Get your business ready for tax time 2022

 

The past two years have been a very challenging time for small businesses, with COVID-19 and natural disasters affecting many people.

 

 

While tax and super may not be on the top of your mind during these times, at the ATO we want to support you and your small business to get your tax and super right. We have a range of information, digital tools and services to make things easier for you to get ready this tax time and keep your business on track.

Take advantage of small business concessions

You may be able to reduce your tax bill if you are eligible for concessions such as 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:

1. The expense must have been for your business – not for private use.

2. If the expense is for a mix of business and private use, you can only claim the portion that’s used for your business.

3. You must have records to prove the expense and show how you worked out the business portion of an expense.

If you’re in an industry that requires physical contact with customers, such as healthcare, retail or hospitality, you can claim deductions for expenses related to COVID-19 safety. This includes hand sanitiser, sneeze or cough guards, other personal protective equipment and cleaning supplies. Find out more at ato.gov.au/businessdeductions

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. There is a limit on the cost you can use to work out the depreciation of passenger vehicles (except motorcycles or similar vehicles) designed to carry a load of less than one tonne and fewer than nine passengers. The maximum value you can use for calculating your claim is the car limit (irrespective of any amount you were paid for a trade-in) in the year in which you first used or leased the car. The car limit for the 2021–22 income year is $60,733. Find out 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 relocated your base of operation from an office to your home 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 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. Find out more at ato.gov.au/businessincome

Find out about the tax implications of government grants, payments and stimulus

Generally, grants or support payments from the government are taxable and need to be included as assessable income in your tax return, unless they are specifically made non-taxable. This will include help provided as a one-off lump sum or a series of payments. You don’t need to pay tax on some COVID-19 payments you receive from the government to support businesses. Eligible payments will be non-assessable non-exempt (NANE) income for tax purposes. To find out more, visit ato.gov.au/COVID19supportpayments

Keep track of losses so you can claim a deduction for it later

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.

See if you’re eligible for the loss carry back tax offset

The loss carry back tax offset is a refundable tax offset that corporate entities may be eligible to claim in their company tax return. This may result in a cash refund, a reduced tax liability or a reduction of a debt owed to the ATO. Our tool at ato.gov.au/LCBtool can help you work out if you are eligible to claim this tax offset and the maximum you can choose to claim if you’re eligible.

Know how to report the use of business money or assets for private purposes

There may be tax consequences if you use money or assets from your company or trust for private purposes. You need to know how to report and record different transactions correctly. Find out more at ato.gov.au/businessmoney

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 You can also use our record keeping evaluation tool at ato.gov.au/ record keeping evaluation 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/ manage cashflow) 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 the Cash Flow Coaching Kit (find out more at ato.gov.au/cashflowcoachingkit).

Look after your mental health

In tough times, it’s more important than ever to look after yourself and the people around you. There are many organisations out there that can provide information and support to help you with your mental health and wellbeing. For a complete list of organisations, and information about the support we can provide you, check out ato.gov.au/support

If you are a small business owner, you can also consider NewAccess. Developed by Beyond Blue, NewAccess is a free mental health coaching program developed for small business owners by coaches with a small business background at beyondblue.org.au/newaccess. You can also check out the Australian Small Business and Family Enterprise Ombudsman’s My Business Health portal at asbfeo.gov.au/my-business-health for practical tips.

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 the recent floods, 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.