The 2021 financial year saw government stimulus packages and tax incentives help businesses keep their head above water amidst the economic volatility wrought by the pandemic. Now with tax time upon us, Australian business owners need to get up to speed on the tax implications of the various supports including their obligations and entitlements.
The Australian Tax Office (ATO) has been vocal about its plans to hold wrongful and misleading claimants to account. With the ATO casting a watchful eye over this year’s tax returns, here are our top tips to help Australian small businesses lodge returns correctly this tax time.
1. Don’t go it alone
For small businesses, the key to successfully lodging this year’s return is getting up to speed with entitlements and obligations under the various stimulus measures. However, trying to make sense of these is especially challenging due to the breadth of economic and regulatory changes that have taken place in the past 12 months.
Fortunately, you don’t have to go it alone. The benefits of seeking out a certified tax professional cannot be understated in this context. From talking to our own accounting partners, it’s clear a huge amount of time and effort, many late nights and early mornings, have been invested in understanding the various nuances of the new tax arrangements, and how to help clients navigate them.
2. Declaring JobKeeper payments
Of all the stimulus measures extended to businesses this past year, JobKeeper has undoubtedly been the essential life raft. However, businesses need to understand that JobKeeper payments are taxable and must be included in their tax return.
Businesses should seek guidance from their accountants to ensure they are properly declaring their JobKeeper payments, to avoid underreporting income and possibly incurring penalties.
3. Navigating tax depreciation incentives
Another entitlement businesses need to consider are tax depreciation incentives, including instant asset write-offs or ‘temporary full expensing’, the loss carry-back offset and the backing business investment. Claiming these expenses correctly can go a long way in helping businesses offset losses and save money.
Instant asset write-offs, sometimes referred to as “temporary full expensing”, allow businesses with an annual turnover of less than $5 billion to fully write off the value of eligible depreciating assets such as office equipment and business vehicles. They can be used for multiple assets (if the cost of each individual asset is less than the relevant threshold) as well as new and second-hand assets.
Furthermore, the ATO has granted a 12-month extension to the instant asset write-off scheme until 30 June 2023. This means any eligible assets purchased following June 30 should be carefully recorded for next year’s return.
Setting up for success
Tax time can be overwhelming and without the necessary preparations, has the potential to cause a lot of anguish for small businesses. However, by seeking the guidance of an accountant, businesses can outsource some of the headache and have full confidence they are maximising their return while sticking to the rules.
The right technologies can also go a long way in alleviating many tax-related challenges. Leveraging advanced technologies including open cloud platforms with automated workflows can streamline business operations, help with record-keeping and ensure compliance, making tax time easier and allowing you to focus on what matters most – your business.
After a year of substantial change, one thing is for sure. Those who take advantage of their accountants’ expertise and invest in the right solutions to keep their bookkeeping on track will make the most of this financial year and beyond.