Tips to help you get your tax right
Emma Tobias is an Assistant Commissioner for the Australian Taxation Office in the Small Business line. Her focus is to help support small businesses by leading and influencing their experience across the tax, super and registry systems. Emma collaborates with small businesses, industry partners and government agencies to drive an improved small business experience and digital services. Her area also helps small businesses manage cash-flow and digital readiness, assisting them as they look to recover and succeed after the challenges of the last few years.
We understand that running a business can be hard work. That’s why it’s important to us to make it as easy as possible for you to get your business’s tax and super obligations right. Here are some tips and support to set yourself up for the year ahead.
Identify what’s income and what’s not
Besides the usual forms of business income, like cash and digital payments, you can have other forms of income throughout the year you need to report. For you, this might look like income from business investments or online and overseas business activities. It could also include assessable government grants and payments, the value of trading stock you have, payments from insurance claims or non-cash benefits you receive.
Some income you receive won’t be assessable. For example, non-assessable non-exempt (NANE) government grants or GST you’ve collected are not assessable. Neither are bona fide gifts or inheritance, or money you’ve borrowed or contributed as the business owner.
Make sure you keep accurate and complete records to prove the income you report.
Find out more at: ato.gov.au/isitincome
Go for golden (rules of deductions)
You can claim deductions for most expenses you incur while carrying on your business, but they must directly relate to earning your assessable income. Claimable deductions can relate to your day-to-day operating expenses, purchased products or services, and certain capital expenses.
However, to check what– and how much –you can claim, consider the 3 golden rules for allowable deductions:
- 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 is used for your business.
- You must have records to prove it.
Find out more at: ato.gov.au/businessdeductions
Apportion business and private asset use correctly
Most assets you purchase on behalf of your business to help earn its income can be claimed as deductions. However, if the asset is also used for both business and private purposes, the business can only claim the portion related to business use. This also means you cannot claim any deductions against your business income for an asset that has been used entirely for private purposes.
When claiming mixed-use assets, you will have to keep proper records for your business that can explain all transactions. This includes payments to and receipts from employees, shareholders and associates for their use of the assets.
Private use of business assets by company shareholders, employees and associates can have different reporting obligations for both parties. The amounts attributed to the private use of these assets may need to be reported as dividends or fringe benefits.
Let your tax professional know how you’re using your assets so they can correctly apportion the relevant income and deductions.
It’s important that you review your treatment of business assets each year to make sure you’re apportioning the assets correctly when your circumstances change.
Find out more at: ato.gov.au/businessmoney
Follow the five rules for record-keeping
Tax time gets a lot easier when you have complete, accurate, and organised records to help you. You or your tax professional will need this information to know what income to report, what deductions to claim and anything else you may need to include on your return.
That’s why it’s important to follow these 5 rules to keep your records in order:
- Keep all records related to starting, running, changing, and selling or closing your business that are relevant to your tax and super affairs.
- Store records safely to prevent damage and protect information from being changed. You must not change relevant information in your records.
- Keep most records for 5 years and know which records to keep longer. You’ll need to keep records longer if they’re connected to a future, corrected, or amended return, or records about depreciating or capital gains tax assets.
- Be able to show us your records if we ask for them.
- Ensure your records are in English or can be easily converted to English.
If your tax records are damaged, destroyed or lost, we can help you reconstruct them.
Make sure you have a system for reviewing, updating, and destroying records as required throughout the year.
Find out more at: ato.gov.au/recordkeeping
Check how well you’re keeping your records using our record-keeping evaluation tool at: ato.gov.au/recordkeepingevaluation
If you use crypto assets in your business, it’s important to understand their tax treatment.
Your business may use crypto assets:
- in carrying on a crypto asset business, (including a crypto trading, mining or exchange business or a business selling non-fungible tokens), in which case the crypto assets are treated as trading stock, and
- the cost of acquiring them is a deductible expense
- the proceeds of selling them are assessable as ordinary income
- for the purpose of exchanging goods or services in the ordinary course of carrying on a business, in which case the crypto assets are also trading stock.
- as an investment, in which case the crypto assets are subject to capital gains tax (CGT) when a CGT event happens, and you need to account for them in the business’s net capital gains or capital losses.
Irrespective of how you acquire and use crypto assets, you must keep records of each of your crypto assets and all transactions for tax purposes.
Find out more at: ato.gov.au/cryptobusiness
Check for concessions
There are a range of concessions available for eligible businesses and industries to help reduce the amount of tax you pay. Each year you should check if any apply to your business.
Small businesses can access a range of concessions based on their aggregated turnover. However, before you apply, you must also check that you meet all other extra eligibility conditions.
For example, if your turnover is under $5 million, you can access the small business income tax offset. This offset can reduce the tax you pay by up to $1,000 each year.
Other turnover based concessions for small businesses include capital gains tax (CGT) concessions and the restructure roll-over.
You may also be able to save time by estimating the value of your trading stock instead of doing a stocktake. There are simplified trading stock rules. If the estimated difference between your 2022–23 opening and closing trading stock is $5,000 or less, you don’t need to do a stocktake. Just report the same amount for your opening and closing stock in your tax return.
Find out more at: ato.gov.au/concessionsataglance
Stay on top of super
When you pay super guarantee (SG), you’re helping to set your employees up for their future. That’s why it’s important to make sure that your payments are received by your eligible employees’ super funds in full and on time. Missed or late super obligations can also cost your business more in the long run.
Paying in full and on time means you need to make sure that payments:
- are at least 11% of each of your eligible employees’ ordinary time earnings (OTE) – this is progressively increasing to 12% by 2025
- are received by your employees’ super funds at least 4 times a year by the 28th of January, April, July, and October.
