement
You’ve probably put every spare cent into your business lately – perhaps at the expense of your retirement fund. If so, now would be a good time to invest in yourself. Some retirement schemes offer tax incentives or credits depending on your business structure and circumstances, so take a look around.
If you’re afraid to lock the cash away until retirement, consider a high-interest term deposit. Just be aware that you’ll be taxed on the interest.
- Reward your staff
Don’t forget the people who make your business tick every day. How many times have you asked your employees to put in extra effort during the year? Now’s your chance to give back – and increase the loyalty they feel to your business. You could pay them a bonus or organise an event to show them they’re appreciated.
- Put money aside for next year’s tax bill
Just because you’re getting a tax refund this year doesn’t mean you’ll get one next year. If you’re still a young business, it might be hard to predict your tax exposure from year to year. Consider putting money aside as insurance against a big tax bill in the future.
- Make a community or charity donation
This could be your opportunity to give back to the community that supports your business. You might give to a charity, sponsor a community group or support a public project. Donations often get favourable tax treatment and can create PR opportunities. But most of all, they make you feel good.
Getting a tax refund is just the start
Paying taxes is an absolute certainty when you’re running a business. Getting a tax refund is not. Don’t squander the opportunity. Treat it as an investment opportunity and ask how that lump sum can best serve you. You might choose to put it back into your business or you might not. The important thing is that you’re thoughtful and strategic about how you use it.