What a time we have had over the last six months, first with the devastating bush fires and now with the Covid-19 pandemic, it certainly has been a different time, the likes that many of us have not seen before.
Many small businesses and sole traders would have been entitled to receive Government assistance during this period including grants and concessional loans for those affected by the bush fires and JobKeeper reimbursements, cash flow boost for employers and State Government grants for those affected by the Covid-19 pandemic.
Of these assistance packages some will be tax-free, while others will be considered taxable income. Here are some of the packages and their tax treatment:
- DISASTER RELIEF PAYMENTS [BUSH FIRES] // these are non-taxable payments + do not need to be included in your tax return
- JOBKEEPER REIMBURSEMENT [COVID-19] // as the name implies, these are reimbursements + are therefore considered taxable income
- CASH FLOW BOOST [COVID-19] // these payments are tax free. They are not required to be paid back once the business’ cash flow improves
- STATE GOVERNMENT BUSINESS SUPPORT FUND GRANT [COVID-19] // this one-off payment to eligible businesses is considered taxable income
Due to Covid-19, your business income may have been affected to such a degree that you will not have any issues with the 2020 Financial Year tax, but if you will here are some tips to help reduce your taxable income:
- SUPPLIER INVOICES // pay any supplier invoices prior to 30 June, even if they are not due until July or later.
- SUPERANNUATION // pay the June quarter superannuation obligations prior to 30 June. Generally, it takes 5-7 business days for payment to be received by the employees superannuation fund, so payment will need to be processed earlier to allow for this.
- BUSINESS OWNERS // if you are a business owner, you could pay an additional superannuation contribution to maximise the $25,000 concessional contributions cap.
- SOLE TRADER // if you are a sole trader, you may take a concessional contribution to your superannuation fund and claim a tax deduction for it.
- INSTANT ASSET WRITE-OFF // the threshold currently stands at $150,000, so any piece of equipment or business vehicle, below this threshold, will be able to be deducted in full in the 2020 financial year, if purchased and in use by 30 June 2020.
Danny Grigg – Senior Accountant
BComm CA