The end of the financial year is looming – it's time to get your paperwork in order and make any last-minute business purchases to take advantage of government deductions.
Let's face it; the end of the financial year can be a stressful time for small businesses. 2020, with its bush fires, drought, and COVID-19 pandemic has proved tougher than most. With this in mind, it's essential to get all your ducks in a row.
Assistant Commissioner Karen Foat said the Australian Tax Office (ATO) is aware many individuals, businesses and their tax agents will have questions about how different types of income and expenses may affect their obligations this year. To assist with the process, the ATO has released a new Tax Time Essentials guide to ensure people know how to get it right.
"The Tax Time Essentials page is a one-stop-shop for the things that are a little different this year and how they impact your return, Foat said.
The resource will help businesses navigate the parts of their tax return that may change as a result of COVID 19.
"This tax time the ATO expects to see a substantial increase in people claiming deductions for working from home or for protective items required for work," Foat said.
Working from home? There's a short cut to claim expenses
If the COVID19 lockdown and restrictions have forced your small business to work from home, there are a couple of ways you can now claim your costs. The most notable is the new 'temporary short cut method' which can be applied from March 1- June 30, 2020.
The short cut method makes it easier to claim a deduction as it covers all deductible expenses. You can use it for multiple people working from home in the same house. It allows you to claim 80 cents for each hour worked from home.
"If you use the shortcut method, all you need to do is keep a record of the hours you worked from home as evidence of your claim. But it is all-inclusive, meaning you can't claim for any other working from home expenses," Foat said.
Taxpayers can still choose to use one of the other existing methods to calculate their expenses for working from home if they prefer.
Sole traders, JobKeeper and JobSeeker
If you're a sole trader and you've been receiving the government's JobKeeper or JobSeeker payments don't forget to include the benefit in your taxable income.
The benefit is preloaded as a government allowance in the majority of tax returns. However, the ATO has warned sole traders that receive the JobKeeper or JobSeeker benefit to pay careful attention if lodging early as the payment may not appear automatically for early birds.
If you are in receipt of either benefit and don't see it listed under government allowances, you will need to manually enter the payment or possibly face penalties down the track.
The instant asset write-off and EOFY deals
The end of financial year often spells plenty of sales for small business owners. If you have some cash to splash around, then it could be an excellent time to take advantage of the government's instant asset write-off to buy specialised equipment or upgrade your technology.
"It's now a great time to purchase big-ticket items such as laptops, printers and desks to take advantage of the government's instant asset write-off scheme, which allows eligible businesses to instantly write-off the cost of business-related purchases under $150,000. We encourage you to speak with your accountant to see if you're eligible*, says Jim Berndelis, National Merchandise Manager, Officeworks.
Big purchases aren't the only consideration. If you're working from home, it could also be a great time to stock up on office supplies.
"Whether you're buying office supplies, stationery, furniture or technology for your business or for working from home, it's worthwhile knowing that these purchases could be tax-deductible. We encourage business owners and professionals to speak to a tax expert to seek advice on what they can claim based on their situation," Berndelis said.
Looking for some home office inspiration?
Working from home has become par for the course for many small business owners. Ensuring you have the right equipment, from laptops to desks and chairs is vital to productivity, health and safety. If you haven’t already considered it, investing in an ergonomic chair should be a priority. Consider these options from Officeworks or even think about adding some flare by designing your own here.
Visit Officeworks to see what your business could claim this EOFY
* This advice is general. Please speak to your tax professional for advice tailored to your individual circumstances.