10 minute read
2021–22 FinanCiaL year
ChaPter 6
tiPs to HeLP you Get your tAx riGHt in tHe 2021–22 FinAnCiAL yeAr
tony Goding | acting assistant Commissioner SMALL BuSINESS AREA OF ThE ATO
About the Author
Tony Goding is an acting Assistant Commissioner in the Small Business area of the ATO. His role involves engaging and supporting small businesses so that it’s easier for them to meet their tax, super and registration obligations. He is also focussed on advancing the ATO’s digital services and helping small businesses manage their cash flow.
As a small business, the process of lodging your tax return can seem daunting. 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.
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, you can claim deductions for expenses related to protecting your customers and staff from COVID-19.
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
You may be able to claim home-based business expenses
If your home has been your main place of business (for example, if you have used your home as your main place of business because of COVID-19), you can claim deductions for the portion of expenses that relate to running your business. Your business structure will affect how and what you can claim. Find out more at ato.gov.au/ homebasedbusiness
remember to include all your income
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 and bank interest, and income from the sharing economy. Any JobKeeper and JobMaker Hiring Credit payments you received are also assessable and need to be included in your tax return.
You may also have income from business assets, other business activities or capital gains. Find out more at ato.gov.au/businessincome
The JobKeeper Payment program ended on 28 March 2021. Remember, JobKeeper payments are part of your business’s assessable income and need to be included in your 2020–21 income tax return. If you’re a sole trader, you need to include the payments as business income in your individual tax return. If your business is a partnership, trust or company, you need to report it as part of your business income. Find out more at
ato.gov.au/sBsupport
Your workers who have received JobKeeper payments won’t need to do anything different as the payments will be included in their regular income statement that you provide as an employer.
how to report Jobmaker hiring Credit payments in your business tax return
Eligible employers can access the JobMaker Hiring Credit for each eligible additional employee they hire between 7 October 2020 and 6 October 2021. If you have received JobMaker Hiring Credit payments, you will need to declare them as part of your business’s assessable income. Find out more at ato.gov.au/sBsupport
Eligible employers and not-for-profit organisations received between $20,000 and $100,000 in cash flow boost amounts by lodging all of their monthly or quarterly activity statements from March to September 2020.
You don’t pay tax on cash flow boost credits as they are non-assessable non-exempt income. You can, however, include cash flow boost credits in your tax return if you have included the amounts in your gross income for accounting purposes. Find out more at
ato.gov.au/sBsupport
make sure 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 easily converted to English). Find out more at
ato.gov.au/recordkeeping
A good record-keeping system will help you manage your tax and super obligations, making it easier to report and lodge on time with us. You can use our record-keeping evaluation tool at ato.gov.au/recordkeepingevaluation to help you check how well you’re keeping your business records and make improvements if you need to.
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. This will help ensure your tax return and cost of sales figures are accurate. Find out more at ato.gov.au/stockforpersonaluse
report and record transactions properly if you use your company money or assets
If you’re a director or shareholder of a company, check that you know how to accurately report and record your personal use of company money or assets with our handy fact sheet. It will help you understand when you can take money out of your company or use its assets, and the right way to report these transactions and keep proper records. Find out more at ato.gov.au/division7A
take advantage of concessions available for your business
You may be able to reduce your tax bill if you are eligible for concessions such as the lower company tax rate and the increased small business income tax offset . 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
You may be eligible to claim temporary full expensing or loss carry back in your 2020–21 tax return.
Temporary full expensing allows eligible businesses to deduct the business portion of the cost of eligible depreciating assets that are first purchased or installed for use after 7.30pm (AEDT) on 6 October 2020. Temporary full expensing is available until 30 June 2022.
Temporary full expensing is intended to interact with loss carry back, allowing new investment which may result in tax losses. Eligible corporate entities can choose to carry back these tax losses and claim the refundable tax offset to increase their cash flow. You can find out more at ato.gov.au/bounceback
There are a number of tax depreciation incentives available for small businesses. If you’re unsure which may be right for you, use our infographic for a breakdown of the interaction of the different tax incentives, available at ato.gov.au/depreciationincentives
Loss carry back is a refundable tax offset that allows eligible corporate entities to carry back tax losses in any of the 2019–20, 2020–21 and 2021–22 income years to offset prior income tax liabilities in the 2018–19 or later income years.
