EOFY warning from the Australian Taxation Office on small business deducations for home offices, income from COVID payments, “side hustles”

The ATO is also keen to remind businesses that most government payments or financial support received as a result of COVID-19 need to be included as taxable income, whereas some others are exempt and should not be included. This includes JobKeeper payments, state government voucher subsidies and grants to support the creative economy.

“It may be tempting to over-claim a deduction for your business, but it’s not worth the risk.”

Andrew Watson, ATO Assistant Commissioner

Watson also warned businesses to declare extra income, saying that most often the ATO was already aware of these additional payments to businesses, particularly through federal government COVID payments.

“Almost half of the 1.9 million sole traders also have non-business income, like salary and wages or income from investments, so make sure to double-check you’ve included it all before you lodge. Don’t fall into the trap of leaving out non-business income thinking we won’t notice.”

“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.”

Watson said the ATO had a range of online guides and services to help business understand their tax obligations, particularly for sole traders who sometimes prefer to take a “DIY” approach to organising their tax returns.

It particularly cautioned sole traders in the building and construction sectors, as well as people working in the cleaning, courier, information technology, road freight, security and investigations or surveillance industries that the ATO regularly already had the data on their income.

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