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NSW COVID-19 Small Business Support Program

The NSW Government has announced a support package that is available to your business if you have experienced a downturn during the NSW Omicron wave.

The program is similar to JobSaver, which was available in 2021, but is only available for wages paid in February 2022.

Eligibility

To be eligible for the NSW 2022 Small Business Support Program, you will need to show that:

• your annual turnover is between $75,000 and $50 million, and
• you have experienced a minimum 40% decline in turnover in January 2022 and the first fortnight of February 2022.

At present, there are no specifics on whether the decline in turnover is compared to the same time in 2021 or not.

Support payment

Similar to the 2021 JobSaver, a business’s support payment will be based on its payroll to staff for the month of February 2022.

Employing businesses will receive a lump sum payment of 20% of their weekly payroll for the month of February. The minimum payment will be $750 per week ($3,000 lump sum) with a maximum payment of $5,000 per week ($20,000 lump sum).

Non-employing businesses will receive a lump sum payment of $2,000, based on $500 per week in February.

How to apply

We have been advised that you will be able to apply through Service NSW from mid-February. Also, you may be required to provide additional information to finalise your application. This may include sales reports and payroll reports.

If you have any questions or issues, please talk to us first. We will be able to provide you more information once it comes to hand.

Extension of the temporary full expensing regime for your business

Currently, your business is eligible to claim an outright deduction for the cost and installation of new and second-hand assets. The outright deduction is known as temporary full expensing.

Under the legislation enacted by the federal government, a business must hold and use a business asset before 30 June 2023 to qualify for temporary full expensing.

As your business is below the turnover limit of $50 million, you will qualify for temporary full expensing for both new and second-hand assets. This means that, unlike previous rules on instant asset write-offs, no limit applies to the cost of an asset under the temporary full expensing rules.

What the rules mean for your business

Any eligible new or second-hand assets purchased this year will be immediately written-off. Also, if you are using a small business depreciation pool for depreciation, the entire balance will also be written-off. Unfortunately, small businesses cannot “opt out” of the full expensing rules.

This large deduction may not be something you want to claim all at once and would rather smooth out over a number of years. Options available to you in this situation include leasing assets, rather than purchasing them, over the next couple of years.

Alternatively, we may reduce your income tax instalments accordingly so that you can adequately account for cash flow over the year.

Please contact us if you wish to discuss this further, including other options available for your business this year.

NSW COVID-19 Small Business Support Program

The NSW Government has introduced a support package that is available to your business if you have experienced a downturn during the NSW Omicron wave.

The program is similar to JobSaver, which was available in 2021, but is only available for wages paid in February 2022.

Eligibility

To be eligible for the NSW 2022 Small Business Support Program, you will need to show that:

• your annual turnover is between $75,000 and $50 million, and
• you have experienced a minimum 40% decline in turnover in January 2022 and the first fortnight of February 2022.

The comparison period for turnover is the same month in either 2021 or 2020.

Also, if you employ staff you will need to show that you have maintained the same employee headcount from 30 January to 28 February 2022.

Support payment

Similar to the 2021 JobSaver, a business’s support payment will be based on its payroll to staff for the month of February 2022.

Employing businesses will receive a lump sum payment of 20% of their weekly payroll for the month of February.

The minimum payment will be $750 per week ($3,000 lump sum) with a maximum payment of $5,000 per week ($20,000 lump sum).

Non-employing businesses will receive a lump sum payment of $2,000, based on $500 per week in February.

How to apply

You will need to apply through Service NSW before 31 March 2022. Also, you will be required to provide additional information to finalise your application. This may include sales reports and payroll reports.

If you have any questions or issues, please talk to us first. We will be able to provide you more information once it comes to hand.

Are You Providing Employee Benefits Due to COVID-19? Look Out for FBT

Are you providing rapid antigen tests and other COVID-19 related benefits to employees?

Business owners providing benefits in addition to salary or wages because of COVID-19 need to check if fringe benefits tax could apply.

Although you may be providing various benefits to create a safe workplace and support employees, you may be inadvertently liable for fringe benefits tax.

Track COVID-related benefits paid for by the business

• COVID-19 PCR and RAT testing
• Work from home equipment
• Work vehicles that are garaged at employees’ homes
• Vaccination incentives
• Travel or accommodation costs
• Protective gear
• Emergency health care

If you pay for COVID-related services for employees, you’ll need to track them in your accounting system to make it easy to determine if you have an FBT liability and if you should report any amounts on employees’ end of year income statements.

The minor benefits FBT exemption may apply for many or all of the benefits you have provided to employees. Still, we’ll need to review your records to ensure that you’re not going to get a surprise bill from the ATO down the track!

