Small business tax help

As part of the Government’s attempt to reduce the impact of the global financial situation on Australia, they announced some cashflow relief for small businesses. It was announced in December but applies to payments due, in the main, at the end of February (or late January for some.)

In short, if you have a PAYG installment due for the October to December quarter, you only have to pay 80% of the amount requested by the ATO.

However, it is very important to note that the 20% discount only applies to payments due now – the actual amount of tax you need to pay for the year is not being reduced. If you pay less now, you will have to pay the remaining 20% as part of your annual tax return.

So in choosing whether or not to take the discount this month, remember

• it is 20% off your Oct-Dec quarter IAS/BAS
• it is not a tax cut so you will have to pay it eventually
• it may help your cashflow

If you are very organised and will not overspend, you could take the discount and keep the 20% earning interest or paying off loans. If there is a risk you will forget to put aside money for a larger tax bill later this year, consider carefully before taking up this opportunity.

What do you think – are you likely to take up this offer? Do you need help with your cash flow at this time of year?

P.S. Your business must turnover less than $2million p.a. to qualify for the reduction. And you have a couple of extra days to pay, too – it is due on 28 February but as that is a weekend, you have until 2 March.