The tax tips you need to keep afloat during COVID-19
The pressure COVID-19 has put on small and medium businesses is staggering. In less than a month following Australia’s new trading and social distancing laws, two-thirds of the country’s SMBs have already reported a slump in revenue, with one in ten businesses grinding to a halt all together.
The government’s stimulus package and financial benefit schemes have been well received and there is a lot that business owners can do to help keep themselves afloat during this time.
Making the most of the federal government’s support
The government has introduced a myriad of initiatives to increase cash flow and provide relief for business owners. Keeping up to date with the latest initiatives and understanding how and when they can be applied is important.
- Businesses who employ staff are eligible for cash flow boosts, specifically SMBs with an aggregated turnover less than $50m (based on the previous year).
- They can receive a payment equal to the amount withheld on the employee’s salary and wages, up to a maximum of $50,000. SMBs who pay salary and wages but don’t withhold tax could also qualify for a minimum payment of $10,000. The payment will be received as a credit and can be found in activity statement systems from April 28.
- Businesses can also qualify for a second, equal payment that is planned for the July-October 2020 period on the condition that they remain open until then.
Understand the ATO’s tax relief initiatives
The ATO has recognised that for many SMBs, taxes may be the reason why they are forced to close their doors. That is why the ATO has introduced a range of schemes to help reduce tax pressure. For one, the ATO has increased instant asset write-off. This means, that from March 12 until June 30 2020, businesses with an aggregated turnover of less than $500m can immediately write off the cost of each asset costing less than $150,000. The ATO has also introduced accelerated depreciation, allowing business with a turnover of less than $500m to accelerate their depreciation deduction, and deduct 50% of the cost of an asset on installation.
On a case-by-case basis, the ATO may also allow payment deferrals, permitting business owners to potentially defer income tax, Fringe Benefits Tax and excise payment. Alterations to a business’ GST reporting cycle, which will enable businesses to change their reporting and payment cycle from quarterly to monthly to receive GST credits sooner, is a possibility.
Furthermore, the ATO will also allow businesses who are PAYG instalment payers to apply to vary their PAYG instalments and claim a refund for instalments made during the 2019-20 financial year.
Get in touch with your accountant
Take advantage of the advice that your accountant can provide in this time. There is no doubt that SMBs are united in the challenges they face and your accountant will be supporting the same issues with SMBs of all calibres. They’re well versed in navigating the latest government initiatives, so they’re well equipped to offer advice and help you be strategic about your financial plan.
Accountants also hold a close relationship with their accounting software provider and are able to work closely with them to align on discounts or delayed payments during this time. Like many large organisations, government bodies or banks, accountant software providers are looking to do everything they can to support customers to get through this difficult time.
This post was originally published by Kochie’s Business Builders.