Business making a COVID-19 loss? Claim a deduction, ATO says

The ATO has issued a public service announcement to businesses struggling with the economic downturn, reminding companies they can claim deductions for losses incurred during the pandemic.

Australian Taxation Office (ATO) assistant commissioner Andrew Watson says those doing it tough in 2019-20 and 2020-21 might be booking a loss for the first time, and that tax deductions are available for those that are struggling.

“If you’re feeling overwhelmed or getting behind with your tax, let us know as early as possible so we can work with you to find a solution,” Watson said in a statement.

“No matter what your situation is, it’s never too late to ask for help.

“If you find yourself in this boat, you may be able to claim a deduction for the loss.

“It’s crucial that you keep proper records to ensure you can claim the deduction you’re entitled to.”

Under tax laws, companies that make a tax loss in a given year can generally carry forward that loss, as long as they claim a deduction for their business in a future year.

Sole traders and those operating under a partnership structure can offset current year losses against other assessable income such as salary or investments, subject to some conditions, the ATO says.

“You’ll 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,” Watson said.

The tax office has also decided not to apply penalties or interest for excessive variations on pay as you go (PAYG) installments for businesses finding it difficult to estimate their costs during the pandemic.

Elsewhere, the ATO has extended an arrangement where it is not taking compliance action against businesses selling takeaway alcoholic beverages under relaxed liquor licensing requirements across most states and territories.

These rules have been allowing restaurants, hotels, pubs and other hospitality venues to sell alcohol on a takeaway basis during the pandemic, and the ATO has pledged to forgo pursuing excises on manufacturer licenses and duties related to these sales.

These arrangements, first outlined in March, have now been extended until January 2021, meaning those selling repacked duty-paid kegged beer for takeaway sale in sealed containers, and those selling duty-paid beverages to make cocktails in sealed containers, will not be chased by the ATO.

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