Swiss-born restaurateur Flavio Carnevale is among Australia's 2.3 million small business owners preparing for the end of the current financial year.
But after another coronavirus-interrupted year and the introduction of new government incentives, he's unsure about what he owes and can claim this time around.
“It is confusing because it's like we, and even the accountants, need to learn everything from scratch,” the 44-year-old told SBS News.
While for the past year Mr Carnevale's Italian restaurant Marta in Sydney's Rushcutters Bay has remained open, he had to add a weekend bakery to help survive the pandemic.
“Without the bakery, I don't know if we could survive, or be here today,” he said.
The Australian Tax Office has been hearing from many owner-operators like Flavio about the challenges of the past 12 months.
“Many are feeling a little anxious, a little fearful, and there are a few different things that small businesses need to think about this year,” said Deborah Jenkins, the ATO's deputy commissioner for small business.
SBS News posed some of the most common questions about this unique financial year to a team of experts, who answer them below:
Why is this financial year so complex?
Trudi Yip, founder of Sydney's Numeric Eight Bookkeeping, said this is "probably the most confusing end of financial year [we’ve faced] because there are so many areas impacted".
“Because of COVID-19, it's an interesting year. The government has thrown so many grants and benefits [to small business owners] and ... made changes to tax laws,” she said.
Because of the volatile economic landscape, Ms Yip said even her company is still using the ATO as a resource to find out what the changes are.
“It is a minefield,” she said.
Trudi Yip is founder and managing director of Numeric Eight Bookkeeping. Source: SBS/Sandra Fulloon
What should I do with my cash flow records?
Mr Carnevale, like many business owners, has managed wild income swings over the past 12 months.
“Cash flow is definitely one of the main questions this year,” he said. “During COVID-19 lockdowns everyone panicked, not knowing who would stay open or close and who would survive.”
According to the ATO, each state and sector is reporting wildly different issues with cash flow.
Ms Jenkins said some small businesses have seen no change during COVID-19, some are doing really well, and others are really struggling.
“The stop-start nature of the [small business] economy means many are asking: ‘do I even have enough money to pay my taxes this year?’” Ms Jenkins said.
For this reason, it is more important than ever for small business owners to produce accurate digital cashflow records this year.
“As a small business, if you have made a loss this year, but paid tax last year on profit, you can offset that with the tax you paid last year, therefore giving you a potential refund or offsetting it against any tax liabilities,” said Lielette Calleja, founder of cloud accounting business All That Counts.
Is JobKeeker taxable?
While the government's wage subsidy scheme ended on 31 March, some employers became eligible to receive the JobMaker Hiring Credit for any additional employees that started employment on or after 7 October 2020.
The ATO says JobKeeper is assessed as taxable income and for this reason needs to be included in a tax return.
“The whole point of JobKeeper was to keep people employed, and it did its job. It did a wonderful job actually,” Ms Yip said.
“It can be very confusing because people say: ‘oh, but it was given to us by the government’. But actually, no, it is a taxable item.”
How much can I claim for new equipment?
The threshold for the Instant Asset Write Off was increased to $150,000 last year, covering businesses with an aggregated turnover of less than $500 million.
Mr Carnevale said he spent $30,000 to fit out his new bakery, including ovens, machines and mixers. He said he did not know how much of that he could claim back.
The ATO’s Ms Jenkins explains: “You don’t get the money back immediately for exactly the amount that you've paid. It is a tax deduction.”
Ms Calleja said now is also a good time to buy new equipment if your business is making a profit, “especially if that piece of equipment can help you create additional revenue”.
However, Ms Yip warned: “Spending affects your cashflow, so if you don't have much money in the bank, don't spend it unnecessarily.”
Is superannuation changing?
Superannuation changes are set to come into effect in the new financial year. The guarantee rate increases by half a per cent to 10 per cent from 1 July, 2021.
“Even though COVID-19 is still around, a lot of business owners are confused about whether superannuation is still increasing,” Ms Yip said.
“But it is going ahead, so ensure you are paying your employees the correct amount.”
Most cloud accounting software will be ready by July to implement the changes, she said.
“If you're not sure of what to do or you're questioning employee contracts, go back to your accountant or bookkeeper to double-check.”
Should I be getting special advice this year?
According to Ms Calleja, it's a good idea.
“This financial year it is more important than ever to speak with an advisor who can guide you not only from a compliance point of view, but also business strategy - cashflow, budgeting, and forward planning,” she said.
“Many businesses still don't work with an advisor, perhaps because they think they're too small, or that they don't need help, or they can't afford it.
“But it is more important than ever to seek professional advice from an accounting advisor due to all the legislative changes during COVID-19.”
Resources in more than 20 languages are also available . The tax office also offers an interpreter service, Ms Jenkins said.
Lielette Calleja is the founder of cloud accounting business All That Counts. Source: SBS/Sandra Fulloon
The ATO’s top tips this tax time are:
- Get advice from a trusted professional
- Keep an eye on cashflow
- Maintain good digital records – which must be in English or easily translatable.
“And please be careful of phishing emails or text messages asking you to ‘click on this link’. If you're uncertain, give us a call or contact your tax agent,” Ms Jenkins said.
