Melbourne, 14 June 2022—Xero, the global small business platform, today released research into how small business leaders are approaching the end of financial year (EOFY), revealing that 66 per cent of those surveyed don’t understand all parts of a business tax return.
The research, which was commissioned by Xero and conducted by Lonergan Research, surveyed more than 500 small business owners and managers, and more than 1000 consumers, uncovered almost a third of people who run a business (30%) taught themselves how to lodge a company tax return online and a further 12 per cent never learnt how to lodge a tax return. The research also revealed that, of those business leaders surveyed, tax offsets, asset depreciation, and profit and loss statements were the most confusing components of filing their taxes.
Positively, the research also showed that the majority (76%) of Australian small businesses are engaging with an accountant or tax advisor at EOFY, highlighting the vital role they play in keeping businesses compliant at tax time, and 27 per cent learnt how to file their business return with the help of a tax advisor.
Joseph Lyons, Managing Director Australia and Asia, Xero, said: “The research highlights a concerning but unsurprising education gap for people who run a business at tax time. After all, most Australians who start their own business do so because of passion or opportunity, not because of a love of financial and business administration. That’s all the more reason to make sure small business owners and sole traders make use of the right people, like accountants and bookkeepers, and cloud tools to stay compliant and on track.
“These advisors can guide small business owners through the complexity of the EOFY process and set them up for success. They’re the secret sauce to being confident heading into EOFY,” said Lyons.
Key research from small businesses surveyed:
- 42 per cent don’t fully understand tax offsets while a third (33%) don’t understand asset depreciation.
- 26 per cent don’t fully understand profit/loss statements and another 21 per cent don’t fully understand overseas transactions.
- A quarter (27%) double check what they are eligible to claim for online, while only a fifth (19%) will check in with an advisor.
- Only a third (34%) of small businesses understand all parts of a business tax return.
Australians likely to be sensible with extra cash from tax refunds
Xero’s research also revealed Australian consumers will be conservative with any tax refunds they receive this year, with two out of five (40%) respondents planning to save, and 23 per cent of respondents intending to put any refunds towards everyday bills. For many, this could be a reflection of rising cost of living pressures inducing conservative money management – Xero’s latest Small Business Insights data notes sales are already slowing in industries that rely on discretionary spending.
The research also noted that similarly to small business leaders, a third (33%) of Australians surveyed have taught themselves to do their personal tax return through online research. Of those that will lodge a return this year, the majority (84%) of those surveyed say they will be claiming deductions. However a third (33%) aren’t confident what they can claim so they will search for answers online, while nearly a sixth (15%) plan to check in with an advisor.
Key research from general consumers surveyed who are lodging a tax return:
- 48 per cent know exactly what deductions they are eligible to claim.
- Donations (38%) and work from home utility bills (33%) are the most common deductions claimed, followed by home office equipment (25%).
- 41 per cent will be making additional work related purchases before the 30th of June to be able to claim them in this financial year.
- 60 per cent like to reward themselves with something fun once they have completed their taxes.
- 37 per cent would rather be stuck in traffic than carry out their EOFY responsibilities/tasks.
“Tax season can be stressful so preparation is key, whether you run a business or are filing your personal tax return. While it can take time to set up good processes and say goodbye to the shoebox of receipts, it’s a worthy investment that will make the whole experience smoother for years to come,” concluded Lyons.
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Xero Australia | Sophie McCullen | 0435 913 863 | firstname.lastname@example.org
Xero is a global small business platform with 3.3 million subscribers which includes a core accounting solution, payroll, workforce management, expenses and projects. Xero also provides access to financial services, and an ecosystem of more than 1,000 connected apps and more than 300 connections to banks and other financial institutions. Through Xero’s open platform, small businesses can connect to a range of solutions that help them run their business and manage their finances. For three consecutive years (2020-2022) Xero was included in the Bloomberg Gender-Equality Index. In 2021, Xero was included in the Dow Jones Sustainability Index (DJSI), powered by the S&P Global Corporate Sustainability Assessment. Xero has been named as a FIFA Women’s Football partner under FIFA’s new commercial structure
About the data
The research was commissioned by Xero and conducted by Lonergan Research in accordance with the ISO 20252 standard. Lonergan Research surveyed 1,024 Australians 18+ and 548 Australian Small Business Leaders. Surveys were distributed throughout Australia including both capital city and non-capital city areas. The survey was conducted online amongst members of a permission-based panel, between 12 May and 21 May 2022. After interviewing, data was weighted to the latest population estimates sourced from the Australian Bureau of Statistics.
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