Tax breaks key for small business owners for Covid-hit 2021 financial year

More than two million Aussie small business owners should be looking at one key thing to save money following a Covid-ravaged financial year.

More than two million small business owners should be looking at possible tax breaks to save money or offset losses from a Covid-ravaged financial year.

With just a few weeks to go until June 30, bosses must get their paper work and files up to date before seeing their accountant, according to experts.

More than 70 per cent of small business owners find the tax system for small business confusing, and a third feel that working from home will impact what they can claim or lodge in the 2021 financial year, according to new research from Officeworks.

Just under half of small business owners aren’t aware that the government had increased the instant asset write-off by $30,000 to $150,000 this financial year, the survey of nearly 1500 people found.

So what are the best next steps?

KNOW WHAT YOU QUALIFY FOR

Officeworks chief operating officer Michael Howard says business tax breaks could save small business owners money or offset their losses. But many don’t take advantage of them because they’re unaware of what’s available.

“The first step to making sure small business owners make the most this tax year is to find out what your company qualifies for. Then, they’ll need to regularly monitor compliance,” Howard says.

Officeworks chief operations officer Michael Howard says business tax breaks could save small business owners money or offset their losses. Picture: Supplied

“Small business owners must make sure to take advantage of the instant asset write-off, as well as maximising deductible super contributions.”

Howard also says if your home has a dedicated work space or room, they could calculate the work-related portion for most or all home office expenses, noting the Australian Taxation Office has a home offices expenses calculator and a depreciation and capital allowances tool to help.

“If you are running your own business from home, you may also be able to claim work-related share of occupancy expenses.”

GET YOUR RECORDS IN ORDER

ATO assistant commissioner Andrew Watson says it’s a great time to get organised before seeing the accountant.

“Over 90 per cent of small businesses get their tax returns prepared by a registered tax agent. So the better their records are, the easier it is for the tax agent to find the right deductions (and) make sure all the income‘s declared,” he says.

Watson says the ATO has carried out more than 2000 audits related to its small business random inquiry program in recent years, partly to help them estimate the tax gap. It also showed which businesses got it right with their tax returns.

Some common characteristics that emerged from the audits was the use of digital accounting software, which helped small business owners keep good records, plus good professional advice.

“So not just getting their forms filled out, but someone who actually knows them and their business and can help them run their business well. And also if they‘re on top of cash flow, the tax case takes care of itself,” Watson says.

There are also a raft of accounting software including QuickBooks, Xero, Zoho Books and Odoo to help small business owners.

CLAIM COVID-RELATED EXPENSES

Nina Sabey, who runs her own yoga and pilates business Sabey Wellness, says logging everything and staying on top of the paper work is key to getting taxes done quickly and efficiently.

Sabey always uses an accountant to make sure her taxes are “air tight”, which has also allowed her to focus on her business.

“I know a few people that use online services, and I‘ve heard that it’s cost them more in the long- term and you just don’t get that personal touch,” she adds.

Nina Sabey, who runs her own yoga and pilates business, says logging everything and staying on top of paper work is key to getting taxes done quickly and efficiently. Picture: Justin Lloyd

For the current financial year, Sabey expects there to be greater tax deductions because she’s been working from home more due to the pandemic.

“I did so many live and virtual classes at home, so that‘s where there’ll be greater tax deductions and stuff for my home office, electricity bills,” she says.

“I had to buy like a new computer and new lighting and that sort of thing, so I know that you can claim depreciation and all kinds of like tools that are priced more than a $1000,” Sabey says.

The ATO recently warned people to be careful with work-related expenses like car and travel claims, which are expected to fall in this year’s tax returns with many working from home during the coronavirus crisis.

Around 8.5 million Australians claimed nearly $19.4 billion in work-related expenses in their 2020 tax returns.