With a new year comes a fresh start to get things right with your tax obligations. Here are some tips from ATO Assistant Commissioner Emma Tobias for businesses looking to get the most out of tax time.
Small business focus areas
The ATO has released ‘Our focus areas for small business’ to provide transparency of the key risk areas that are of concern. The ATO knows most small businesses do the right thing, however some choose not to and gain an unfair advantage over those who do.
The ATO is actively detecting, treating and addressing concerning behaviours to support all businesses to have an equal chance of success. Each quarter, the ATO will highlight specific risk areas to support you in meeting your tax, super and registry obligations. By being transparent about what they’re targeting and clear about the consequences of doing the wrong thing, the ATO wants to help you get it right.
Find out more about the ATO’s current focus areas at ato.gov.au/sbfocusareas
Business income is not personal income
Using business income or assets for personal use may have tax consequences. This applies when you fail to account for the transactions accurately. This could be a payment or reimbursement of private expenses. Or, it could be using business assets, like the company car, for private purposes. It’s important to report these transactions correctly and keep accurate records.
Regularly cross-check your records against their original copies. This will help you to track your business’s cashflow and assets and help catch mistakes early.
Find out more at ato.gov.au/businessincome and ato.gov.au/division7A
What to do with a non-commercial loss
Have you experienced a loss outside of your core business? A non-commercial business loss is a loss you incur, either as a sole trader or in partnership. It comes from a business activity not related to your main source of income.
For example, Logan is a sole trader who has a construction business, this is his main source of income. In his spare time, Logan refurbishes and sells antique furniture. In the 2023-24 income year, Logan’s antique furniture costs exceeded the income from selling the refurbished furniture. Logan made a non-commercial loss from this activity and will need to work out if he can claim the loss in the 2023-24 income year, or carry it forward.
The activity must have business-like characteristics and a significant commercial purpose. The losses from a non-commercial business activity can’t be offset against other assessable income in the year in which the loss is incurred unless an exception applies, the Commissioner’s discretion is exercised or there is a profit made.
Find out more at ato.gov.au/noncommercialloss
Do you qualify for capital gains tax concessions?
As a small business owner, there are 4 capital gains tax (CGT) concessions available to you. If you’re eligible, you can use these concessions to reduce the CGT on selling a qualifying business asset. The way you report the concession depends on your business structure. This means:
- If you’re a sole trader or partnership, in the supplementary section for individuals in your tax return.
- If you’re a company or trust, in the CGT schedule for companies and trusts.
Find out more about the different CGT concessions and eligibility requirements at ato.gov.au/businesscgt
Don’t forget to register for GST
If you’re carrying on a business, and your turnover is $75,000 or more in a 12-month period, you must register for GST. You should check each month to see if your turnover is reaching or if you’re likely to exceed, the $75,000 threshold.
Once you’ve registered, you report and pay GST and may claim GST credits by lodging a business activity statement (BAS) quarterly or monthly.
Find out more at ato.gov.au/GSTregistration.
TIP: If you want more information, we’ll be covering GST and BAS essentials in next month’s edition.
CALLOUT:
Changing your GST reporting cycle from quarterly to monthly could be beneficial to your business. Monthly reporting means smaller, more manageable payments, so you can better track your cash flow and make more informed decisions and forecasts from month to month. It will also better align with your other regular business processes (such as invoicing, reconciling figures and paying suppliers) so you can do your admin around the same time. Find out more about reporting cycles at ato.gov.au/BASduedates
Establish good business habits
The ATO knows most businesses try to report correctly but understand mistakes can happen. Establishing good habits will give your business its best chance of success.
If you want your business to operate well, it’s important to get the basics right. Such as:
- Using digital tools and business software to help track and streamline processes to increase your business’s efficiency.
- Keeping accurate and complete records will help you meet your tax and super obligations and make lodging easier.
- Getting the right advice from trusted resources like your registered tax professional or the ATO’s website can help you navigate change and uncertainty, at any stage of the business lifecycle.
The ATO wants to help you get it right, the first time.
Find out more about good business habits at ato.gov.au/sbhabits
Support and resources
The ATO has a range of tools and services on their website to make it easier for you to get your tax and super right.
Each year the ATO updates the Tax Time toolkit for small business. The Toolkit includes updated factsheets and has a directory of links to useful information, tools, calculators, learning resources and other support and services.
If you want to build up your business knowledge, you can take self-paced courses using Essentials to strengthen your small business. All the courses are free, easy to use and designed for all stages of business.
The Cash Flow Coaching Kit is another great resource. It will help you manage your cash flow better this income year.
You can also subscribe to the ATO’s small business newsletter. It has the latest tax and super info that could affect your business.
Find out more at ato.gov.au/SBsupport
The ATO knows how hard you work and provides information to help you get your tax and super right. This article gives you the big picture. For detailed advice that’s relevant to you and your specific situation, visit ato.gov.au/tradies or speak with a registered tax professional.
About the author
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. As part of her role, Emma collaborates with small businesses, industry partners and government agencies to drive an improved small business experience and digital services. Her team also helps small businesses manage cash-flow and digital readiness, assisting them as they look to recover and get back on track after the challenges of the last few years.