Tax is one of the most important challenges facing small, growing businesses. The impact of the pandemic brought changes on the business structure of many.
Despite these challenges, opportunities are still existent to reduce taxes.
Review bad debts
Take time to review and assess outstanding debts if they can be recovered or written off as bad debts. Tax deductions for bad debts are only applicable if:
- The debt still exists when it is written off. There will be no tax deduction if the debt is forgiven or compromised before it is written off as bad in the accounts.
- The debt is unrecoverable and considered bad debt in the year when you will claim the tax deduction.
Take note that there are certain additional requirements if the creditor is either a company or trust.
Value of trading stock
For some small businesses, the market value of their trading stock is reduced below its cost due to COVID-19. Not to mention its effect on the sales and inventory levels. This may result in closing stock at a lesser value than the cost. You can take the opportunity to generate an allowable tax deduction from this.
JobKeeper
The JobKeeper program of the government lets you claim deductions for payments made to your employees and business participants.
While the JobKeeper extension has ended on 28 March 2021, it is important to keep the reporting and documentation you submitted for five years.
GST adjustments
GST adjustments may be required for businesses that have contracts or sales cancelled, as well as incurred refund purchases as a result of COVID-19.
Here are worksheets from ATO that will assist you in calculating adjustments for sales, purchases, bad debts, creditable purpose, and adjustments summary.
Other things you can do
Keep your books in order
Invoices, receipts, cash register tapes, banking records, creditors invoices, wage records, cheque butts, and cash books are some of the things that should be kept in your business records. Keep an asset register to record the assets you purchase for your business.
Remember to store all your documents for at least five years. Work papers are also desirable as they assist in preparing the proper accounting records for the determination of income tax liability.
Remember important deadlines
To make sure that your lodgments are always on time, regularly visit the ATO website to check payment dates for the financial year.
Regularly review with your accountant
It is always best to seek professional advice when it comes to your taxes. Provide your accountant with your financial records so can lodge on time without unnecessary delays.
Our team can help you with your tax needs. You can always message us at bbsi.admin@beale.net.au or give us a call at (02) 8075-2532
This article is provided as general information only and does not consider your specific situation, objectives or needs. It does not represent accounting advice upon which any person may act.
