Before you claim a tax loss for your business, you must ensure that you have correctly claimed the expenses to which you are entitled. If you overclaim expenses, your business can be put into an incorrect tax loss situation, which can make things complicated.

Generally, a business can make a tax loss when the amount spent on expenses outweighs the income.

If you make a tax loss, you may be able to:

• Claim it in the current year,
• Carry it forward or
• Carry it back

Before you claim a tax loss, check that you’ve correctly:

• Accounted for all of your business income
• Claimed expenses, such as cost of goods sold, motor vehicle and ‘all other’ expenses
• Apportioned expenses that have been a mix of business and private use
• Applied your loss to the right year

You also do not want to forget that:

• A capital loss is different to a tax loss – it can only be offset against future capital gains but not income
• If you’re claiming a tax loss from a previous year and your business is a company, you may need to meet requirements such as the ‘similar business test’
• Accurate and up to date records will help you better calculate your income and expenses.It can also help you to avoid incorrectly carrying back a tax loss or carrying forward tax losses to deduct in future years.

If you are a sole trader or an individual partner in a partnership (who meets certain conditions), you may be able to offset current-year losses

If you’re an eligible corporate entity (company, corporate limited partnership or public trading trust), you may be able to claim the loss carry-back tax offset. You can check your eligibility for this tax offset using the ATO’s loss carry-back offset tool, or by consulting with us.

Remember, registered tax and BAS agents like us are equipped to help you with your tax concerns as we approach the best time of year to start planning the next year for your business.

Your tax file number (TFN) is an essential piece of information in your possession and should be a constant companion throughout your life. However, there are times when a TFN is misplaced or forgotten. What are you supposed to do?

If you forget your TFN or lose it, this can be a major issue. A TFN can be used for opening bank accounts, tracking super savings, applying for government benefits, and is required to give to higher education providers (for HECS/HELP loans). It’s also required if you begin new employment, as you have 28 days to provide your new employer with your TFN before they start withholding tax from your pay at the maximum rate.

What Can You Do? 

Your first avenue of inquiry, if you use the services of a tax agent or accountant, will be to ask them for your tax file number, as you will have previously provided it to them. If not, however, you can call the Australian Taxation Office (ATO) to find out what you can do to get your TFN.

The ATO will need to make certain you are who you say you are and that you’re the correct person with whom to be discussing your tax affairs (identity theft can and does occur) – so be ready to answer a few identifying questions.

You may also (if you haven’t done so already) be invited to record a short “voiceprint”, which is another layer of security that can identify you the next time you call.

Another option is to fill in a form provided by the ATO to apply for or inquire about a TFN. But as the ATO will only process the paperwork it provides taxpayers, you will need to order an actual paper form.

Check The Document Trail

Before you grab the phone to track down your lost TFN, you should check other places that it may have been entered into.

You might want to rifle through your paperwork and check the following, as your TFN should be on them:

• your income tax “notice of assessment” for a previous year
• any correspondence sent to you from the ATO
• a payment summary from your employer
• an account statement from your superannuation fund.

Have you recently purchased life insurance?

The type of cover, deductibility of premiums and treatment of claims make life insurance a complex topic for tax. It’s a topic that individuals and businesses alike seek assistance from accountants.

The deductibility of premiums and treatment of claims payouts can be a complex, nuanced topic. The opportunities and traps hidden in those complexities are significantly amplified for professionals with higher incomes and greater-than-average wealth.

For professionals who want to structure their life insurance to optimise the balance between cash flow, tax treatment and robust protection, here’s a high-level look at the issues.

Tax Considerations – Cover Outside Super

While premiums for death, TPD (total or partial disability) and trauma cover are not tax-deductible outside of superannuation, premiums for income protection and business expenses protection are.

On the flip side of that, claims payments from death, TPD and trauma policies are entirely tax-free, regardless of whom they are paid to, while income protection and business expense benefits are classed as income and need to be declared (business expenses payments would naturally offset the actual expenses they are intended to cover).

Special Tax Treatment Of Policies Held For Business Purposes

Some tax concessions are available to life insurance policies held for business purposes, including buy/sell agreements and those covering revenue lost in the event of the death or disablement of a key person.

In such cases, policies are generally held by the business with premiums tax-deductible to the business. However, claim payments are generally regarded as income or a capital gain, depending on the purpose of the cover, and therefore subject to appropriate tax. FBT can also apply where a business pays ownership protection premiums on behalf of individual owners.

Tax On Life Claims Paid Through Super

Death benefits paid through super are generally tax-free if paid to a dependent (a term strictly defined under the law). Benefits paid to non-dependents may include a tax-free component but are likely to be subject to tax on at least some of the balance. Depending on the circumstances, the applicable rate will either be 15 or 30 per cent.

With TPD lump sum benefits, a portion is likely to be assessed as tax-free, depending on the member’s eligible service period. The remainder is subject to a tax rate that varies according to the member’s age.

Other tax-optimisation strategies include taking benefits as an income stream to qualify for tax offsets, maximising the uplift in the tax-free portion of the benefit, and washing out taxable components.

For more information about tax and life insurance, consultation with a tax professional (like us) is advised. This can be a very complicated topic to discern, with many intricacies that you may require assistance with.

Australians can experience a range of natural disasters, such as floods, bushfires, tropical cyclones, severe storms and even earthquakes. These events can cause devastation to communities and financial hardship for individuals and businesses.

While FBT may not be at the forefront of your mind when helping your employees after an emergency, it can result in potential exemptions depending on the assistance provided.

