Small businesses given unique opportunity to get back on track with tax

The Australian Taxation Office (ATO) is encouraging small businesses that have overdue income tax returns, fringe benefits tax returns or business activity statements to take advantage of a new amnesty to get their lodgements back on track.

The amnesty was announced in the 2023–24 Budget. It applies to tax obligations that were originally due between 1 December 2019 and 28 February 2022 and runs from 1 June 2023 to 31 December 2023.

To be eligible for the amnesty, the small business must be an entity with an aggregated turnover of less than $10 million at the time the original tax return lodgement was due.

During this time, eligible small businesses can lodge their eligible overdue forms and the ATO will then proactively remit any penalties associated with failure to lodge.

When forms are lodged with the ATO under the amnesty, businesses or their tax professionals will not need to separately request a remission of Failure To Lodge (FTL) penalties.

Businesses are encouraged  to lodge any overdue forms even if they are outside the eligibility period. Whilst forms outside the amnesty eligibility criteria will attract late lodgement  penalties, the ATO will consider your circumstances and may remit such penalties on a case-by-case basis.

The ATO acknowledges that some  small businesses may be worried about paying tax amounts owing on their overdue lodgements. However, the ATO  makes best endeavours to work together with you or your registered tax agent to figure out the right solution for you.

The ATO wants to  make this process easy and encourage small businesses to do the right thing and believes it is a good time to reach out to your tax agent  to make sure you are up to date with your tax affairs.

The ATO offers a range of support options, including payment plans. Many small businesses are also able to set up their own payment plan online.

The amnesty applies to income tax returns, business activity statements, and fringe benefits tax returns. It does not apply to superannuation obligations and excludes other administrative penalties such as penalties associated with the Taxable Payments Reporting System.

Year end tips – 30th June deadlines

Instant Asset Write Off

There are three temporary tax depreciation incentives available to businesses with an aggregated turnover of up to $500 million:

  • Temporary full expensing
  • Increased instant asset write-off
  • Backing business investment

In broad terms, depreciating assets purchased before 30 June 2023 can be written off under one of the above rules. There are  exclusions and limits that apply to car purchases.

From 1st July 2023,  the amount that can be written off has been reduced  to $20,000 and only for businesses with annual turnover less than $10 million.

Loss Carry-Back

The temporary loss carry-back measure ends on 30 June 2023

  • Eligible corporate tax entities with a ‘aggregated turnover’ of up to $5b can elect to ‘carry back’ a tax loss incurred in the 2019-20 to 2022-23 income years and offset the loss against the income of the 2018-19 or later years to generate a refundable tax offset
  • The loss carry-back provision only applies to taxable losses, not capital losses and is limited to the corporate entity’s income tax liabilities in the relevant income year and the company’s franking account balance at the end of the current year

Other Business Considerations

At this time of the year,it is review time to look for opportunities to defer or lower tax imposts which may include:

  • Stock valuation
  • Writing of bad debts
  • Deferral of income
  • Accelerating expenditure
  • Repairs versus capital expenditure
  • Specific rules on
    • Trust distributions
    • Loans to shareholders from companies

Personal Tax

The rules for claiming tax deductions change frequently

Individuals who are seeking to claim deductions for employment related expenditure should be aware of an increase in audit activity by the Tax Office in relation to personal employment related deductions.

When claiming these deductions, you should ensure that :

  • the amount is a valid tax deduction
  • the expenditure is substantiated with relevant  receipts, tax invoices, diaries etc.
  • the  deduction is restricted to the business/ employment related portion of the deduction and thereby excludes the private/non-deductible amounts

Car Expenses

The cost of using cars for earning income can be claimed but there are rules;

  • actual expenses -  a current logbook is required  and that the logbook details are correct. A new logbook must be completed every 5 years or if the usage pattern changes.
  • odometer readings are required at least at the start and end of the tax year and for the period of the log book
  • the log book period should be representative of the years activity
  • receipts for expenditure are required

The per kilometre rate method is still available but limited to 5,000 kms.

Home Office Expenses

Home office expenses may be deductible where you carry on business or employment activities at home.

Claims can be made for:

  • Power, heating and depreciation claimed at a flat rate established by the Tax Office even if the room is not exclusively set aside for a home office

However, claims cannot be made for:

  • a portion of interest, rent and insurance unless you are carrying on business from home and the area is separate and distinguished from private living areas ,If carrying on business from home, deductibility of interest, rent etc. may be determined by the space occupied by the home office, as well as extent the space is used for income producing purposes
  • merely converting the spare room to be classified as a home office
  • working from home as a convenient place to do part of the work  an office is provided by the employer,

Superannuation Contributions

The rates of employer contribution (Superannuation Guarantee Charge) is scheduled to increase over the next few years. From 1 July 2023, the rate increases to 11% of salary.

In this  2022-23 Financial Year, the tax-deductible superannuation contribution cap is $27,500 for all individuals regardless of their age. The non deductible superannuation contribution cap is $110,000.

If you are over the age of 75 years old, you can only contribute mandated employer contributions and downsizer contributions.

If your total superannuation balance as at 30 June 2023 was less than $500,000 you may be in a position to carry-forward unused concessional caps starting from the 2018/19 financial year. Unused deductible or concessional caps arise where the maximum claim amount has not been claimed or contributed by the employer. Eg up to $27,500 this year and $25,000 in previous years – the opportunity extends back for five years,

Non deductible(non concessional) caps can be brought forward contribution up to three years worth in one contribution.

For example – for a contributor with less than $500,000 in their fund – an optimised contribution over the next month may look like:

Pre 30th June 2023

  • Non- concessional contribution                                  $110,000
  • Concessional amount                                                    $27,500
  • Past shortfalls on Concessional caps say 3 years     $75,000

Post 30th June

  • Non- concessional contribution                                  $330,000

Total                                    $542,500

Plus 2023-24 the concessional contribution up to $27,500.