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Importance of Compliance in Obtaining Government Support

Author: Harry Hoang

In comparison to many of your priority tasks, compliance likely ranks fairly low in terms of importance. Most businesses complete the bare minimum level of compliance necessary to keep themselves out of jail. But did you know that a clean and tidy set of books can also increase your eligibility for many forms of government entitlements and support?

We are fortunate to be in Australia, a country where the government offers livesaving packages like the government subsidies during the height of the pandemic. But oftentimes, there are businesses who miss out of these government support because of their lack of compliance with the tax office.

Some mistakes that Tailored Accounts have witnessed in the past include: 

1. Late Lodgement of Tax Returns & BAS

We have witnessed at least 5 businesses who were not entitled to the Cashflow Boost because of their late lodgement of tax returns or BAS in previous financial years. This late lodgement meant that they missed the active ABN test for the Cashflow Boost.

Late lodgement of tax returns and BAS is one of the most common compliance mistakes in Australia. Normally, the punishment for this is a penalty and interest from ATO. But in this case, missing $100,000 of support from the Cashflow Boost, especially in a time when most businesses were in dire need of it, was horrible. The $100,000 cash support was tax free, being equivalent to at least $130,000 in gross earnings.

While there are some circumstances where we could argue with the ATO to prove that the client has an ABN, the ATO is rarely lenient of businesses who fail to meet basic compliance requirements.

2. STP Compliance

No STP compliance meant no JobKeeper for many businesses. In some industries like Retail or F&B, small businesses still pay their staff in cash, choosing to let the accountant organise super and payroll later. 

This may seem fine normally, but during the pandemic, the ATO rejected many JobKeeper applications because of poor payroll record keeping. Employees who couldn’t provide the necessary documentations by the cut off date were not eligible.

3. Incomplete Turnover Records 

Even today, some businesses fail to keep adequate records of their sales. Many businesses who sell goods in the open market mostly use cash, keeping no record of sales.

While these businesses may not be registered for GST, adequate records are still necessary for tax returns. Even if we’re just looking to reconstruct the turnover for the current testing period, the turnover test requires us to go back 12 months, which is almost impossible without any evidence.

Although the JobKeeper and Cashflow Boost schemes have ended, the Australian government still continues to have a multitude of support schemes available for small businesses. This is why it is essential for businesses to continually uphold compliance practices. It doesn’t cost you much to adhere to these compliance practices now but these simple task can have a large impact on your eligibility for government support and entitlements in a time when you really need the aid.

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Five Ways to Effectively Manage a Business Grant

Author: Harry Hoang

During the pandemic, after putting in efforts and time to prepare for your JobKeeper or Cashflow Boost grant application, there is nothing better than receiving the news that your work has paid off; your business got the grant!

Before you can celebrate the great news, you need to make sure you are prepared to use the money well. Government grant is an essential part of every small and medium sized businesses, but effective grant management is a skill that takes time to develop. Economic support packages are managed and audited by ATO. However, there are millions of dollars were provided to businesses without any check & balancing process in place from both Government and business sides. In some cases, acquittals of government funding are relying on manual process or external audit parties.

In this article, we share some tips to manage the grant money efficiently and discuss why businesses owners need to understand the importance of an efficient and transparent grant management solution.

Understand your responsibilities

  • Do not assume that the Government is giving away money means that you can do whatever you like with the cash. You should check the grant funding terms & conditions that you have agreed to make sure you have a sufficient level of diligent financial record-keeping process to comply with the terms & conditions, when it comes to audit time.
  • Do not confuse purposes & objectives of one relief program with those of another grant. Each of the economic support programs has its distinctive purpose to aid your business. Make sure that you don’t try to be too creative with free money.

Treat your grant as a project

We strongly suggest that you treat each government funded programs you receive as a project. You should do a budget scoping before submitting your plan and budget projection to request for funding. It is important that you implement the proposed scope & budget to your financial system to monitor the progress closely during the grant period.

You should not wait to start working on acquittal until the deadline is approaching. Planning weeks earlier and collecting data as you go with a financial system that can provides your acquittal data in one click.

Engage with your stakeholders

You should communicate with your staff and suppliers who are working under grant-related projects so they are aware of their own budget limits and obligations. This to avoid overspending and human-made errors in your accounts. The most common mistakes that we have encountered in managing Government funding are caused unintentionally, however in the time of difficult economic conditions, it is in your best interest to prevent such mistakes to occur.

Pay attention to the advice from your auditor

Some of the current Government funding programs do not require financial statement audits so most organisations can get their accounts reviewed by a CPA/CA practitioner. However, we strongly believe that the value of auditing/accounts review is beyond compliance. Business owners should pay attention to the recommendations from auditors. You can improve your accounting practice, enabling a good business profile with the ATO in the future.

Implement an automated financial system

Financial data automation and security should be the top priorities for funding recipients. Implementing a more automated accounting process with higher security is the best preventive way to avoid frauds. Businesses are using automated system such as:

  • Receipt Bank for bills management;
  • Xero for bookkeeping, bank feeds, reconciliations and batch payments;
  • ApprovalMax for approval automation of accounts payable and accounts receivable;
  • LastTick - Our own banking audit tool to match financial data (BSB, account number, account name) before seeking online banking authorisation from our clients when processing payments on their behalf.

If you are interested in a business grant management solution such as R&D, EMDG or other business relief grants, please contact Tailored Accounts for a chat with our experts.

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