Unsure if FBT applies to your business?

FBT is a complex area of tax law, and there are specific tests that must be satisfied to be exempt from FBT.

Book an appointment with us to go through the benefits you have provided to employees. We can look at the minor benefits and otherwise deductible rules to ensure you’re not paying more tax than you need to. If you’re not already registered for fringe benefits tax, we will look at whether FBT applies and register your business if needed.

We’ll also notify you of any amounts that need to be reported on employees’ income statements at the end of the payroll year.

The fringe benefits tax year finishes on 31 March, so now is an excellent time to get ahead and assess whether your business could be up for an FBT bill.

New Family Trust Tax Rules – Will the Changes Impact You?

If your trust pays adult-child beneficiaries, then you’ll need to know how the new ATO tax guidance rules could alter your beneficiary arrangements. The proposed changes won’t affect every small business operating through a trust arrangement, but it’s important to check that existing provisions meet the new requirements.

The ATO has released several related documents as a draft package that outlines specific taxpayer arrangements it is examining. It is interested in agreements where parents benefit from trust income allocated to their children or other family members, particularly where tax avoidance could be an issue, and family member beneficiaries are unaware of the provisions.

Another area of focus is the application of Division 7A rules to trusts that pay private companies, especially with related business entities and where the trust and company are part of the same family group.

Do Your Trust Distribution Arrangements Need to Change?

Trust beneficiary arrangements can be complex, and we want to make sure your trust arrangements meet the ATO guidelines so you don’t get penalised. We’ll examine your situation in detail against the new information and advise you if any changes to trust arrangements are required.

With the ATO’s stronger position on the taxation of trust distributions, it’s essential to review arrangements before the end of this financial year. The new rules are set to apply from 1 July 2022.

Book a tax planning session with us today, so we can make sure you’ve got the best beneficiary arrangement for your business and family.

What is Personal Services Income?

Personal services income (PSI) is income received as payment for individual personal efforts and skills. It applies to many contractors who provide services as their means of earning an income. PSI rules can apply to individual sole traders and other types of business entities, but not employees. If PSI rules apply, the entity is called a personal services entity (PSE).

The PSI rules ensure the income is attributed to the individual who performed the services and not apportioned across other entities.

There are several tests to work out if your income is PSI or if you are instead conducting a personal services business (PSB), which means the PSI rules don’t apply. If a personal services entity qualifies as a PSB, the ordinary tax rules apply for that financial year.

At least one of these four tests must be satisfied for an entity to be classified as a PSB.

• Results test: the individual must be paid to produce a result, is required to supply their own equipment and tools to produce that result and is liable for the cost of rectifying defects in the work.
• Unrelated clients test: the sole trader or entity must be engaged by unrelated clients, and services must be advertised to the public.
• Employment test: in general, a sole trader or other entity must engage one or more entities to perform at least 20% of the sole trader’s principal work. Entities other than individuals must not be associated with the sole trader.
• Business premises test: the entity must maintain and use business premises to conduct personal services. The business premises must be exclusively used by the PSE and physically separate from private premises and customers.

If more than 80% of income in a financial year is derived from one customer, the PSE must satisfy the results test to be classified as a PSB.

If none of the four tests are met, the income is classified as personal services income, and the PSI taxation rules apply. PSI rules restrict the type of allowable tax deductions made in relation to personal services income-earning activities.

If you’d like to know more about PSI, talk to us to see if the services you provide meet the tests for conducting a personal services business. We’ll make sure you are claiming the maximum allowable deductions and being taxed correctly.

Cash or Accrual Accounting – What’s the Difference?

There are two methods of calculating the amounts stated in business financial reports, and the difference is all in the timing.

Cash reporting – income is recorded when cash is received in your bank, and expenses are recorded when money is paid out of your bank.

In cash reporting, the income and expenses are reported in the financial period that the cash transaction occurred.

Most small businesses report on a cash basis (although they can opt for accruals), but those with a turnover of more than $10 million must report on an accruals basis. Businesses that get paid immediately may find cash flow easier to manage on a cash basis.

Cash reporting is generally simpler and an easy option for the BAS, although it’s not always as accurate as the accrual system is.

Accrual reporting – income is recorded when a customer is invoiced, and expenses are recorded when suppliers issue bills.

In accrual reporting, the income and expenses are reported in the financial period that the transaction was created, regardless of whether a payment was received or made.

Businesses that don’t get paid immediately may have a more accurate picture of their financial position using an accrual basis, although it requires more detailed bookkeeping. While cash reporting gives a short-term picture of your accounts, accrual reporting gives a longer-term view and is more accurate for planning and decision making.

