Getting Your Business Tax Return Right
Updated: Feb 7
EOFY has been and gone, but now the hard work begins! To make life a little easier here is a list of changes made by the ATO to 2019 tax forms and some handy things to remember to help you prepare your tax information.
We’ve also created a handy Small Business Tax Checklist that you can download at the bottom of this blog!
This tax time the ATO will be focused on supporting small businesses to get it right through a range of services and tools available to them, they have provided a list of five common errors they’ll be on the lookout for this year, make sure you don’t get pulled up on these;
· Claiming of private expenses in the business.
· Failing to properly attribute personal and business use.
· Misunderstanding how tax applies for different and often complex business structures.
· Omitting income, including coupon sales.
· Not providing the necessary records for substantiating expense claims.
Research and development tax incentive amendments
On 8 May 2018, the government announced it would reform the research and development (R&D) tax incentive to encourage additional investment in R&D while ensuring the integrity and fiscal affordability of the incentive. These changes are expected to apply for income years commencing on or after 1 July 2018.
Increasing access to company losses
On 1 March 2019, legislation was passed that will supplement the current ‘same business test’ for losses with a more flexible 'similar business test'. The new test will expand access to past year losses when companies enter into new transactions or business activities.
The similar business test allows a company (and certain trusts) to access losses following a change in ownership where its business, while not the same, is similar, having regard to the:
· extent to which the assets that are used in its current business to generate assessable income were also used in its former business to generate assessable income
· extent to which the activities and operations from which its current business is generating assessable income were also the activities and operations from which its former business generated assessable income
· identity of its current business and the identity of its former business
· extent to which any changes to the former business resulted from the development or commercialisation of assets, products, processes, services, or marketing or organisational methods of the former business.
As a test for accessing past year losses, the 'similar business test' will only be available for losses made in income years starting on or after 1 July 2015.
The 'same business test' and the 'similar business test' will be collectively known as the 'business continuity test'.
Expanding accelerated depreciation for small businesses
Small businesses can claim an immediate deduction for most depreciating assets purchased after 12 May 2015 and first used or installed ready for use for a business purpose:
• from 7.30pm (AEDT) on 2 April 2019 until 30 June 2020, if they cost less than $30,000 each
• from 29 January 2019 and before 7.30pm (AEDT) 2 April 2019, if they cost less than $25,000 each
• before 29 January 2019, if they cost less than $20,000 each.
The balance of the general small business pool is also immediately deductible if the balance is less than $30,000 at the end of an income year that ends on or after 2 April 2019 and on or before 30 June 2020 (including an existing general small business pool).
For more info on this see our blog - Update: Instant Asset Write Off is now $30,000! Click the above image or this link - http://bit.ly/Instant-Asset-Write-Off
A Reminder of other business claims for your tax return?
You can claim a deduction for most expenses you incur to run your business if they directly relate to how you earn assessable income.
Travel - If you or your employees travel for work, you can claim deductions on transport such as airfares, train, bus or taxi fares.
For overnight travel, the rule for claiming expenses is:
• one night or more - keep written evidence of all expenses
• six or more consecutive nights - keep a travel diary recording all the particulars of the business activities you undertake.
ATO Link - Business travel expenses
Motor vehicle expenses - Do you have a car you only use for business? Claiming expenses and how you calculate them will depend on:
• your business structure (i.e. sole trader, company, partnership or trust)
• the type of vehicle
• how the vehicle is used.
ATO Link- Motor vehicle expenses
Repairs and maintenance - You can claim a deduction for repairs and maintenance on your business assets, including:
• plumbing maintenance
• repairing electrical appliances
• repairing machinery.
ATO Link Repairs, maintenance and replacement expenses page.
Home- Based Business - If you run a home-based business, or have a home office where you work from home, you may be able to claim:
• occupancy expenses - such as mortgage interest or rent, council rates, land taxes, house insurance premiums
• running expenses - such as gas and electricity, phone, a decline in value of plant and equipment, a decline in value and cost of repairs to furniture and furnishings, cleaning.
ATO Link Home office expenses calculATOr
General operating expenses - Operating expenses are the costs you incur in the everyday running of your business, such as:
ATO Link Other operating expenses
Sole traders, check out the ATO’s mydeductions tool in the ATO app to record your business income and expenses during the year.
Speak to your accountant about any concerns you may have, it’s not a good idea to just assume everything will be OK as the ATO is looking closely at small business.
Download your Income Tax Checklist by clicking the above image or this link - http://bit.ly/Small-Business-Tax-Checklist
If tax, BAS and reconciliation has you feeling overwhelmed and you wish you could get some clarity on your financials and cash flow, but can’t afford a big bill? Let us take away the overwhelm and worry your business accounts cause you, we can give you clarity and help set your future goals, so we can work towards them together!
No big bills, just a manageable monthly fee that includes quarterly BAS and business analysis, tax planning and end of year financials
Book in for a chat to see how we can help make tax time easier for you https://calendly.com/becalaco/15min
Or you can book your Business Tax Return with this link- https://calendly.com/becalaco/business-tax-return