COVID-19 and EOFY Tax Returns - by Steven Thomas
With the EOFY rapidly approaching, what do the COVID-19 stimulus packages mean for your business tax returns? This all depends on whether you have taken advantage of these packages, so let’s take a look at some of these measures and how they may affect your tax returns this year.
The JobKeeper program is designed to help businesses keep their staff employed during the COVID-19 lockdown. The subsidy is $1500 per fortnight for each eligible employee and is paid to the employer. Whilst the employer will be taxed on this subsidy, it can be recuperated when the employer passes it onto their employees. Essentially, there will be no net tax loss to the employer.
It’s important to remember that employers still need to pay superannuation, however these payments are based on the employees’ pre-subsidy wage. If employees are stood down or take extended leave due to COVID-19, employers still need to pay superannuation on leave that’s paid out; if employees are terminated or retire, super does not need to be paid when leave is paid out.
Asset instant write-offs
For eligible businesses with less than $500 million annual turnover, instant asset write-offs have been increased to $150,000 (the cost of each asset must be below $150,000). This applies to all assets purchased between 12 March and 30 June 2020. On July 1st, 2020 however, the asset write-off only applies to turnovers of less than $10 million and the threshold is $1000, not $150,000.
Boosting cash flow for employers
Businesses with employees and have been affected by the COVID-19 lockdown can receive between $20,000 and $100,000 cash flow boosts. This money will be delivered as credits on your activity statements lodged up to the September 2020 quarter. You won’t need to pay tax on this cash flow boost and it doesn’t need to be paid back when your cash flow recovers from COVID-19.
Additional concessions if your turnover has reduced
If your business turnover has reduced below a certain level, you can also access other concessions already in place for SMEs. These include the small business company tax rate of 27.5% if your annual turnover is less than $50 million. For businesses with less than a $10 million annual turnover, cash accounting can be accessed to reduce cash outflows, because you only pay tax when cash is received. Trading stock concessions are also available when they are less than $5000. Also, SMEs with less than a $2 million annual turnover, may be eligible for tax concessions when selling assets or part of their business.
EOFY Insurance renewals
Many businesses also renew their insurance policies at the end of the financial year, so it’s important that you don’t skip this step during the COVID-19 lockdown. Just because you are juggling multiple financial balls, it’s not the time to increase your risks further by ignoring your insurance responsibilities. If you’re not sure whether you should simply renew your policies or review them, check out our post here.
Hopefully, the JobKeeper payments, asset write-offs, cash flow boosts, and additional concessions will be a simple matter for your accountant to include on your EOFY tax return. Finally, if you have already paid your PAYG instalments, based on conditions prior to COVID-19, you may well benefit from a large tax return.
To speak to an insurance specialist about your insurance policies and renewals, contact Steve Thomas.