On 11 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced it will extend the temporary full expensing and loss carry back measures by one year to 30 June 2023. This extension is not yet law. Further information is available at ato.gov.au/bounceback
rent or lease payment changes due to CoVID-19
If you rent your business premises or are the landlord of a commercial property, and you have received or given a rent concession as a result of COVID-19, your tax obligations may change.
The income you must declare, deductions you can claim and your GST and capital gains tax obligations will depend on: • the type of rent concession you have received or given (a waiver or a deferral) • if an existing agreement has changed, or a new or additional agreement is created • your accounting method (if you are a landlord).
Find out more about at ato.gov.au/COvidleasechange
enter into pay as you go instalments
If you are new to business or expecting to make a profit from your business income, it’s a good time to voluntarily enter into pay as you go (PAYG) instalments. PAYG instalments allow you to make regular payments during the year toward your end of year tax bill, so you won’t have to pay a large amount when you lodge your tax return.
You can find out how to start paying PAYG instalments at ato.gov.au/paygientry.
lodge your bAS online
Still lodging your business activity statement (BAS) on paper? With more time to lodge, it’s worth your time to switch your BAS to online. Join millions of other businesses that lodge online and you may get an extra two weeks to lodge and pay your BAS. It’s also important to lodge all outstanding activity statements before you lodge your tax return, so your tax assessment takes into account the instalments you’ve paid throughout the year.
For more information, visit ato.gov.au/lodgeBas
registering or cancelling GSt
If you’re not registered for GST, it’s a good idea to review your business regularly, to see if you have reached the GST turnover threshold of $75,000 (gross income from all businesses minus GST) or provide services that need to be registered for GST. If you are selling or closing your business, you must cancel your GST registration within 21 days. You will also need to lodge your last GST activity statement and cancel your ABN registeration. In some instances, you can also choose to cancel your GST registration, if your GST turnover is below the GST threshold for compulsory registration.
Find out more at ato.gov.au/Business/gst/registering-for-gst or
ato.gov.au/Business/gst/if-your-business-changes-or-ceases/Cancelling-yourgst-registration
make sure your cyber security is up to date
It’s important to keep all your business, staff and client information secure. If your data’s lost or compromised, it can be difficult and costly to recover. Knowing what to protect and how to protect it is your best way to stay safe. To find out more go to
ato.gov.au/businessidcrime
If a breach does occur, then reporting it to us helps ensure protective measures can be taken to help prevent the risk of harm to your business and your clients. You can learn more on where and how to report data breaches at ato.gov.au/databreachbusiness
Check out our tax time toolkit
Our tax time toolkit for small business is a handy directory with guides on home-based business expenses, motor vehicle expenses, travel expenses, using your company’s
money or assets and if you have to pause or close your business. Find out more at
ato.gov.au/sBtaxtimetoolkit
Ask for help if you need it
It’s important to lodge your tax return on time, even if you can’t pay. This will show us you’re aware of your obligations and doing your best to meet them. If you’re worried you won’t be able to pay on time, we will work with you to set up an affordable payment plan that works for you. You may be able to set up a plan yourself using our Online services for business. We encourage you to contact us as early as possible or speak with a registered tax practitioner who can contact us on your behalf. And remember, it’s never too late to ask for help. Whether it’s COVID-19, natural disasters, personal issues or financial difficulties, we’re committed to understanding your situation and helping you to get your tax and super right.
For more information, visit ato.gov.au/supporttolodgeandpay
Single touch Payroll (StP) reporting
Closely held payees
Amounts paid to closely held payees from 1 July 2021 need to be reported through STP. A closely held payee is an individual directly related to the entity from which they receive payments (such as family members of a family business, directors or shareholders of a company, or beneficiaries of a trust).
If you’re a small employer (19 or fewer payees), you can report these amounts on or before each payday. You can also choose to report either the actual amounts or a reasonable estimate quarterly.
If you have any other payees (also known as arm’s length employees) they must be reported on or before each payday. Different arrangements apply for businesses with 20 or more payees. For more information, visit ato.gov.au/stpcloselyheld
end of year finalisations
At the end of the financial year, you need to finalise your STP data. This means you are making a declaration that you have completed your STP reporting for the financial year. One you finalise your data, your employees’ income statements in ATO online services will be marked as ‘Tax ready’. They, or their registered tax agent, will use their income statement to lodge their tax return. You need to make a finalisation declaration by 14 July each year. You have additional time to complete this declaration for any closely held payees. For more information, visit ato.gov.au/stpfinalisation
