Covid-19 brought tax relief for SMEs. Have you claimed it?
How government incentives and rebates can save you thousands
We’re reaching the end of the financial year, which means it’s tax time. This year, however, there are a number of COVID-related concessions and incentives available to business owners.
Some relate specifically to tax – and go by catchy-sounding titles like ‘loss carry back’ and ‘temporary full expensing’; if you can get past the jargon, these rebates are worth knowing about, as they can save your business thousands of dollars. Both federal and state governments have also announced incentives for SMEs to boost employment, with wage subsidies for employees, trainees and apprentices.
You should always talk to your accountant to see which tax benefits apply to your business, but here’s a round-up of some of the most wide-ranging and useful schemes and rebates.
Claim more deductions
When you claim depreciation, you’re claiming back the cost of a product over its useful life. So, for example, you might buy a laptop for your business, and deduct the cost of the laptop over its useful life of, say, five years (there are ‘useful life’ rules set by the tax office).
In the May 2021 Federal Budget, the government announced a 12-month extension of an incentive called ‘temporary full expensing of depreciating assets’. This means most businesses can immediately deduct the full business cost of any eligible assets – such as computers, printers or machinery – to reduce your taxable income. There’s no general limit on the cost of assets you can claim but there may be specific cost limits on certain assets.
This is a great way of reducing your tax bill in the short term, as historically you would have to depreciate such assets over several years. You need to have bought the business equipment between 6 October 2020 and 30 June 2023, and you can claim for an unlimited number of eligible assets.
This particular incentive has already proved a winner with small businesses, says Peter Bembrick of Sydney tax firm HLB Mann Judd. “Also worth noting is that it applies to second-hand goods,” he adds. “For SMEs with less than $50 million aggregated turnover, this is really helpful as some don’t have big budgets to buy brand new.”
Access wage subsidies
Shortly before the end of JobKeeper, the Federal Government announced the $4 billion JobMaker scheme, which allows employers to claim $200 a week for every additional employee they hire aged 16 to 29, and $100 a week for those aged 30 to 35. The scheme was launched in October 2020, and employers can claim until October 2021.
A similar programme – Jobs Victoria Fund – provides wage subsidies of up to 20 per cent to businesses that take on an employee from a priority group.
So, if you choose to employ a woman, particularly aged 45 or over, or a young person under 25, or a recent migrant, for example, you can apply for a subsidy to cover up to 20 per cent of the cost of their employment for 12 months, even if they’re employed part-time. Sole traders and social enterprises are also eligible.
While this scheme is only available in Victoria, it’s worth keeping an eye on other state government websites to see if other comparable incentives are launched.
Backdate your losses
Typically, businesses can carry a loss forward and claim it in future years if it is more profitable for them to do so, says Bembrick. “The ‘loss carry-back’ rule was brought out in October 2020, and it allows a carry back, which means any losses incurred from June 2020 to 2022 can be offset against previous profits.”
He gives this example: if an eligible business makes a $1million profit in the 2019 tax year, but a loss of $500,000 in 2020, under the old rules, this loss had to be carried to a future year. Now, the loss can be carried back against profit in the 2019 tax year. This means you get money back from the tax office in the form of an adjustment.
“This is one concession that many businesses wanted, and it [has been announced that it will be] extended in this recent budget,” Bembrick explains.
Hire an apprentice
Employers will be given an extra $1.5 billion to hire 100,000 apprentices and trainees in the next year, as the government extends its job creation program. Under the scheme, eligible employers will be reimbursed 50 per cent of an apprentice or trainee’s wage for the first year, up to a cap of $7000 a quarter.
Apply for grants
There are numerous grants available for small businesses affected by Covid-19, especially for those in tourism, hospitality and travel. They tend to be state-based, so it’s worth checking state government sites, such Service NSW and Business Victoria. The Small Business Digital Adaptation Grant in Victoria is worth noting, too – eligible small businesses can apply for $1200 rebates to access business tools like MYOB and Shopify.
Just because you haven’t paid for something doesn’t mean that you can’t claim it, says tax expert and author Dr Adrian Raftery. “Businesses are entitled to an immediate deduction for certain expenses that have been ‘incurred’ but not paid by 30 June, such as salary and wages. You can even claim a tax deduction for staff bonuses and commissions that are owed and unpaid at 30 June, where the business is ‘definitely committed’ to the expense.”
Emily Chantiri is the author of five books about finances, and contributes regularly to The Sydney Morning Herald and the Australian Financial Review
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