1. Understand what assessable income is
Any business claiming the JobKeeper payments will have to classify these payments as assessable income.
There are exceptions, however.
Employer cashflow boost is not assessable income, it is what we like to refer to as “NANE,” or non-assessable non-exempt. It does not form assessable income, but it may be reported and calculated for some other income test purposes.
The early release of superannuation, that payment is not taxable.
2. Amendments to the Instant Asset Write Offs
From the 12 March, the Instant Asset Write Off has been expanded to cover assets up to $150,000 for businesses with a turnover of up to $500 million.
3. Stay on top of multiple tax entries
The introduction of STP (Single Touch Payroll) has caused businesses confusion about their tax reporting obligations, confusion that has resulted in unnecessary reporting to occur.
Some people who had come on to STP part way through the year issued payment summaries, did the old style end of year reconciliation and finalised through single touch payroll, which created two lots of records in the ATO system.
Although often sorted by the ATO, these double records do have the potential to cause unnecessary headaches. The solution is easy:
Once you’re on single touch payroll, you don’t need to issue payment summaries.
Finalising the data is a key step, which last year the ATO found some employers did not do. They thought just doing the last payroll of the year was going to be enough.
4. It’s not too late to get up to date with STP
For businesses still unsure about when to start using single touch payroll, here is some some handy advice.
It is still not too late to get onto Single Touch Payroll. It is getting close to the end of the financial year, but you can join at any stage during the year.
The finalisation for employers of 20 or more people is the 14th of July. For small employers, it’s the 31st of July.
Given the economic climate, sooner is better than later to ensure you receive your tax return in a timely manner.
It is encourage to finalise as reasonably quickly as you can, from 1 July, because it is expected that a lot of people are going to be looking to lodge a return early this year for a refund, given the situation with COVID-19.”
5. Understanding JobKeeper eligibility
Surprising bounce back from some sectors has understandably raised questions related to JobKeeper eligibility and continued payments.
ATO has advised that there is no need to be concerned in these instances, however.
The eligibility criteria around the drop of income is a once off test. Once you have met that eligibility, you stay in JobKeeper for the length of the scheme.
Concern usually stems from these businesses needing to continue to report projected earnings, but these earnings are not related to payments in any way.
When a business comes back in and does what’s called the declaration, where they nominate how many employees have been paid the $1,500 per fortnight for the previous month.
As part of that declaration, they’re asked to give projected turnover figures and that, That’s not an eligibility test, the ATO is gathering that information as a statistical exercise, rather than it being a retesting of eligibility.
6. Fraud will be quickly discovered
Although it might be tempting to double dip with government handouts now and beg for forgiveness later, businesses should be aware that the ATO is highly prepared to deal with fraud.
There is an ATO integrity unit out and about just double checking whether the applications were correct and whether the information or the eligibility criteria was met. It’s important that people respond with the right information the ATO requires, just to confirm continued eligibility.
The ATO are doing some pre-issue checks, running out analytical models over them. Where they are in that most fraudulent top aspect, or they look that way, the ATO will stop them to ask questions.
7. Document your projected income for JobKeeper payments
Employers have had a bit of trouble wrapping their head around how to correctly income in relation to JobKeeper.
The ATO has had questions with JobKeeper because one of the eligibilities is either an actual or a projected drop in income.
If a business, say in April, projected a drop in income and then halfway through that projected month, restrictions started easing quicker than expected and they did not quite get to that 30 percent projection.
The ATO are not looking to jump on those things. What to do? It is strongly recommended when you are making those decisions, based on projections, document it.
8. Take the time to re-determine financial strategy
With the current economic climate causing businesses to reconsider their finances, it provides a valuable opportunity to rethink future business strategies.
The conversation pivots away from tax, more to business viability – your ability to renegotiate rents, your ability to get your bank or a financier to extend lines of credit, your supply chain management, your staffing levels, and cost control.
The solution? Look to your business software.
A lot of the attention will focus on the forecasting and the scenario planning and those sort of features in software such as MYOB’s to give management and their advisors a good indicator of business viability.
9. New deductions for businesses working from home
Although business have needed to relocate their work to home over the past few months, the ATO has confirmed that the usual rules apply, except for a new temporary deduction.
The ATO has put in a temporary shortcut method to cover the 1st of March through to the 30th of June.
They will allow an 80 cents per hour deduction for people working from home through the COVID-19 period. It does not require that you’ve got a dedicated office space, and it can apply to multiple people in a household.
As this is an all-encompassing deduction, it is important to remember that traditional home office don’t apply.
Tax agents or accountants should be a little bit sceptical and just try and validate in their discussion with a client that those are legitimate expenses that can be claimed.”
10. Financial help is just a phone call away
A bit of good financial advice can mean all the difference between a smooth tax time and a business landing in hot water.
To prevent this, the relationship between business and advisor should not be forgotten.
These are options, but it is that relationship with your tax agent is important to make sure that you’re doing these things with a bit of knowledge.
The most important thing is for the small businesses and their advisors, if they are in trouble, or they have been impacted by this, is to talk to your accountant or bookkeeper.
The big issue really is just around viability and tax time will be an important time for accountants and bookkeepers to really get a sense of how the business is coping and is there a viable recovery strategy to look into the future and see whether this business will be viable in the longer term?