Tax time is upon us, and savvy small business owners around Australia should be ending the financial year on a strong note, claiming all eligible tax deductions and planning for a successful financial 2023.
So, what should you be aware of when rounding up 2022 and planning for 2023?
Covid 19 stimulus payments
Some Covid 19 payments, relief schemes and grants made to business in 2022 will count towards your businesses taxable income. These payments were made to small business to keep their staff employed and to help them stay afloat. Some of these payments were non-taxable, however some counted towards taxable income and will need to be reported when lodging your businesses income tax return.
Taxable Covid 19 payments for small business include:
- Payments to support businesses affected by Covid-19: These payments are taxable unless eligibility criteria are met that will cause the payments to be non-taxable in special, individual cases. GST does not apply.
- State government voucher subsidy scheme: Businesses who took part in this scheme will need to include these vouchers as business income in their tax returns. GST reporting does apply.
- Payroll Tax Relief: Some states and territories were offered support, such as increased threshold, waivers and interest-free deferrals of payroll tax. No payroll tax will be payable if the business has a smaller allowable deductions in their tax return. A refund of payroll tax will need be paid if the allowable deduction for payroll tax is less than refunds given. There are no GST consequences on payroll tax relief.
- Land Tax Relief: Commercial tenants in government –owned properties in some states and territories will need to be declared.
- Grants to support the creative economy: Eligible organisations in the arts sector will need to include their amounts in their income tax returns
- JobKeeper: Closed on 28 March 2021, those businesses yet to lodge their 2020-21 tax return will need to declare JobKeeper income
- Childcare Transition Payment: Approved early childhood educational and care providers for 13 July 2020 to 27 September 2020 will need to include these amounts in their businesses tax return. The payment is for a GST-free supply
- Consumer travel Support Programs: Eligible travel agents and tour arrangement service providers will need to include these amounts in their business tax returns. GST does not apply.
Temporary Full Expensing and Loss Carry Back
Temporary Full Expensing can be claimed in your 2020-21 business tax return. This allows for businesses to deduct the business portion of costs for eligible depreciating assets that are first installed or installed for use from 7:30 (AEDT) on 6 October 2020 and is available until 30 June 2023.
Eligible corporate entities can claim Loss Carry Back, which is a refundable tax offset, if they choose to carry back losses in the 2019-20, 2020-21, 2021-22 and 2022-23 income years against tax paid for the 2018-19 and later income years if a tax liability was incurred.
Most Australian small businesses have revenue goals, but you’ll need to generate the right reports to understand where you currently stand and where you want to grow. Ideally, some reports should be generated monthly or quarterly to give you a real-time understanding whether you’re on track or if some work is needed to be done in lagging areas of your business.
- Profit and Loss: This statement summarises your sales and expenses. It tells you how much profit you’re making and how much you’re losing. This statement will help you develop sales targets and appropriate prices for your goods or services. Don’t forget to state your GST debits and credits.
- Balance sheet: This document contains details of your company assets and liabilities at a specific point in time. This helps you evaluate your businesses financial standing
- Cash Flow Report: This report sums up the cash that flows through your business and is used alongside the balance sheet and profit and loss statement
- Stocktake: These records relate to all transactions relating to buying, maintaining, repairing and selling business asserts or stock. These figures are reported in your income tax return. Keep a list describing each article of stock, who did the stocktake, how and when it was done and who valued the stock
- Summaries of debtors and creditors: These reports show debtor charges and creditor charges outstanding at a given time or state period
- Capital Gains Tax: If your business sells an asset, such as property, shares or Cryptocurrency, you’ll need to report your gain or loss in your business income
Small business need to pay other taxes during the year, and should be reported in key dates that are separate to when you lodge your business income tax return. These taxes are the Goods and Services Tax (GST), Fringe Benefits Tax (FBT) and Pay-As-You-Go (PAYG) withholding.
- GST: this is a common tax of 10% on most goods and services. If your business earns over $75,000 per annum, you’ll need to register and lodge a Business Activity Statement (BAS) where you can claim back some GST credits
- FBT: Your business might be liable to pay tax on the fringe benefits you offer your employees. FBT is calculated on the taxable value of the benefits you provide your staff
- PAYG: You have to make tax payments on behalf of your employees, some contractors and businesses that don’t quite their ABN. You’ll need to collect tax and pay it directly to the Australian taxation Office (ATO) using Single Touch Payroll (STP) built into your accounting software with each pay period
If you hire staff and some contractors, you’ll need to pay their super guarantee. From 1 July 2022, there is no longer a $450 threshold per calendar month before you must pay super for an employee. Employees will be owed super right from the first dollar they earn. If you hire under 18s, you‘ll need to pay super if they work more than 30 hours a week for you or earn more than $450 per month. The super guarantee charge is currently 10.5% of your employee’s base earnings and is planned to progressively increase to 12% by 2025.
Tax Deductions and Concessions
They key to claiming all tax deductions and concessions is to be current with your bookwork and also to provide proof of your businesses activities.
Most businesses can claim:
- Running and occupancy costs
- Vehicle expenses
- Employee expenses
- Travel expenses
- Capital costs on equipment, tools and computers
Always check that the items you’re claiming are 100% eligible and that your tax agent is a member of the Tax Practitioners Board (TPB). Don’t forget to back up all of your records electronically and sure your files, registrations and financial information is cyber secure.
Your ITP Accounting Professional will help you navigate tax scams and make sure you’re tax compliant. They’ll help you claim all of your eligible expenses and provide assistance with understanding how you can pay less tax. They’ll help review your business structure and provide advice to business insurances that will protect your business.