If you are an Australian running a small to medium-sized business in 2020, chances are you’re just about ready to throw in the towel.
Or maybe you already have thrown that towel, ripped it into tiny pieces, set it on fire, and walked away. Either way, we get it: this has been a really, really hard year: from bushfires to pandemics to lockdown, it seems like we just can’t catch a break.
While we can’t promise a shift in the state of emergency COVID-19 has put upon us, we can offer a small silver lining for 2020 -- your tax return! With a sizeable number of new and upgraded claims for your business this year, your tax return might just be the injection of cash (and optimism) you need right now.
Claim, claim, claim!
The financial outlay to keep businesses up and running during the COVID-19 pandemic has been huge. From safety equipment to rising production costs, every business in Australia has had to spend money, in order to keep making money.
So the rule of thumb this tax time is pretty simple: if you have had to spend money on it to keep your business afloat, deduct it!
The ATO website has a detailed list of goods and services you can claim, but some of the standout items for 2020 include:
- COVID-19 protective gear for you, your staff, and your customers
- Self-education, for those who have been upskilling during lockdown
- New technology for those trying to replicate complex office environments, at home
- Accountant fees
There are other things you can claim too, such as furniture depreciation -- which, for businesses who faced immediate closure, is actually a handy cost. Take a look on the ATO website for more details or jump on the phone to your accountant to talk through your situation.
Do you declare Job Keeper/ Seeker?
Good question! 2020 has been made slightly more complex with the introduction of various stimulus packages to help with the COVID-19 shutdown. When it comes to claiming, however, it’s pretty straightforward: for Job Keeper and Job Seeker, you have to declare both as income.
For more information about incorporating the COVID-19 financial packages into your FY19/20 tax return, check out this handy guide from our friends at the ATO.
Unpaid invoices can actually work in your favour
If you have a bunch of unpaid invoices from FY19/20 that your customers are unable to pay (given the lockdown, this is not uncommon) then it’s time to turn those sour old lemons into lemonade!
‘Bad Debt’ is a legitimate write-off, and refers to any unpaid invoices you might have from the previous financial year. If you are certain these are not going to be paid, and you have made several attempts to redeem your payment, these can be used to reduce your taxable income. As always, it’s best to chat with your accountant about your specific circumstances!
Boozy lunches are (still) not a tax write off
After a year of unending financial hardship, it’s going to be really tempting to lean into some ‘creative accounting’. But it’s important to play by the rules when it comes to tax claims. Aside from the penalties, you must also bear in mind you have a business, and staff, to consider. Setting an example of leadership from the top down is crucial to maintaining morale in these tough times.
With so many changes to tax returns this year, it’s probably a good idea to check what you cannot claim. Some of the more common mistakes include:
- Client lunches or dinners
- Personal UBER or taxi fares
- Uniform dry cleaning for non-uniform items
- Luxury bags posing as ‘laptop bags’ (good try, though)
- Car costs over 5,000km without a logbook
Still think you can sneak in some pub lunches on this year’s return? Think again: the maximum penalty is $360,000 with some cases even resulting in jail time. It’s just not worth it.
Make tax time 2020 work for you
There is a lot we can’t control this year, but your tax return doesn’t have to be one. Take the time to explore all of your claim options and purchases you’ve made. We know that you’ve put in a marathon effort to keep your business above water, so now is the time to get something back.
If 2020 tax time has made you realise that your business finance is a bit of a mess, fear not! The team at BOQ can help. First stop would be to get in touch with your local BOQ branch and let us help you get sorted so that this time next year, EOFY will be a breeze!