What’s on the 2021 Tax Horizon for Businesses?

At the beginning of lockdown and COVID-19 trading restrictions, Chartered Accountants identified 10 business and tax impacts that would significantly affect business conditions.

“Coronavirus is proving a particularly difficult challenge for many Australian businesses given lingering uncertainty on the duration and extent of the outbreak,” says Michael Croker, Australian Tax Leader at Chartered Accountants ANZ.

A number of specific issues for Australian business owners to consider during this time included:

  • Workforce
  • Managing a downturn
  • Supply chain
  • Travel restrictions
  • Online strategy
  • Compensation receipts
  • Financing commitments
  • PAYG instalment (PAYG-I) variations
  • Tax payment problems
  • Government support

Government Response

The federal government’s economic response to the pandemic included:

  • Temporary tax measures to support business investment e.g. increasing and extending the instant asset write-off, accelerating depreciation deductions,
    immediate expensing of assets and the ATO providing administrative relief.
  • Cash flow assistance for employers, including boosting cash flow for employers and apprentice and trainee wage subsidies.
  • Assistance for severely affected regions and communities.

Some assistance has also been provided by state governments in the form of payroll tax concessions, and limited access to small business grants for identified industries and regions in most need.

Business planning in an uncertain environment

With the end of Jobkeeper approaching for those businesses still meeting eligibility criteria, and other tax concessions being phased out, business owners need to look beyond March.

The COVID-19 crisis has provided some indirect beneficial outcomes. It has in many ways been a catalyst for businesses to more closely examine how they operate, who they transact with, and the efficiency and profitability of their businesses.

There has been a greater focus on planning, strategy, active management of production and sales, sales and marketing and re-imagining of business. While cash flow is always key, business resilience will have as much to do with recovering after COVID-19 as it has in how businesses manage temporary setbacks.

For businesses that have not or will not adapt, the end of concessions and cash flow lifelines may be terminal.

The greater the level of control we have over our environment and our business processes, the greater control we have over outcomes such as profit, improved cash flow and a stable workforce. Many would argue that we are still operating in an environment that we can’t control.

Fear created by uncertainty, limits our ability to plan for the future. Many of the ten issues identified earlier can’t be controlled.

What we can do is understand the “new rules” for the business and the compliance environment we operate in, and control our responses. By understanding the new rules, we can decide with greater clarity the directions and strategy our business will take. We can be more purposeful in our decisions and actions.

However, we are still faced with uncertainty regarding the taxation environment. The taxation environment and the level and accessibility of government subsidies or assistance during the next phase of the pandemic may decide whether business can return to a normal healthy position. Until announcements are made as to what the tax and stimulus measures will be, a lot of decisions will be deferred.

How can we know what is on the tax horizon for 2021?

The speed at which policy and legislation was determined at the height of the pandemic in March and April 2020 was exceptionally quick. Normally the formation of tax policy, legislation and administration takes time. Industry and professional associations such as Chartered Accountants ANZ are involved in this process and act as advocates for members, businesses, and taxpayers.

Join us at the March 10 SHBC business lunch, where Michael Croker from Chartered Accountants ANZ will provide an informative update on tax policy and matters on the horizon for 2021.

Michael is the Australian Tax Leader at Chartered Accountants ANZ, leading the team responsible for taxation policy and advocacy work with federal and state governments and regulatory bodies.

A Chartered Accountant, Michael is a member of the National Tax Liaison Group and numerous Treasury and ATO consultation forums.

About the author:

Paul Sweeney is a chartered accountant and found of Pretium Solutions Pty Ltd.

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