Maximising cash flow
Maximising cash flow
Business guide to Coronavirus
Generally, government grants, rebates and subsidies are all considered assessable income of the recipient if they are received in relation to running a business. The GST applicable on grants will depend on the particular facts and circumstances of each grant.
Similarly, all JobKeeper payments made to employers are assessable income of that business. The normal rules for deductibility apply in respect of the amounts your business pays to its employees where those amounts are subsidised by the JobKeeper payment.
The JobKeeper payment received from the Government is not subject to GST.
To record these it is best to set-up new income items in your chart of accounts for each type of government payment you receive and code accordingly.
The instant asset write-off is accelerated depreciation – meaning small business owners, therefore, get the benefits of an immediate deduction, rather than having to depreciate an asset over the term of its useful life (i.e. how long an asset will last for).
If you have purchased an asset under $30,000 between 1 July 2019 and 11 March 2020 or under $150,000 between 12 March and 30 June 2020 then you should be able to claim the entire deduction in this financial year if you use it 100% for business.
To do this you need to record the purchase of the asset as normal and then pass a journal as follows:
CR: Accumulated depreciation (linked to the asset purchased).
Remember: if you use your vehicle for say 75% business use, the total you can claim under the instant asset write-off is 75% of the immediate write-off amount.
For the period 1 March 2020 until 30 June 2020, the ATO will accept the following method of working out what working from home expenses you can deduct:
Claim a rate of 80 cents per work hour for all additional running expenses.
If you use the shortcut method to claim a deduction and you lodge your 2019–20 tax return through myGov, you’ll have to include the note ‘COVID-hourly rate’ in your tax return.
There’s also the old fixed-rate method (52 cents an hour) and actual-cost method (based on a floor plan percentage) which have been available in previous financial years.
While the shortcut method is easy, you still may want to use your existing method if it gives you a better result.
The minimum amount of the cash boost is $10,000 so even if your PAYG withholding amount is $1,234 you will still receive the $10,000 credit as a minimum.
You don’t have to do anything to claim this. You simply need to lodge your March BAS and have your 2019 tax return lodged before the credit is allocated.
There is nothing to stop a business from using the MyGovID and software like QuickBooks Online to self-lodge Single Touch Payroll (STP) events and Business Activity Statements (BAS).
The same business could then engage a tax agent to prepare their year end tax return.
This may be a good cost saving measure if you are on top of your record keeping and experienced using the software.
You do not need to pay tax on the amount of the cash flow boost nor is it subject to GST.
You will still be entitled to a deduction for PAYG withholding paid and there is no effect on tax paid by employees in respect of their salary and wages.
Ideally, you would record the cash boost against an income exempt revenue item or at least flag it as non-assessable income for your year end tax return.
Remember that record keeping exceptions are available to make things simpler – they don’t allow a business to claim an automatic deduction.
So, in some circumstances, you may not need receipts, but you will still need to be able to show you spent the money and how you calculated the claim.
If you are unable to obtain a receipt from a supplier, you can still claim a deduction if your accountant is satisfied that the nature and quality of the evidence shows you spent the money and are entitled to claim a deduction.
In this situation, evidence of your expenses can include a bank or credit card statement that shows the amount that was paid, when and who it was paid to as well as other documents that outline the nature of the goods or services provided.
Remember: always ask for a receipt first and file it away just in case.
A partner cannot be an employee of a partnership. In this instance, the partner would need to nominate themselves as an eligible business participant for JobKeeper.
An eligible business participant is simply an individual not employed by your entity, but who is actively engaged in the business carried on by your entity (at 1 March 2020 and for the fortnight you are claiming).
A business may only nominate one eligible business participant (which possibly presents an issue for partnerships). The ATO has a form that needs to be completed for this nomination to occur.
Refunds and tax payable from the previous year will generally be coded against the Income Tax Payable or Income Tax Provision liability account in your software (depending on how your software was set-up).
This will be regardless of whether it is a refund or payable, most businesses use the same account for both.
Make sure your accountant passes what we refer to as “adjusting journals” in your software so the figures all match up at 30 June each year.
The accountants' expense simply goes against accounting fees or professional fees (again depending on how your software was set-up).
If you're an employer then there is a very high likelihood that you should be reporting what you have been paying your employees via Single Touch Payroll (STP). STP is the new way of reporting tax and superannuation information to the ATO.
With STP you report employees' payroll information each time you pay them.
If you have been reporting payroll payments via Single Touch Payroll for the first time in the 2020 financial year then your end of financial year process will change.
You are no longer required to provide a payment summary to your employees or lodge a payment summary annual report. This is because the information that has already been reported through STP.
What you will need to do is check your payroll data is correct and then lodge a finalisation event for the 2020 financial year. This is quite a straight forward process when supported by the right software.
Once you have made the finalisation declaration your work is done and your employees will see the status of their payment information change to 'tax ready'.
You can then direct your employees to their MyGov account where their payment data will be sitting waiting for them to prepare their 2020 individual tax return.
The content is expressing the view of the author, and not Business Australia.