Xero’s survey of 503 small business owners also found that 40 per cent are unsure of the business deductions they are able to claim, showing a "lack of financial literacy" among some business owners.
The research also revealed that 45 per cent of the small businesses surveyed put off doing their taxes, with one in five business owners delaying because they find the process "daunting and stressful".
Further, two thirds of small business owners find tax time stressful and 58 per cent say the time it takes to manage EOFY obligations makes them stressed.
In addition, 30 per cent of respondents indicated that EOFY has an impact on the running of their business, while another 29 per cent "resent" the time it takes away from customer-facing tasks.
When asked what could be improved, half of respondents indicated that easier government compliance requirements would make tax time less stressful; over a third suggested an easier way of doing taxes, and a fifth would like less paperwork to complete.
"This year’s federal budget did provide assistance to small and medium businesses, however, the research shows that small businesses are still being caught up in red tape," said Trent Innes, Xero managing director.
"The government could do more to make compliance easier for Australian small businesses, which ultimately will save them the time they need to invest back into their business."