As the economy begins to get back on its feet, it’s time to get your business back on track and start preparing for this year’s tax time.
Although 30 June may seem a long way off, there have been so many changes and government initiatives announced during the current financial year, you are likely to need extra information and paperwork to lodge your business’ return.
Here’s a list of things to consider and/or seek advice on.
Reporting JobKeeper support
JobKeeper payments are assessable income, so they need to be included in your business’ tax return if you operate through a company structure. Entities operating as a partnership or trust also need to report JobKeeper payments as business income in their partnership or trust return.
If you are a sole trader who received JobKeeper payments, you need to include your payments as business income in your individual tax return.
Cash Flow Boost credits
On the other hand, the government’s Cash Flow Boost payments to employers with a turnover of less than $50 million are classed as non-assessable income. This means your business won’t pay tax or GST on them.
How these credits are reported in your tax return or financial statements depends on your business structure, so contact us for more advice.
Budget tax changes and incentives
It’s also sensible to consider whether or not you plan to take advantage of the government’s temporary full expensing measure in this financial year. This measure applies from 6 October 2020 to 30 June 2022 for businesses with turnover of up to $5 billion. The initiative allows you to deduct the full cost of eligible depreciable assets of any value in the year they are first used or installed ready for use.
Another tax decision to start mulling over is whether to use the new temporary loss carry-back measures. These allow you to offset tax losses against previous business profits on which tax has been paid to generate a tax refund. Losses incurred in 2019-20 and 2020-21 can be carried back against profits made in or after 2018-19. If you are eligible, you can elect to receive a refund when you lodge your 2020-21 return.
Extended tax concessions
Businesses with turnover of up to $50 million (up from $10 million) can now take advantage of tax concessions allowing an immediate deduction for eligible start-up expenses (such as professional fees and accounting advice) and prepaid expenditure incurred after 1 July 2020.
From 1 April 2021, you can also claim an exemption from the 47 per cent FBT on any car parking or multiple work-related portable electronic devices (such as phones and laptops) provided to your employees.
Defer assessable income
Despite the difficult trading conditions, some businesses may need to consider deferring assessable income. Businesses wishing to delay paying tax on their income could review the potential benefits of deferring invoicing until after 30 June to ensure income from any payments is not assessable until the following financial year.
Do a stocktake
Over the next few months, identify and dispose of any obsolete, slow-moving or damaged stock so you can claim a tax deduction for the write-off.
Employee super contributions
Since the SG Amnesty finished in September last year, the ATO has indicated it will actively check compliance in this area, making it important to ensure your reporting and payments are up to date.
Consider your personal tax
Now is also a great time to review your personal tax preparations for 30 June. Look at personal tax decisions such as implementing a salary sacrifice arrangement for the remainder of the tax year, making personal super contributions and collecting the necessary paperwork to substantiate work related deductions.
Contact the ATO
If you are struggling to stay on top of your tax obligations due to the pandemic, consider contacting the ATO to discuss deferring your tax payments or varying your quarterly PAYG instalments. You can also apply to move your GST reporting cycle from quarterly to monthly to gain faster access to GST refunds.
If you would like help getting your business ready for tax time, call our office today on 03 5120 1400.
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