ATO Urges Small Business to ‘Nail’ its Tax 

A comprehensive toolkit gives a run-down on expenses and deductions.  

The comprehensive guide also highlights three areas of concern: deductions, omissions of business income and record-keeping. 

On deductions, the ATO reminded small-business owners to only claim what they are entitled to and outlined three rules for valid business deductions:

• The expense must have been for your business, not private use.
• If the expense is for a mix of business and private use, you can only claim the portion that is used for your business.
• You must have records to prove it.

“It may be tempting to over-claim a deduction for your business, but it’s not worth the risk,” said ATO Assistant Commissioner Andrew Watson. 

“Only claim the business portion of expenses, and also keep complete and accurate records so you have appropriate evidence for any deductions you are planning to claim.”

The ATO said that record-keeping will continue to be a point of emphasis including insufficient or non-existent records that are needed to substantiate claims.

Mr Watson said that while it had been a tough period for small-business owners they needed to remain diligent with their record-keeping to best help themselves come tax time.

“We know it’s been a tough couple of years for many small business owners, and we understand your tax obligations may not be at the top of your list,” said Mr Watson.

“If you need a hand, I encourage you to contact your registered tax professionals or the ATO.”

Mr Watson also said that all income not just that earned from the primary business function needs to be included come tax time.

The ATO said that as small businesses diversified to overcome the pandemic through the sharing economy or new business ventures, it would focus on income gained from these streams. 

“Almost half of the 1.9 million sole traders also have non-business income, like salary and wages or income from investments, so make sure to double check you’ve included it all before you lodge,” said Mr Watson. 

“Don’t fall into the trap of leaving out non-business income thinking we won’t notice.”

The ATO said that most government payments or financial support received as a result of COVID would need to be included as taxable income.

A table on the ATO website under, “Covid-19 support: tax quick guide” explains which government benefits are taxable and which are not. 

Mr Watson also reminded small businesses that they needed to have their tax lodged by the 31 October deadline.

Source: AccountantsDaily

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