With businesses taking advantage of multiple federal and state government COVID-19 relief packages, the issue of tax compliance – knowing what assistance is taxable and what isn’t – is much more complex for EOFY 2020 than for previous financial years. The speed of the economic slowdown and implementation of assistance packages have left businesses scrambling to keep up with legislative changes to taxation.
The key to remaining tax compliant, according to Carbon Group’s Jamie Davison, is staying on top of your business basics.
Keep real-time records
Whether you’ve suspended trading or are struggling with a reduced turnover, Davison advises you to maintain the business basics of up-to-date, preferably real-time accounts. “You’ll be in a much better position to complete this year’s tax return and ensure you’re maximising the assistance that’s available to you,” he says.
Gain a full, up-to-date view of your business accounts and download your statements from the past seven years via NAB Internet Banking, the NAB Mobile Banking App and NAB Connect.
He emphasises that all tax relief processes take time, so it’s vital you don’t leave organising any applications until the last minute.
Stay up to date on tax and application changes
Davison says the original legislation, passed on 8 April, has already been changed. “Originally, it was proposed you had to be continuously reassessed. Now, once you qualify, you qualify indefinitely.”
In order to qualify, you can use a number of different formulas, based on a mix of past performance and future projections. He recommends you may need professional help selecting the best criteria for you. “For example, should your business base projected turnover on sales or services in pre-existing contracts, agreed billing timeframes or factor in work in progress?” He adds that “whichever criteria you choose, you must provide evidence to back it up.”
“Once you’ve submitted the original JobKeeper application, you’re still required to provide actual and projected GST turnover information to the Tax Commissioner on a monthly basis,” Davison says. “This is where it becomes crucial to have a real-time record keeping system in place.”
Registered tax or BAS agents can apply online for lodgement deferrals until September. These include:
Fringe benefits tax returns
Monthly and quarterly activity statements
Annual GST returns
Taxable payments annual reports.
ATO payment plans have traditionally been capped at about two years. However, the Federal Government has now extended repayment plans and we are seeing up to five years in some cases.
Payroll, land and parking space tax relief
Each state and territory has a different approach to relief for these statuary charges. Look at the ‘Revenue’ pages of your relevant government’s website for up-to-date details and check with your accountant about application conditions.
Super payment deadlines are unchanged
Davison notes that a few of his clients incorrectly assume superannuation payments can be deferred. This is not the case; they still have to be paid on time.
Decide your payment priorities before 30 June
According to Davison, in times of financial crisis, cash is king. Reducing your tax bill, getting a refund, deferring payments, renegotiating rents and accessing government aid will all help you position yourself better for FY2021.
Working out if it’s best to defer statuary payments is particularly difficult to navigate. With all the possibilities around low-interest government and bank loans, statutory payment relief and JobKeeper assistance, Davison says it’s important to run multiple scenarios before deciding which payments to prioritise. “And you need to do this before 30 June. In many cases, it will be too late to change things after that date.”
And with pivoting a business to succeed after the end of lockdown requiring so much of your time, Davison says working with your accountant has never been more important. He also stresses that staying in contact with your bank is crucial.
Understand working-from-home deductions
While the new simplified expenses calculation is grabbing the headlines, Davison cautions it may not be the most tax efficient option for everyone. Whether it’s for yourself or your staff who are working from home, understand that there are three methods:
A flat hourly rate The simplified method lets an individual claim a flat $0.80 for every hour worked at home from 1 March 2020 to 30 June 2020. Hours worked at home before this period are calculated using one of the methods below.
An hourly rate plus bills Another option is to claim $0.52 per work hour and include a portion of household bills such as utilities, internet and cleaning. This may deliver a larger deduction.
A pure percentage rate Individuals can add up everything spent working from home, work out what percentage was for work, and claim that.
All three require you to keep a log of the hours you’ve worked. The last two require adding any equipment purchases and ‘home office’ expenses like utility, phone, internet and cleaning costs. Davison adds that, unlike at an official workplace, tea, coffee, biscuits, food and alcohol are not claimable.
Keep records to avoid repayments down the track
Lastly, Davison reminds us that it’s more important than ever to keep all your expense records for the mandatory five years. “If you are investigated and can’t justify the assistance you’ve received, then you may have to repay it with interest.”
Your best sources of reliable information
Check the ATO website and maintain regular contact with your accountant. For state assistance, including payroll tax relief, check the business portals of the state or territory government where your business operates. NAB also has a comprehensive COVID-19 business support page that explains the range of ways NAB is supporting business customers. There is also a COVID-19 customer support page for general guidance for all our customers. Head to nab.com.au/coronavirus for both.
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