By Juliano Oliveira
In just over a month, the deadline to lodge the tax return for the previous income year will end.
Businesses struck by the COVID-19 still have time to claim a deduction for losses.
For the first time in years, coffee shops, small markets, restaurants, among others, might be facing a financial struggle to keep up to date with their employees’ salaries and daily bills.
“We know some small business owners are under incredible amounts of stress and facing uncertainty like never before,” says The Australian Taxation Office (ATO) Assistant Commissioner Andrew Watson.
“We understand your tax obligations may not be at the top of your list of things to do. So if you need some extra help with your tax and super affairs, I urge you to contact your registered tax professional or the ATO. We’re here to help.”
Time, Mr Watson highlights, is precious in a situation of financial despair.
“If you find yourself in this boat, you may be able to claim a deduction for the loss. It’s crucial that you keep proper records to ensure you can claim the deduction you’re entitled to.”
One of the options for sole traders and individual partners in a partnership is to offset current year losses against other assets, such as salary, in the same income year. Otherwise, they can defer the loss or carry it forward and offset it to a future year when the business next makes a profit.
According to ATO, businesses that are set up under a company structure that has made a tax loss in a current year can generally carry forward that loss for as long as they want and claim a deduction for their business in a future year.
“You’ll need to keep records for five years for most transactions. However, if you fully deduct a tax loss in a single income year, you only need to keep records for four years from that income year,” Mr Watson said.
“If you have to close your business permanently as a result of COVID19 or for any other reason, there’s a few things you’ll need to do, like lodge any outstanding activity statements and instalment notices, make GST adjustments on your final activity statement and lodge final tax returns – so we can finalise your account and issue any refunds that might be owed to you.”
“After you’ve finalised your tax affairs, don’t forget to cancel your ABN, and GST registration if you have one. If you need help doing this, ask your registered tax professional or call us,” Mr Watson said.
“You’ll also need to keep your business records for at least five years after the end of the financial year you sell or close your business in.”
Mr Watson says that to assist businesses affected by COVID-19, ATO will not apply penalties or interest for excessive variations when you make your best attempt to estimate your end of year tax.
To help businesses navigate through these difficult times, the ATO is offering a series of webinars:
- Tax support for small business
- Considering your small business viability
- Closing your small business