2020 has been a very challenging time for businesses, with COVID-19, bushfires and drought taking an unprecedented toll on many. While tax and super may not be on the top of your mind during these times, we want to make it as easy as possible for you and are here to help and support you. We know that most of you use a tax agent to prepare and lodge your returns – reach out to them if you need help.
Take advantage of small business concessions
You may be able to reduce your tax bill if you are eligible for concessions such as instant asset write-off or immediate deductions for prepaid expenses. You may also be able to save time by estimating the value of your trading stock instead of doing a stocktake. Find out more about the different types of concessions at ato.gov.au/concessionsataglance
Follow the three golden rules when it comes to claiming deductions
You can claim a deduction for most of the costs of running your business. But it’s also important to remember the three golden rules so you only claim what you’re entitled to:
The expense must have been for your business – not for private use.
If the expense is for a mix of business and private use, you can only claim the portion that’s used for your business.
You must have records to prove the expense and show how you worked out the business portion of an expense.
Work out your motor vehicle expenses the right way
The method you use to calculate your motor vehicle expenses depends on your business structure and the type of vehicle. For example, if you operate your franchise as a sole trader or partnership and the vehicle is a car, you can use the cents per kilometre method or the logbook method. However, if you operate your franchise as a company or a trust, you can’t use either of these methods and can only claim the actual costs based on receipts. Read more at ato.gov.au/motorvehicleexpenses
You may be able to claim home-based business expenses
If your home has been your main place of business (for example, if you have used your home as your main place of business because of COVID-19), you can claim deductions for the portion of expenses that relate to running your business. Your business structure also affects how and what you can claim. Find out more at ato.gov.au/homebasedbusiness
Remember to include all your income
Include all your income in your income tax return, including cash, coupons, EFTPOS, online, credit or debit card transactions, and income from other platforms such as PayPal, WeChat or Alipay. You may also have income from business assets, other business activities or capital gains. Getting your income and expenses right, and keeping good records of them, will also help you keep track of your turnover and cash flow.
Keep track of losses so you can claim a deduction for it later
It has been an extra challenging year and many businesses may find themselves making a loss for the first time. If your business makes a loss, you can generally carry forward that loss and claim a deduction for your business in a future year. How you can claim a tax loss depends on your business structure. Visit ato.gov.au/businesslosses for more information.
Know what to do if you take money out of your company or use its assets
If you take money out of, or use your company assets for private purposes, you need to report these transactions appropriately and keep proper records. There are different reporting and record-keeping requirements depending on how you have done it (for example, through your salary, a fringe benefit or a loan from the company). Find out more at ato.gov.au/Division7A
How to report JobKeeper in your business tax return
JobKeeper payments are taxable and need to be included in tax returns. If you’re a sole trader who has received JobKeeper payments, you need to include the payments as business income in your individual tax return. If your business is a partnership, trust or company, and you received JobKeeper payments, you don’t need to include it as assessable income in your individual tax return – but you need to report it as part of your business income.
Your workers who have received JobKeeper payments won’t need to do anything different as the payments will be included in their regular income statement that you provide as an employer.
Monthly reporting for JobKeeper payments
Businesses that have enrolled for the JobKeeper Payment and identified their eligible employees will need to make a business monthly declaration to the ATO. A registered tax professional can also do this on their behalf.
The monthly declaration can be completed from the 1st to the 14th day of each month, to receive reimbursements for the payments made to employees in the previous month.
As part of this declaration, businesses will need to:
ensure they have paid their eligible employees at least $1,500 (before tax) in each JobKeeper fortnight that they are claiming for.
reconfirm their eligible employees and contact and financial details.
provide information on their current and projected GST turnover, this isn't a retest of their eligibility - it will indicate to us how their business is progressing.
If eligible employees change or leave a business’s employment, they will need to notify the ATO through this step so they can adjust their JobKeeper payments.
To lodge a business monthly declaration:
log in to the ATO business portal using myGov ID or ATO online services through myGov.
this step will need to be completed each month to claim payments until the end of the program.
How to report Cash Flow Boost in your business tax return
You don’t pay tax on the Cash Flow Boost credits as they are non-assessable non-exempt income, but you may need to report the amount for the purpose of other income tests. This is different depending on your business structure so talk with your tax agent for more detail.
Check that your records are complete and accurate
It’s important that you understand what records you need to keep, and they are complete and accurate. You need to keep most records for five years, store them in a safe place, and they must be in English (or easily converted to English). Check out ato.gov.au/recordkeeping. You can also use our record keeping evaluation tool at ato.gov.au/ recordkeepingevaluation to help you check how well you’re keeping your business records so you can make improvements in the future.
Get expert help if you’re having trouble with cash flow
Good cash flow means having enough cash at the right time to pay bills and meet your tax, super and employer obligations. You can prepare a cash flow projection (find out how at ato.gov.au/managecashflow) to help you see your likely cash position at any time. You can also talk to a registered tax professional about managing your cash flow and they can help you work through our cash flow coaching kit.
Look after your mental health
In tough times like these, it’s more important than ever to look after yourself and the ones you love. We have information available at ato.gov.au/smallbizmentalhealth. You can also check out the Australian Small Business and Family Enterprise Ombudsman’s My Business Health web portal at www.asbfeo.gov.au/my-business-health for practical tips.
If you are having difficulty meeting your tax and super obligations, we can work with you to develop tailored payment plans and defer lodgments and payments.
Ask for help if you need it
We want to work with you to solve problems before they escalate; it’s never too late to speak with us. If you've been affected by COVID-19, or a disaster such as bushfire or drought, and need some help with reconstructing records, we have information available at ato.gov.au/reconstructing-your-tax-records.
If you need some extra help with your tax and super affairs, you can contact us or your registered tax professional. We’re here to help.
Visit ato.gov.au/SBsupport our one-stop shop for tools and services to help make it easier for you to get your tax and super right.
Andrew Watson is an Assistant Commissioner in the Small Business area of the ATO. His role involves engaging and supporting small businesses so it’s easier for them to meet their tax and super obligations, and they get the help and support they need. He is also focused on driving the ATO’s digital services and helping small businesses manage their cash flow.