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Get your small business tax right in 2021

With tax time fast approaching it’s a good time to start thinking about your tax return. At the ATO we want to make it as easy as possible for your business to get your tax and super right and we have support available to help you. Here are some tips to get your tax right and set yourself up for the year ahead.

Follow the three golden rules when it comes to claiming deductions

You can claim a deduction for most of the costs of running your business. For example, you can claim deductions for expenses related to protecting your customers and workers from COVID-19.

Remember the three golden rules, so you only claim what you’re entitled to:

1. The expense must have been incurred for your business – not for private use.

2. If the expense is for a mix of business and private use, you can only claim the portion that’s used for your business.

3. You must have records to substantiate the expense and show how you worked out the business portion.

To find out more go to ato.gov.au/businessdeductions

You may be able to claim home-based business expenses

If your home has been your main place of business (for example, if you have used your home as your main place of business because of COVID-19), you can claim deductions for the portion of expenses that relate to running your business. Your business structure also affects how and what you can claim. To find out more go to ato.gov.au/homebasedbusiness

Remember to include all your income

It’s important to include all your income in your income tax return. This includes cash and digital payments, vouchers or coupons, assessable government grants and payments, personal services income, investment income and bank interest, and income from the sharing economy. JobKeeper and JobMaker Hiring Credit payments are also assessable and need to be included in your tax return.

You may also have income from business assets, other business activities or capital gains. To find out more go to ato.gov.au/businessincome

How to report JobKeeper in your business tax return

The JobKeeper Payment program ended on 28 March 2021. Remember, JobKeeper payments are part of your business’s assessable income and need to be included in your 2020–21 income tax return. If you’re a sole trader, you need to include the payments as business income in your individual tax return. If your business is a partnership, trust or company, you need to report it as part of your business income. To find out more go to ato.gov.au/SBsupport

Your workers who have received JobKeeper payments won’t need to do anything different as the payments will be included in their regular income statement that you provide as an employer.

How to report JobMaker Hiring Credit in your business tax return

Eligible employers can access the JobMaker Hiring Credit for each eligible additional employee they hire between 7 October 2020 and 6 October 2021. If you have received JobMaker Hiring Credit payments, you will need to declare them as part of your business’s assessable income. To find out more go to ato.gov.au/SBsupport

How to report cash flow boost in your business tax return

You don’t pay tax on cash flow boost credits as they are non-assessable non-exempt income. You can, however, include cash flow boost credits in your tax return if you have included the amounts in your gross income for accounting purposes. To find out more go to ato.gov.au/SBsupport

Make sure your records are complete and accurate

It’s important that you understand what records you need to keep, and they are complete and accurate. You need to keep most records for five years, store them in a safe place, and they must be in English (or easily converted to English). To find out more go to ato.gov.au/recordkeeping

A good record-keeping system will also help you manage your tax and super obligations. This will make it easier to report and lodge on time with us. You can use our record-keeping evaluation tool to help you check how well you’re keeping your business records and make improvements if you need to.

Take advantage of concessions available for your business

You may be able to reduce your tax bill if you are eligible for concessions such as instant asset write-off or temporary full expensing. You may also be able to save time by estimating the value of your trading stock instead of doing a stocktake.

To find out more about the different types of concessions you may be eligible for, go to ato.gov.au/concessionsataglance

Bounce back: consider temporary full expensing and loss carry back

You may be eligible to claim temporary full expensing or loss carry back in your 2020–21 tax return.

Temporary full expensing allows eligible businesses to deduct the business portion of the cost of eligible depreciating assets that are first purchased or installed for use after 7.30pm (AEDT) on 6 October 2020. Temporary full expensing is available until 30 June 2022. On 11 May 2021, as part of the 2021–22 federal Budget, the Australian Government announced it will extend the temporary full expensing measure by one year to 30 June 2023. This extension is not yet law.

Loss carry back is a refundable tax offset that allows eligible corporate entities to carry back tax losses in any of the 2019–20, 2020–21 and 2021–22 income years to offset prior income tax liabilities in the 2018–19 or later income years.

Temporary full expensing is intended to interact with loss carry back, allowing new investment which may result in tax losses. Eligible corporate entities can choose to carry back these tax losses and claim the refundable tax offset to increase their cash flow. To find out more go to ato.gov.au/bounceback

Ask for help if you need it

It’s important to lodge your tax return on time, even if you can’t pay. This will show us you’re aware of your obligations and doing your best to meet them.
If you’re worried you won’t be able to pay on time, we may be able to set up an affordable payment plan that works for you. We encourage you to contact us as early as possible or speak with a registered tax practitioner who can contact us on your behalf.

And remember, it’s never too late to ask for help. Whether it’s COVID-19, natural disasters, personal issues or financial difficulties, we’re committed to understanding your situation and helping you to get your tax and super right.

For more information, visit ato.gov.au/supporttolodgeandpay

Andrew Watson

Assistant Commissioner | ATO

Andrew Watson is an Assistant Commissioner in the Small Business area of the ATO. His role involves engaging and supporting small businesses so it’s easier for them to meet their tax and super obligations, and they get the help and support they need. He is also focused on driving the ATO’s digital services and helping small businesses manage their cash flow.