As we adjust to ‘living with COVID’ the ATO has signalled that its position on not pursuing business tax debts will return to debt collection and offsetting tax debts against refunds.

If you have a tax debt that has been on-hold, expect the ATO to offset any refunds against this debt, and take steps to actively pursue the payment of the debt. 

Small business account for around two thirds of the total debt owed to the ATO. If you have a tax debt, it is important that you engage with the ATO to work out how this debt will be paid.

A list of items that the ATO will be paying particularly close attention to in processing small business returns this year has been published on the ATO website including:

• The claiming of deductions for expenses that are private in nature and not related to business income, as well as over-claiming of business expenses (especially for taxpayers running a home-based business).
• Omission of business income, for example income from the sharing economy or new business ventures. The key point with this item is that small businesses should include all income in their income tax return, including cash, coupons, EFTPOS, online, credit or debit card transactions, and income from platforms such as PayPal, WeChat or Alipay.
• Government payments or financial support received as a result of COVID-19 will normally need to be included as assessable income unless a specific exemption applies. Not all state and territory government payments that relate to COVID-19 qualify for tax-free treatment.
• Like all taxpayers, those running a business need to ensure that they gather and retain appropriate records to substantiate claims that will be made.