BAS and Tax Returns

Many small businesses are registered for cash reporting for the business activity statement, but the tax agent generally reports the income tax return on an accrual basis. The accrual system gives a more accurate financial picture for income tax calculation.

Sometimes it isn’t always clear! We’re here to help make it simpler, so get in touch if you’d like to understand more about your financial reporting for BAS and tax.

Tax Tips for small businesses

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides.

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
• Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
• Repairs and maintenance to assets and business premises.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.

There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.

What’s on the ATO Radar?

Businesses whose benchmarks fall significantly outside the ATO’s small business benchmarks.

• Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.
• Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
• Home office expenses – this year there is a shortcut calculation for people who have temporarily had to work from home due to COVID-19. This allows for a flat rate of 80 cents per hour for work time. For people who usually work from home, check the ATO home office expenses calculator to maximise the allowable deduction.
• Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised.
• JobKeeper – if you have claimed JobKeeper for eligible business participants and/or employees, the ATO will be doing data matching to check that JobKeeper has been claimed and paid to employees correctly.
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
• Instant asset write-off – the threshold remains at $150,000 this year, but there are rules about eligibility so talk to us to see if the asset deduction claims apply to your business.

Keep Your Records

Remember you need a valid tax invoice for any expenses over $82.50 (including GST) to prove the business expense.

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
• Keep all records relating to employees, contractors and payroll for at least seven years.
• If your business is a company, keep all records for at least seven years, including director meeting minutes.

Maximise Your Business Deductions

We can check your business’s eligibility for concessions, offsets, incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!

With so many businesses still affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner.

Tax Tips for small businesses

Common Tax Deductions for Small Business

Are you claiming all the business tax deductions that you are entitled to?

There are many expenses common to most small business, and there are other expenses that are specific to the nature of the goods or services that your business provides.

• Operating expenses include accounting, administration, advertising and marketing, office premises, office running expenses, trading stock, legal fees, insurance and vehicle expenses.
• Employment expenses include salary and wages, fringe benefits, superannuation and training costs.
• Other operating expenses may include things specific to your business, for example point of sale systems, freight, professional membership fees, professional education, protective equipment, tools or specialised software.
• Capital expenses include machinery and equipment, vehicles, furniture and computers. Depreciation for these assets may also be deductible if the expense was not written off immediately.
• Repairs and maintenance to assets and business premises.

Expenses must relate to the running of the business and providing the goods or services that your business offers.

Some common expenses that are not deductible are fines and penalties, provisions for employee leave, donations to entities not registered as deductible gift recipients and entertainment.

There may be some expenses you want to check with us such as private usage of business vehicles, prepaid expenses, bad debts, loss of stock and borrowing expenses. We’ll make sure to include all the deductions you’re entitled to.

What’s on the ATO Radar?

Businesses whose benchmarks fall significantly outside the ATO’s small business benchmarks.

• Work-related travel expenses – travel fares, accommodation, meals. The travel should be directly related to income producing activities and you need records to verify the travel claims.
• Motor vehicle expenses – keep records for fuel, repairs and servicing, finance arrangements, insurance and registration. Keep a logbook to record private travel.
• Home office expenses – this year there is a shortcut calculation for people who have temporarily had to work from home due to COVID-19. This allows for a flat rate of 80 cents per hour for work time. For people who usually work from home, check the ATO home office expenses calculator to maximise the allowable deduction.
• Fringe benefits – have you captured all benefits provided to employees? Vehicle and entertainment benefits are usually scrutinised.
• JobKeeper – if you have claimed JobKeeper for eligible business participants and/or employees, the ATO will be doing data matching to check that JobKeeper has been claimed and paid to employees correctly.
• Superannuation – have you paid the superannuation guarantee on time to employees’ super funds? The ATO will examine your Single Touch Payroll records including superannuation payments.
• Instant asset write-off – the threshold remains at $150,000 this year, but there are rules about eligibility so talk to us to see if the asset deduction claims apply to your business.

Keep Your Records

Remember you need a valid tax invoice for any expenses over $82.50 (including GST) to prove the business expense.

• Keep records for all business transactions (income and expenses), activity statements and financial reports for at least five years.
• Keep all records relating to employees, contractors and payroll for at least seven years.
• If your business is a company, keep all records for at least seven years, including director meeting minutes.

Maximise Your Business Deductions

We can check your business’s eligibility for concessions, offsets, incentives and rebates and make sure your business is calculating taxable income correctly, so you don’t pay more tax than you need to!

With so many businesses still affected by COVID-19, it’s important to get the allowable tax deductions right for your business and get in early for your tax return. This way you get more time to plan for payment, or if you are due a refund you will see it in your bank sooner.