It is worthwhile to know what kinds of benefits you, as a business owner, can provide for different emergencies that will be excluded from FBT. Businesses that provide benefits to employees during an emergency situation are likely to have assistance costs be exempt from fringe benefits tax (FBT).

Exemptions will apply to benefits you provide to employees who are being impacted by or will be potentially impacted by:

• A natural disaster such as a bushfire, flood or cyclone.
• An accident such as a car accident.
• A serious illness such as cancer.
• An armed conflict such as a war.
• A civil disturbance such as a riot.

The benefits you provide to your employees that can be exempt from FBT include health care, temporary repairs or emergency needs such as food supplies, clothing, accommodation, transport or household goods. These can be of great use to employees looking to get back on their feet.

Short-term benefits you provide to an employee, such as temporary repairs to damaged property due to a natural disaster, are exempt from FBT. However, long-term employee benefits after an emergency event will not be exempt, such as a replacement car, new house or ongoing renovations.

When providing health care, certain requirements must be followed. FBT exemptions only apply to health care provided:

• For an employee of yours or from a related company.
• On your premises or the premises of a related company
• By a company doctor at an accident site.
• At or near an employee’s worksite.

If you decide to pay for your employee’s ongoing medical or hospital bills, then the FBT exemption will not apply.

The benefits costs would be deductible to the employer but not assessable to the employee and will not appear as part of their salary and wages on their payment summary.

These benefits can be of use to not only the individual employees but to your business as well. Regarding FBT, exempt benefits can be a great way to lower the tax bill. They also provide a way to assist your employees during times of great hardship.

However, to ensure you’re maximising your FBT benefits potential, consult with a registered tax agent or adviser for the right information and assistance in handling these matters.

In spite of the many challenges that have faced many industries across the country during COVID-19’s persistence and ongoing effects, the retail industry through their continued, adapted operations has continued to progress.

As a result, retail workers across many stores may find that the taxable income from their work may have been affected by the changed situation. This may be a result of additional income, less income, or stagnation of their taxable income as a result of stand-downs, business closures or a forced pause in their operations.

No matter the situation though, retail workers will still need to ensure that all of their taxable income has been accurately reported and lodged in their tax returns.

If you are a retail worker earning your income or have earned your income in the industry over the course of the previous year, you will need to know:

• What income and allowances you may need to report
• What can and cannot be claimed as a work-related deduction
• What the records are that you may need to keep track of

This information may be applicable to income earned in the 2020-21 financial year, or to income earned over the next year.

Income and Allowances That You May Need To Report

On the 30th of June, you should have received an income statement or payment salary that shows what you have earned as a retail worker throughout the year. This should include your salary, wages or allowances for that income year.

You should include all of the income that you received during the year in your tax return, regardless of when you earn it.  This may include:

• Any salary or wages that you may have earned as income.
• Any bonuses that may have been earned during the year.
• Any allowances that you may have received to compensate for an aspect of your work or to help to pay for certain expenses when you have travelled for work.

Allowances can also be if an employer pays you based on an estimated amount of what you might spend (e.g. paying cents per kilometre if you use your car for work). It may also be for the actual amount spent on the expense before or after the expense is incurred.

You may receive allowances

• For work that may be unpleasant, special or dangerous
• In recognition of holding special skills, such as a first-aid certificate or
• To compensate for industry peculiarities, such as work on public holidays.

Your employer may not include some allowances on your income statement or payment summary but may include them on your payslips. These can include travel allowances or overtime meal allowances (as paid per industrial law, award or agreement).

If that allowance isn’t on your income statement or payment summary and you spend the entire amount on deductible expenses, it should not be included in the tax return as income or claimed as a deduction. If you spent more than what was your allowance, you include the allowance as income in your tax return and can claim a deduction for your expense.

If your employer pays for the expenses that you occur exactly, that payment is considered a reimbursement. This is not included or considered to be an allowance, and as such, cannot be included as income in your tax return or claimed for a deduction.

Deductions That You May Be Able To Claim

If you are a retail worker looking for claimable deductions that may specifically apply to your profession, you need to:

• Have spent the money, and were not reimbursed for the work-related expense
• Have proof that the expense directly relates to earning your income
• Have a record that proves the expense was incurred (a receipt is usually acceptable).

You can only claim a deduction for the work-related portion of an expense. You can’t claim a deduction for any part of an expense that is not directly related to earning your income or that is private.

Some of the deductions that may be eligible as deductions for retail workers include:

• • Car expenses – if you drive between separate jobs on the same day, or drive to and from an alternate workplace for the same employee on the same day.
  • Clothing expenses – the cost of buying, hiring, mending or cleaning certain uniforms that are unique and distinctive to your job, or protective clothing that your employer requires you to wear.

• Meal expenses – the cost of overtime meals on the occasions where you worked overtime and took an overtime meal break and your employer paid you an overtime meal allowance.

• Self-education expenses – if your course relates directly to your current job.

• Seminars and conferences

• Technical or professional publications

• Union and professional association fees

• Phone and internet usage if your employer needs you to use your personal devices for work.

Record-Keeping Tips

Always keep proof of any expenses that you may have incurred for which you want to claim deductions. This is usually a receipt but can be another form of written evidence (such as an invoice). Those records must show what you purchased, when, where, and how much you spent. They must be in English

There are a few exceptions to the rule. These include small expense receipts, hard to get receipts, overtime meal expense receipts and travel and meal expense receipts. These have special rules and conditions that you need to follow if attempting to claim on these.

If you would like further assistance or information on how you can handle your tax return as a retail worker for this current financial year or for last year’s return, you can speak with us. We can assist you in the process, and make sure that your tax return is lodged correctly.