2020 has certainly been one of the more challenging for small business in recent memory. And with tax time well and truly upon us its important small businesses are ensuring they have all the information they need to make tax time as easy as possible.
It is important to acknowledge that some businesses have faced arguably their toughest period ever, laying off staff, cash flow problems and worrying about how to keep staff on and make ends meet.
But the essential thing to note is that there is help available that small business owners should take advantage of this tax time.
The ATO has also just released a tax time toolkit to ensure small businesses have the information they need to make fast work of lodging their tax return.
The toolkit has information, factsheets and quick tips for small businesses as well as highlighting the tax implications of COVID-19 support.
You can find information about home-based business expenses, motor vehicle and travel expenses, and what you can do if your business was forced to pause trade or close permanently because of COVID-19.
We have also included a list of potential deductions to consider including:
- Claiming the increased instant business asset write-off.
If you have purchased any eligible assets including cars, machinery or equipment, and your business turns over less than $500 million, you may be able to claim asset purchases up to the value of $150,000 each in your tax return for 2020.
- Depreciation of business assets
Businesses can generally claim a tax deduction for capital expenses over a period of time, reflecting its decline in value.
Ensure you keep accurate and complete records of all expenses you want to claim deductions for.
- Deduction for a prepaid expense
Small businesses may be able to claim some of the day-to-day running expenses as tax deductions – including ones you pay for ahead of time.
According to the ATO, a prepaid expense may be immediately deductible if:
- It is ‘excluded expenditure’.
- ‘The 12-month rule’ applies.
- Business account and loan expenses
Depending on your circumstances, you may be able to claim the fees and interest from your business accounts and loans. Speak to your UBT adviser and get the right advice for you.
Ultimately, every situation will be different, and remember it is never too late to speak with your accountant if you are not sure about something or need a helping hand.