Tax Time: Look after your data

Taxpayers and tax professionals are increasingly preparing and filing tax returns online. There is a growing reliance on digital data that, if lost through malfunction or error, could spell disaster.

Last year, 90 percent of Australian taxpayers lodged returns electronically, and the tax commissioner is aiming to boost that number to 95 percent.

Managing director of data recovery company CBL, Vicky Brauner, said while the risk of data loss is often underestimated, individuals could find themselves facing a potential crisis at tax time if critical data is not backed up properly and protected by system devices such as firewalls and anti-virus software.

The last thing anyone wants at tax time is a penalty for late lodgement or the stress of having to start again because of lost data.

Running a business generates a significant amount of data and it is imperative that this is stored efficiently and compiled effectively at the end of the financial year. Everyone needs to be aware of how to store their own data, they need to know how to back it up, and how to recover it when necessary, or who to call.

Importance of data
An increasing number of businesses, and even households are becoming more digitally dependant and when data is lost it can cause major problems.

Data loss can occur by not backing up correctly, saving frequently or protecting systems with anti-virus software, firewalls and power surge devices. Other potential causes are power outages, administration errors, hardware failure or the network being hacked into.

When critical data is left exposed because it is not backed up it can have serious consequences. These include the loss of vital and generally irreplaceable financial information, the cost of fines for late lodgement of tax returns, general loss of income, expenses associated with losing sensitive data and the stress of having to start a tax return again.

Recent statistics have estimated the total cost of critical data loss is approximately $3957 per incident for the combined cost of technical services, lost productivity, and the value of lost data.

Being prepared is the key to avoiding a data loss crisis. The key
is to think and plan ahead.

Data recovery
Many small business owners rely completely on their data and when that disappears they can lose a significant amount of revenue, even months’ worth.

Vicky Brauner said the significance of this trend is particularly sharp for the data recovery market. “I doubt that even the most cynical among us would question that we are living through a data explosion — as evidence you need only look to a market where hard drive resellers see 160GB drives as the norm, and many businesses see their storage demands rise by 100 percent, year on year. While speed is a priority for searching stored data, this must be balanced with secure backups.”

It is expected that as this trend intensifies, more households and SMEs will need to pay for data recovery rather than suffer the costs of lost data. Businesses who lack daily access to professional IT and DR support are the ones most vulnerable to data loss.

“We have helped hundreds of customers, both individuals and businesses, recover lost data at tax time,” said Brauner. “Utilising proprietary computer data recovery technology, CBL’s data recovery specialists recover lost data in a fast, secure and cost-effective manner. It’s the service of last resort that resellers can offer their business and home user customers who’ve lost critical tax data in a computer crash.”

Additionally, as business and home users become ever more digitally-based, another flow-on effect will be that the size of data recovery projects is likely to increase.

What you need to know
Lodging your return

Each year, people dread the end of the financial year and the processes that come along with it. As long as you have kept a current and detailed account of your data it should be an uncomplicated process.

This year, the government is campaigning for both individuals and business owners to lodge their tax return online and there are also changes relating to GST. Lodging a tax return, whether it is your personal tax return or for your business, can come with headaches.

Ensure you know what you can and can’t claim and take note of any government changes that may affect you. As long as you are operating under the guidelines of a business you can claim a deduction for expenses you incur in the everyday running expenses of your business, if it is in the same year that you have the expense. These include expected items such as office supplies, rent of business premises, salary and wages.

Small business owners can also claim a deduction over time for some capital expenses incurred by the business. Usually these assets have a longer life that exceeds the income year in which they were purchased and relate more to establishing, replacing, enlarging or improving the structure of your business. These are called capital expenses.

Make sure you consult your accountant or income tax professional as changes regarding the GST will come into effect from 1 July that will affect the way some small businesses operate.

A spokeman from the treasurer’s office told CRN that the taxation reforms announced in this year’s budget will reduce compliance costs and cut red tape for Australia’s two million small businesses. “These changes reflect the Government’s commitment to simplifying the tax system for small business.”

The government has announced from 1July that businesses with an annual turnover of less than $75,000 will no longer be required to register for GST.

The threshold will be higher in real terms than when the GST was introduced in July 2000 which means more small businesses will be able to choose whether or not to register for GST. Effective as of 1 July 2008, the government will allow these taxpayers to pay their pay-as-you-go (PAYG) instalments on an annual basis. The other existing eligibility tests for paying annual PAYG instalments are set to stay the same.

Allowed expense claims
• advertising/sponsorship expenses
• bad debts
• bank fees and charges
• business motor vehicle expenses
• business operating expenses
• business travel expenses
• clothing (corporate wardrobes and uniforms, occupation-specific clothing, protective clothing)
• education, technical or professional qualification expenses
• electricity costs
• cost of any fringe benefit provided and fringe benefits tax on the benefit
• home office expenses, where the home is used as business premises
• insurance premiums
• interest on money borrowed for purposes relating to the business
• land tax on business premises
• legal expenses, incurred, for example, in defending future income-earning capacity, borrowing money, discharging a mortgage, or obtaining tax advice
• losses from previous years
• luxury car lease expenses
• office stationery
• operating a commercial website,
for example, site maintenance,
content updating, Internet service provider fees
• parking fees
• payments – advertising or
public relations
• phone expenses
• rates on business premises
• registered tax agent/accountant fees
• rent or lease of business premises
• replacement of income-producing property costing $300 or less
• salary or wages, bonuses or allowances paid
• subscriptions to business or professional journals, information services, newspapers and magazines
• superannuation contributions, up
to age-based limits
• tax preparation costs
• tender costs (even if the tender
is unsuccessful)
• union dues and subscriptions to trade or business associations