Remember, payments must be received by an employee’s fund by the due dates to be considered ‘on time’. If you pay too close to the due date, you might not leave enough time for your payment to be processed and it can end up being late. That’s why it’s best to pay early.
If you miss the due date, even by one day, you have to lodge a super guarantee charge (SGC) statement and pay the SGC to the ATO. This is more expensive for your business because :
- SGC is calculated on your employee’s salary and wages instead of OTE
- you’ll also need to pay interest and fees
- unlike SG payments that were paid on time, you can’t claim the SGC as a deduction.
If you paid late directly to your employees’ super fund, you’ll be able to claim those late direct payments on the SGC statement as offsets to the amount you owe.
We take compliance with superannuation obligations very seriously at the ATO. It’s also important to lodge your SGC statement on time, or you may face penalties of up to 200% of the SGC.
We also provide a free online SG obligations course on our website at Super guarantee employer obligations course | Australian Taxation Office (ato.gov.au)..
Find out more at: ato.gov.au/superforemployers
Implement cyber security
Setting up and maintaining cyber security is important in protecting your business, staff and client information. It can also save you the time and money it would take to recover lost or compromised data – if you can recover it at all.
To be cyber secure, you should:
- use strong and secure passwords
- turn on multi-factor authentication
- remove system access from people who no longer need it
- monitor your accounts for unusual activity or transactions
- do not leave your information unattended
- make sure all devices have the latest available security updates
- regularly back up your files and devices.
Knowing what to protect and how to protect it is your best way to stay safe.
Find out more at: ato.gov.au/businesscybersecuritytips
You can also find guides and resources, including a Small Business Cyber Security
Guide, at: cyber.gov.au
Fixing a mistake
If you forget to report some income, a capital gain, or a deduction, you generally have two years to amend your return, starting from the date you receive the notice of assessment. There’s no limit on the number of amendments you can make within this period.
You can easily fix your return through your registered tax agent, Standard Business Reporting (SBR)-enabled software, Online services for business, a letter, or if you’re a sole trader you can use ATO Online services for individuals and sole traders.
If you’ve provided false or misleading information to reduce the tax you owe, you can correct this through a voluntary disclosure in the approved form. This generally reduces any penalties that may apply.
Find out more at: ato.gov.au/amendareturn
Get deductions to go digital with the tech boost
The small business technology investment boost is for businesses with an aggregated annual turnover of less than $50 million. You will be allowed an additional 20% tax deduction to support your digital operations and to digitise your operations.
The boost is for business expenses and depreciating assets. It is capped at $100,000 of expenditure per income year. You can receive a maximum bonus deduction of $20,000 per income year.
The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. If the expenditure is on a depreciating asset, the asset must have first been used or installed ready for use for a taxable purpose by 30 June 2023.
Find out more at: ato.gov.au/technologyboost
Enhance your employees with the skills and training boost
The small business skills and training boost is for businesses with an aggregated annual turnover of less than $50 million. You will be allowed an additional 20% tax deduction for external training courses delivered to employees, either in person in Australia or online, by registered training providers.
The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.
Find out more at: ato.gov.au/skillstrainingboost
Energise your enterprise with the energy incentive
The small business energy incentive has not yet become law. However, the Australian Government announced that the incentive will be for businesses with an aggregated annual turnover of less than $50 million. They will be allowed a bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support electrification and more efficient use of energy.
The bonus deduction applies to the cost of eligible assets and improvements up to a maximum amount of $100,000, with the maximum bonus deduction being $20,000 per business.
The incentive, if it becomes law, will apply to eligible assets that are first used or installed ready for use or the improvement cost incurred between 1 July 2023 and 30 June 2024.
Find out more at: https://www.ato.gov.au/ and search for ‘Energy Incentive’
Watch out for our webinars and workshops
Our webinars are live, interactive online seminars presented by experienced tax officers. You can ask questions to help apply the information to your situation. We even have webinars in Chinese, Arabic and Vietnamese, if you need, to help you access the right information. We also have Reach Out a business support program for Indigenous small businesses to understand their tax and super obligations co-facilitated by Indigenous staff.
Currently, we have webinars for topics such as managing your business, employing and paying workers and issues for specific industries.
Our face-to-face workshops are currently on hold, but you can keep an eye out for when they return.
Find out more at: ato.gov.au/Business/Starting-your-own-business/Small-business-webinars-and-workshops/
Take your time with toolkits
We’ve got lots of resources to help you out at tax time and throughout the year – our tax time toolkits are just one of them. Our toolkit contains lots of useful links and information to help you through tax time. This includes factsheets on home-based business expenses, motor vehicle expenses, digital product expenses, travel expenses, and if you have to pause or close your business.
Our toolkits are updated each year.
Find out more at: ato.gov.au/SBtaxtimetoolkit
Search for support
We have a range of tools and services to make it easier for you to get your tax and super right. Our website has information about our tax time essentials, online services, learning resources and more.
If you are having difficulties managing your tax and super obligations, we encourage you to contact us as early as possible so we can help you get back on track. We’ll also check to see what support options are available to you.
Find out more at: ato.gov.au/SBsupport
Help your agent help you
Help your tax and BAS agents help you – keep source documents, keep all your records organised and up to date, and regularly cross check your records with source documents. The less time your agent needs to spend sifting through your paper receipts and other records, the more time they can spend on more complicated parts of your tax affairs.
You can also find information yourself, for example through the ATO website and ATO Community, but then contact your tax professional to understand how it applies to you.
But remember, you’re still responsible for what you report and claim in your income tax return even if you use a tax agent.
Find out more at ato.gov.au/SBsupport