Amidst the constantly changing news cycle and rule amendments, it can be hard for SMEs to keep track of their tax obligations. We interviewed Kirsten Fish, Chief Tax Counsel at the ATO (currently Deputy Commissioner Small Business), on the major tax issues facing SMEs during the pandemic and how best to navigate them.
What are some of the major hardships currently facing SMEs?
Businesses of all shapes and sizes are having to manage challenging circumstances from the evolving COVID-19 situation and the uncertainty that it brings. We are seeing small businesses in particular dealing with issues like:
- drastic reductions in their business, for example, some small businesses have had to close temporarily or permanently
- struggles with managing their cash flow, with many businesses making a loss for the first time
- challenges in retaining staff and paying them
- long hours, stress and balancing work and family life impacting on their mental health
As we all continue to navigate the COVID-19 pandemic, we completely appreciate that it’s a really tough time for many small businesses. Our job is to continue to support businesses who need help with their tax and super obligations, in partnership with the tax profession. It’s never too late to speak with us or a registered tax professional if you aren’t sure about something or need a helping hand.
What kind of assistance is available for SMEs struggling with tax payments?
Options available to assist businesses impacted by COVID-19 include:
- Deferring by up to six months the payment date of amounts due through the business activity statement (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise.
- Allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to.
- Allowing businesses to vary Pay As You Go (PAYG) instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters.
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities
- Working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
Businesses wanting to utilise any of these options should contact us. Employers will still need to meet their ongoing super guarantee obligations for their employees.
Small businesses have also been able to access stimulus measures administered by the ATO:
- As at 3 September 2020 more than $25 billion in CashFlow Boost credits have been paid to more than 790,000 employers.
- As at 3 September 2020 more than $44 billion in JobKeeper payments have been made to more than 900,000 businesses employing more 3.5 million individuals.
- Businesses may also be able to take advantage of the instant asset write off. From 12 March 2020 until 31 December 2020, the instant asset write-off threshold is $150,000 (up from $30,000) and the eligibility range covers businesses with an aggregated turnover of less than $500 million (up from $50 million). Businesses with a turnover of $500 million or more are not eligible to use instant asset write-off. From 1 January 2021, the instant asset write-off will only be available for small businesses with a turnover of less than $10 million and the threshold will be $1,000. More information is on our website.
- Businesses with an aggregated turnover of less than $500 million are able to accelerate their depreciation deductions on the purchase of certain new depreciable assets. This applies to eligible assets acquired and first used or installed ready for use from 12 March 2020 until 30 June 2021. More information is available on our website.
What deduction rules apply to businesses making a loss during the pandemic?
Many businesses that would ordinarily be turning a profit may be making a loss due to COVID-19, possibly for the first time. These businesses may be able to claim a deduction for losses they make. It’s important that these businesses keep proper records to ensure they can claim the deduction they are entitled to. Sole traders and individual partners in a partnership who meet certain conditions can offset current year losses against other assessable income (such as salary or investment income) in the same income year. Otherwise, they can defer the loss or carry it forward and offset it to a future year when the business next makes a profit. Businesses that are set up under a company structure that have made a tax loss in a current year can generally carry forward that loss and claim a deduction for their business in a future year. However, there are some deductions that can’t be used to create or increase a tax loss, such as donations or gifts and personal super contributions.
What is the best way to keep abreast of changes to small business taxes?
We’ve got some great toolkits about things that are particularly relevant for small business owners during COVID-19. These are available at ato.gov.au/SBtaxtimetoolkit
The best way to keep up to date with information about small business tax concessions like income tax, capital gains tax, GST, excise, PAYG instalment, fringe benefits tax and superannuation concessions is:
- Review the information on our website – we have a page set up for businesses impacted by COVID-19 and a page about Small business concessions
- Attend our free webinar “Tax support for small businesses” which explains how the Government’s stimulus package can help your small business.
- Subscribe to the Small Business Newsroom for regular email updates.
- Follow us on social media – we are on Facebook, Twitter, and LinkedIn.
- Join our peer-to-peer forum ATO community to find answers or ask questions.
- Talk to your registered tax professional.
There are also some great resources for small businesses experiencing mental health issues, like Ahead for business. Information about support available from the ATO is also available on the ATO website.