The ATO has reminded businesses impacted by COVID-19 that they have a range of tax options to consider, including claiming a deduction for any losses. And for businesses finding it difficult to estimate income for the purposes of PAYG instalments, the ATO will not apply penalties or interest for excessive variations where businesses make a “best attempt” to estimate their end-of-year tax.
Tip: If you need additional time or support to get your tax return in order or work out what’s next for your business, we can help. Contact us, or phone the ATO on 1800 806 218.
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, the loss can be deferred or carried forward and offset in a future year when the business next makes a profit. Businesses 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. Of course, it’s crucial to keep proper records when claiming a deduction for losses.
Closing a small business
The ATO has acknowledged that some businesses may need to close their doors – either temporarily or permanently – due to COVID-19, particularly in Victoria. It calls on such businesses to “do their best to keep up with tax and super obligations”.
If a business is forced to close permanently as a result of COVID-19, or for any other reason, it must still lodge any outstanding activity statements and instalment notices, make GST adjustments on the final activity statement and lodge final tax returns. This will enable the ATO to finalise the tax account and issue any refunds that might be owed.