Small businesses doing it tough through COVID-19 are reminded of tax options
In the lead up to Christmas and the end of the year, the ATO has sent a reminder about the range of tax options available to small businesses who have been impacted by COVID-19.
No penalties or interest for excessive variations
To assist businesses affected by COVID-19, we won’t apply penalties or interest for the 2020–21 income year for excessive variations when you make your best attempt to estimate your end of year tax. However, general interest charges may apply to outstanding PAYG instalment balances. Read more here.
Choosing to close your business
Understandably, there are a number of businesses that may be reporting a loss over the 2019-20 and 2020-21 financial years, due to COVID-19. Some businesses may even have to close their doors. If you are having to close your business temporarily, the ATO is encouraging businesses to do their best to keep up with tax and super obligations.
If you have to close your business permanently, you will need to lodge any outstanding activity statements and instalment notices, make GST adjustments on your final activity statement and lodge final tax returns. This will allow the ATO to finalise your account and issue any refunds that might be owed to you.
Sole traders and individual partners in a partnership who meet certain conditions can offset current year losses against other assessable income (such as salary or investment income) 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.
Businesses that are set up under a company structure that have 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.
If you have found yourself in difficult times, and your business in struggling, we encourage you to reach out to your accountant at Greenhalgh Pickard, or contact the ATO on 1800 806 218.