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Tax Losses & Business – How To Work Out Your Claim

Before you claim a tax loss for your business, you need to make sure that you have correctly claimed the expenses that you are entitled to. 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 meet 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.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier

David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

David and Alison Parker

Business Owner

Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

Carl Gillmore

Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier