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.