t ips to help you get your tax right in the 2022–23 financial year

Andrew Watson | Assistant Commissioner s mall Business a rea o F the ato

About the Author

Andrew Watson is an Assistant Commissioner for the Australian Taxation Office in the Small Business line. He collaborates with small businesses, industry groups and government agencies to shape the client experience and drive improved digital services. His area also helps small businesses manage cash flow and digital readiness.

We want to make it as easy as possible for you to get your business’s tax and super right and have support available to help you. Here are some tips to set yourself up for the year ahead.

know what income needs to be included in your tax return (and what doesn’t)

It’s important to include all your income in your income tax return. This includes cash and digital payments, vouchers or coupons, assessable government grants and payments, personal services income, investment income, bank interest and income from the sharing economy. You may also have income from business assets, other business activities or capital gains.

Find out more about what to include and what to exclude in your tax return at: ato.gov.au/businessincome

Check if your CoViD-19 business support payments are taxable

Your business may have received a state, territory or Australian Government grant, payment or stimulus as a result of COVID-19, that may have been a one-off lump sum or a series of payments. You don’t need to pay tax on some COVID-19 payments if you meet the criteria.

Find out more at: ato.gov.au/COVID19supportpayments

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. For example, expenses related to protecting staff from safety hazards involved in performing their duties, such as hand sanitiser, sneeze or cough guards and cleaning supplies used for business purposes.

remember the three golden rules, so you only claim what you’re entitled to:

1. The expense must have been incurred 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 substantiate the expense and show how you worked out the business portion.

Find out more at: ato.gov.au/businessdeductions

Check how to calculate home-based business expenses

If you operate your business from home, you may be able to claim the business portion of running expenses (such as electricity and gas, phone and internet services and the depreciation of assets) and occupancy expenses (such as mortgage interest, rent or land taxes).

Sole traders and partnerships can claim running expenses using an hourly fixed rate or actual costs based on receipts. The temporary shortcut method ended on 30 June 2022.

If your business is a company or trust, you should have a genuine, market-rate rental contract, which will determine which expenses the business pays for and can claim as a deduction.

If you used any part of your home for business purposes, you may have to pay tax on a portion of the capital gain when you sell your home.

Find out more at: ato.gov.au/homebasedbusiness and ato.gov.au/homeBasedBusinessCGt

Check how to calculate motor vehicle expenses

You can claim the business-use portion of motor vehicle expenses you incur while running your business, such as fuel, oil, servicing and registration.

Sole traders and partnerships can use the:

• cents per kilometre method – which is 78 cents for the 2022–23 financial year, for claims up to 5,000 business kilometres per car

• logbook method – where you need to keep a logbook for at least 12 continuous weeks and work out the percentage of business use for each expense.

If you are a company or trust, or if you are claiming expenses for a motor vehicle that isn’t a car (such as a ute), you must use the actual costs method which is based on receipts.

You can generally claim a deduction for depreciation if you use the logbook or actual costs methods. The limit on the cost you can use to work out the depreciation is $64,741 for the 2022–23 financial year. Find out more at: ato.gov.au/motorvehicleexpenses

See If You Can Claim An Immediate Deduction For Assets

You may be eligible to claim temporary full expensing in your 2022–23 tax return.

Temporary full expensing allows eligible businesses to deduct the business portion of the cost of eligible depreciating assets that are first held, first used or installed ready for use for a taxable purpose between 7.30pm (AEDT) on 6 October 2020 and 30 June 2023.

Temporary full expensing is intended to interact with loss carry back, allowing new investment which may result in tax losses. Eligible corporate tax entities can choose to carry back these tax losses and claim the refundable tax offset which may result in a cash refund. Find out more at: ato.gov.au/temporaryfullexpensing remember, a loss from using temporary full expensing will mean the non-commercial loss will need to be deferred. It’s not a special circumstance that would support discretion being exercised. Find out more at: ato.gov.au/NCL

made a tax loss? You may be able to claim a deduction for it

Generally, you make a tax loss when your business expenses are more than your income.

Or more specifically, when your total deductions are more than your total assessable and net exempt income for an income year.

If you make a tax loss, you may be able to:

• claim it in the current year

• carry it forward, or • carry it back.

Loss carry back is a refundable tax offset that allows eligible corporate entities to carry back tax losses in any of the 2020–21, 2021–22 and 2022–23 income years to offset prior income tax liabilities in the 2018–19 or later income years.

Find out more at: ato.gov.au/businesslosses

Take Advantage Of Concessions Available For Your Business

You may be able to reduce your tax bill if you are eligible for concessions, for example, you may be eligible for the small business restructure rollover concession so you can save on capital gains tax (CGT). When you sell a business asset, a small business CGT concession may be able to be used to reduce the capital gain. 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 you may be eligible for at: ato.gov.au/concessionsataglance

Account for stock taken for private use

If you have taken something from your business’s trading stock for private use, remember to account for the stock as if you’ve sold it and include the value in your business’s assessable income to ensure cost of sales figures are accurate.

Find out more at: ato.gov.au/stockforpersonaluse

Report And Record Transactions Properly If Using Business Money Or Assets

Check that you know how to accurately report and record your personal use of business money and assets with our handy fact sheet. It helps explain when you can take or use money or assets from your company or trust, and the right way to report these transactions and keep proper records. Find out more at: ato.gov.au/businessmoney

Know Your Super Obligations

If you have staff, you should be aware that as of 1 July 2022, the superannuation guarantee (SG) rate increased to 10.5% and the $450 per month eligibility threshold for SG was removed. Employers will still only need to pay super for workers under 18 when they work more than 30 hours in a week.

Find out more at: ato.gov.au/payingsuper