Up-to-date financial information and bookkeeping are vital if you wish to receive any Government support. Without a set of reconciled and tidy books, your compliance is not ready and, as a result, your business is unlikely to become eligible for any government support.
Running a business is already a challenging talk, running a business during COVID-19 is like riding a bicycle up a hill! Fortunately, we are in Australia where the Government is very efficient in terms of providing lifesavers packages like Cashflow Boost or Jobkeeper. We have spoken to our friends who work in other parts of the world where there is almost no financial support provided to them, other than a small amount of tax savings! However, even here in Australia, we continue to see businesses who have missed out on all of the financial support from the Government due to a lack of compliance with the Tax Office.
This article shares real mistakes we have seen over the past six months:
- Missed the active ABN test for Cashflow Boost. We have seen at least five businesses who came to us who were not entitled to Cashflow Boost due to their late lodgements of either their tax return in 2018-2019 or BAS during 2019-2020 financial years. Lodging tax returns and BASs late are the most frequent mistakes we have seen in Australia. However, on a normal day, the worst aspect is that you will receive a penalty and interest from the ATO. In this case, missing $100k support from Cashflow Boost really hurts. The $100k cash support is tax-free, so it is worth at least $130k gross earning! There are some circumstances in which we can argue with the Tax Office to prove that our client has an active ABN but 9/10 times the ATO is not in favour of businesses who don't meet these basic compliance requirements!
- No STP compliance, no Jobkeeper. In some industries like retail and hospitality, small businesses still pay their staff in cash and get accountants to worry about super and payroll later. The ATO strictly states no to many Jobkeeper applications who do not have good payroll record keeping. There are a number of Jobkeeper tests to prove that you began recording your employees in your books before the cut-off date 12th March or 1st July, if you cannot provide evidence like payslips or EFT transfers then your employees are not eligible!
- Incomplete turnover books that make it impossible to test. These days, there are still businesses who don't have any form of record-keeping for their sales. We see businesses who are selling goods in the open market, who mostly use cash and keep no record of their sales. Most of them are not registered for GST but do not forget you still need to keep records for tax return purposes. The turnover test requires us to go back 12 months so even if we try to help reconstruct turnover for the current testing period, it is almost impossible to go back 12 months without any evidence!
- DIY Jobkeeper testing can lead to failed results without seeking a second opinion from experts. I have written an article (Part 1 & Part 2) on this, however, it is still a very common practice! Jobkeeper testing is complex, self-assessment tests will never get you the exact results.
Compliance is probably the least important in your daily priority tasks. Businesses manage to get their compliance up to date to keep them out of trouble. However, during this pandemic, compliance is a lifesaver! It is always worth it to pay someone with experience to take care of all your problems and concerns during good times, but also to help keep you navigate the difficult times!
- Australian Capital Territory Budget 2020–21 Summary
- Five Ways to Effectively Manage a Business Grant
- Common mistakes that made businesses think they failed the JobKeeper 2.0 test (Part 1)
- How to improve your payment terms to ensure you get paid on time under COVID-19?
- End of Financial Year Tax Tips For Individuals 2019-2020