September 2020 Business Finance Update
Here are two stories you and your business will find interesting:
Tax relief is available, says ATO
Business loan interest rates plummet
Read more below.
ATO offers advice to businesses hit hard by COVID
Small businesses that are struggling due to COVID-19 may be entitled to tax relief, according to the Australian Taxation Office.
The ATO said businesses that make a loss in the 2019-20 and 2020-21 financial years may be able to claim a deduction for the loss – provided they have proper records.
“Sole traders and individual partners in a partnership who meet certain conditions can offset current year losses against other assessable income (such as salary or investment income) in the same income year. Otherwise, they can defer the loss or carry it forward and offset it to a future year when the business next makes a profit,” according to the ATO.
"Businesses that are set up under a company structure that have made a tax loss in a current year can generally carry forward that loss for as long as they want and claim a deduction for their business in a future year."
If you’re finding it hard right now to estimate income for pay-as-you-go instalments, the ATO said it “will not apply penalties or interest for excessive variations when you make your best attempt to estimate your end of year tax”.
The ATO said you will need to keep records for five years for most transactions – however, if you fully deduct a tax loss in a single income year, you only need to keep records for four years from that income year.
Click here to access information about claiming business losses. Click here to access ATO webinars about tax support.
Commercial property searches rise as interest rates fall
Businesses are searching for new premises in surprisingly large numbers, according to data from realcommercial.com.au.
The portal recently reported that both buy and lease searches in August were higher than the year before, despite coronavirus.
That included search increases of 23% for showrooms, 17% for warehouses, 11% for land and 7% for commercial farming. Other categories experienced a decrease in search volumes – 14% for hotel / leisure, 6% for retail, 5% for medical and 4% for offices.
At the same time, there has been a sharp fall in interest rates for businesses that want to buy property, land or equipment.
According to the Reserve Bank, between the end of February and the end of August, variable rates fell by:
0.80 percentage points for big businesses
0.70 - 0.75 percentage points for small and medium-sized businesses
During that time, the cash rate has fallen by only 0.50 percentage points.
Small businesses are charged interest rates about 3 percentage points higher than big businesses, because they’re seen as riskier borrowers.
If you have a small business, and you want to get a lower rate, you need to lower your risk profile. One way to do that would be to secure your loan against residential property (such as the owner’s home). Another way would be to provide a larger deposit.
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Disclaimer: The advice provided in this article is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. We encourage you to consult a finance professional before acting on any advice provided in this article or on this website.
