EOFY tax time tips


26th June, 2020

10 tax time tips for advisors from the ATO, CAANZ

This End of Financial Year is likely to raise more tax related questions than ever before, which is why MYOB recently hosted a webinar for business advisors, featuring guidance from CAANZ and the ATO.

This year has been an incredibly disruptive one for businesses at all levels and regions in the country. One thing they’ve relied upon above all else is the sound, practical advice offered by the likes of the bookkeepers and accountants that make up MYOB’s Partners.

With an eye to further assist its partners, along with all other business advisors, MYOB has brought together key experts in two, 30-minute presentations to cover all the major areas to be aware of at tax time this year.

The first half-hour webinar was hosted MYOB’s General Manager of Sales and Marketing, Blake Collins and with panellists including the ATO’s Assistant Commissioner of Small Business – Client Experience, Andrew Watson, and Chartered Accountants Australia and New Zealand’s Tax Leader, Michael Croker.

Due to the wide-ranging nature of the presentation, we’ve pulled out 10 of the most important points to highlight in the current climate, while you can navigate to the link at the bottom of this article to view the webinar in full.

EOFY 2020: 10 tips for advisors

1. Understand what is assessable income

It should be understood that any business claiming the JobKeeper payments will have to classify these payments as assessable income.

There are exceptions, however.

“Employer cashflow boost is not assessable income, it’s what we like to refer to as “NANE,” or non-assessable non-exempt,” said Watson. “It doesn’t form assessable income, but it may be reported and calculated for some other income test purposes.”

“The early release of superannuation, if businesses or individuals have taken advantage of that, know that that payment isn’t taxable.”

2. Amendments to the Instant Asset Write Offs

From the 12 March, the Instant Asset Write Off has been expanded to cover assets up to $150,000 for businesses with a turnover of up to $500 million.

“One thing which we are aware of and at times some small businesses aren’t, if they do take advantage of the small business depreciation pool, there may be an opportunity there of a change with the asset, going from $30,000 to $150,000, that pool may be able to be written off,” said Watson.

Croker demonstrated the potential for businesses to blanket claim everything as bad debt, despite the potential repercussions.

“Some businesses are mothballing their plant and equipment — that could trigger a balancing adjustment for depreciation if you’re no longer going to use some of this old equipment.”

3. Stay on top of multiple tax entries

The introduction of STP has caused businesses confusion about their tax reporting obligations, confusion that Andrew describes has resulted in unnecessary reporting to occur.

“Some people who had come on to STP part way through the year issued payment summaries, did the old style end of year reconciliation and finalised through single touch payroll, which created two lots of records in our system.”

Although often sorted by the ATO, these double records do have the potential to cause unnecessary headaches. Watson said the solution is easy, though:

“Once you’re on single touch payroll, you don’t need to issue payment summaries.”

“Finalising the data is a key step, which last year we found some employers didn’t do. They thought just doing the last payroll of the year was going to be enough.”

4. It’s not too late to get up-to-date with STP

For businesses still unsure about when to start using single touch payroll, Andrew has some handy advice.

“it’s still not too late to get onto Single Touch Payroll. I know we’re getting pretty close to the end of the financial year, but you can join at any stage during the year.”

“The finalisation for employers of 20 or more people is the 14th of July. For small employers, it’s the 31st of July.”

Given the economic climate, sooner is better than later to ensure you receive your tax return in a timely manner.

“We do encourage everyone to finalise as reasonably quickly as they can, from 1 July, because we are expecting a lot of people are going to be looking to lodge a return early this year for a refund, given the situation with COVID-19.”

5. Understanding JobKeeper eligibility

Surprising bounce back from some sectors has understandably raised questions related to JobKeeper eligibility and continued payments.

Watson said there’s no need to be concerned in these instances, however.

“The eligibility criteria around the drop of income is a once off test. Once you’ve met that eligibility, you stay in JobKeeper for the length of the scheme.”

Concern usually stems from these businesses needing to continue to report projected earnings, but these earnings are not related to payments in any way.

“When a business comes back in and does what’s called the declaration, where they nominate how many employees have been paid the $1,500 per fortnight for the previous month.

As part of that declaration, they’re asked to give projected turnover figures and that, That’s not an eligibility test, we’re gathering that information as a statistical exercise, rather than it being a retesting of eligibility.

6. Fraud will be quickly discovered

Although it might be tempting to double dip with government handouts now and beg for forgiveness later, businesses should be aware that the ATO is highly prepared to deal with fraud.

“There is an ATO integrity unit out and about just double checking whether the applications were correct and whether the information or the eligibility criteria was met,” said Croker. “It’s important that people respond with the right information the ATO requires, just to confirm continued eligibility.”

“We’re doing some pre-issue checks, running out analytical models over them. And where they are in that most fraudulent top aspect, or they look that way, yes, we will stop them to ask questions on the way through,” said Watson.

7. Document your projected income for JobKeeper payments

Employers have had a bit of trouble wrapping their head around how to correctly income in relation to JobKeeper.

“We’ve had questions with JobKeeper because one of the eligibility is either an actual or a projected drop in income,” said Watson.

“If a business, say in April, projected a drop in income and then halfway through that projected month, restrictions started easing quicker than expected and they didn’t quite get to that 30 percent projection.

“We’re not looking to jump on those things. What we do though, strongly recommend is when you are making those decisions based on those projections, document it.”

8. Take the time to re-determine financial strategy

With the current economic climate causing businesses to reconsider their finances, it provides a valuable opportunity to rethink future business strategies.

“The conversation pivots away from tax, more to business viability – your ability to renegotiate rents, your ability to get your bank or a financier to extend lines of credit, your supply chain management, your staffing levels, and cost control,” said Croker.

The solution? Look to your business software.

“A lot of the attention will focus on the forecasting and the scenario planning and those sort of features in software such as MYOB’s to actually give management and their advisors a really good indicator of business viability.”

9. New deductions for businesses working from home

Although business have needed to relocate their work to home over the past few months, Watson confirmed that the usual rules apply, with the exception of a new temporary deduction.

“We have put in a temporary shortcut method to cover the 1st of March through to the 30th of June.

“It will allow an 80 cents per hour deduction for people working from home through the COVID-19 period. It doesn’t require that you’ve got a dedicated office space, and it can apply to multiple people in a household.”

As this is an all-encompassing deduction, it’s important to remember that traditional home office don’t apply.

“Tax agents, accountants should be a little bit sceptical and just try and validate in their discussion with a client that those are legitimate expenses that can be claimed.”

10. Financial help is just a phone call away

A bit of good financial advice can mean all the difference between a smooth tax time and a business landing in hot water.

To prevent this, Watson suggested the relationship between business and advisor shouldn’t be forgotten.

“These are options, but it’s that relationship with your tax agent is really important to make sure that you’re doing these things with a bit of knowledge.

“The most important thing is for the small businesses and their advisors, if they are in trouble, or they’ve been impacted by this, is to talk to us.”

Croker echoed this sentiment: “The big issue really is just around viability and tax time will be an important time for accountants and bookkeepers to really get a sense of how the business is coping and is there a viable recovery strategy to look into the future and see whether this business will be viable in the longer term?”

Want to access the full presentation, as well as the one for SME clients? You can watch them both here.