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If you or your business need help with your financial arrangements during this difficult time, we can help you to work out which of the many coronavirus (COVID-19) related payments, concessions and arrangements apply to you, and how you can best make use of them. Contact us today.
Treasury revises down estimated JobKeeper cost by $60 billion
The ATO and Treasury have released a joint statement advising that the previous estimate of the number of employers who would access the JobKeeper program was significantly overstated. Treasury now estimates the number of employees covered under the JobKeeper program to be around 3.5 million (down from a previous estimate of 6.5 million). The estimated cost of JobKeeper has been revised down to around $70 billion (from the original $130 billion estimate).
The overstatement has been attributed to errors made when employers applied for JobKeeper. For example, when estimating their eligibility over 500 businesses with only a single eligible employee actually reported the dollar amount that they expected to receive per fortnightly JobKeeper payment (1,500) instead of the number of their eligible employees (1).
Importantly, this error has no consequences for JobKeeper payments already made, as payments under the scheme depend on the subsequent declaration that businesses make in relation to each and every eligible employee. This declaration does not involve estimates and requires an employer to provide the Tax File Number (TFN) for each eligible employee.
Tip: Employers must declare their eligible employees monthly in order to receive the ongoing payments. JobKeeper declarations for May must be made by 14 June 2020.
Snapshot of Federal COVID-19 pandemic measures
Tax-related business measures
- Cash flow boost payments: Tax-free payments of up to $100,000 are available for eligible small and medium sized entities and not-for-profits (including charities) that employ people, with a minimum payment of $20,000.
- Instant asset write-off: From 12 March to 30 June 2020, the threshold increases to $150,000 for business entities with aggregated annual turnover of less than $50 million.
- Accelerated depreciation: Businesses with aggregated turnover of less than $500 million can deduct capital allowances for depreciating assets at an accelerated rate. This measure extends over the 2019–2020 and 2020–2021 income years.
- Research and Development (R&D) Tax Incentive: The Government has deferred the lodgment dates for R&D Tax Incentive applications for 2018–2019 until 30 September 2020.
- Superannuation early release: Eligible people affected by COVID-19 can apply to release (tax-free) up to $10,000 of their superannuation in 2019–2020 and up to $10,000 in 2020–2021.
- Temporary residents: Certain temporary residents impacted by COVID-19 may apply for early release of up to $10,000 of their super by 30 June 2020.
- Super pension drawdowns reduced: The minimum annual payment amounts for certain pensions and annuities have been temporarily reduced by 50% for 2019–2020 and 2020–2021.
Social security and support
- Fortnightly Coronavirus Supplement: This $550 supplement is available for six months for job seekers, sole traders, students and some others. It effectively doubles the current payment for new and existing social security recipients from 27 April 2020. It will be paid for six months to both existing and new recipients of the JobSeeker Payment, Sickness Allowance, Youth Allowance for jobseekers, Parenting Payment Partnered, Parenting Payment Single, Partner Allowance, Sickness Allowance and Farm Household Allowance.
- Stimulus payments for income support recipients: The first $750 cash stimulus payment has now gone out to 6.8 million eligible pensioners, carers, disability support pensioners, those on family tax benefits and concession card holders. A second $750 payment will be made from 13 July 2020 for eligible income recipients and concession card holders.
- Regional and sector support: The Government has set aside an initial $1 billion to support regions, communities and industries that have been disproportionately affected by the economic impacts of the pandemic, including those heavily reliant on industries such as tourism, agriculture and education.
- Deferring tax payments: Tax payment dates will be deferred by up to six months for tax amounts due through the BAS. This includes PAYG instalments, income tax assessments, FBT assessments and excise.
- Varying PAYG instalments: The ATO has allowed businesses to vary their PAYG instalment amounts to zero for the March 2020 quarter. Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made during the 2019–2020 financial year.
- ATO automatic lodgment deferrals: Company 2018–2019 income tax returns are now due by 5 June 2020 and SMSF 2018–2019 annual returns by 30 June 2020. For individuals, partnerships and trusts, 2018–2019 income tax returns can be lodged by the 5 June 2020 concessional due date. Finally, the due date for 2019–2020 FBT annual returns has been deferred to 25 June 2020.
- Working from home deductions: The ATO will accept tax deduction claims using a flat rate of 80c per hour, provided a diary of working hours is kept.
- FBT: If entities provide or pay for goods or services to assist employees who are sick or are at risk of becoming sick with COVID-19, this will generally be exempt from FBT if the benefit is provided for their immediate relief.
- Switching to monthly GST reporting: Businesses on a quarterly reporting cycle can elect to switch their GST reporting and payment to a monthly cycle to get a quicker GST refund.
- Bank loan deferrals: Banks will defer loan repayments for six months for small businesses with total business loan facilities up to $10 million who need assistance because of COVID-19.
- Bank assistance for JobKeeper: The major banks have agreed to set up a dedicated hotline for customers needing to access bridging finance to pay their staff ahead of receiving money under the JobKeeper program. The banks have also agreed to expedite the processing of those JobKeeper applications.
Tip: The ATO has a range of regularly updated webpages that provide answers to common COVID-19 support questions, including on:
- JobKeeper for employers, and for employees;
- income tax impacts for people who work and earn money overseas but have returned to Australia because of COVID-19; and
- tax considerations and other financial impacts for residential rental property owners, including rent and loan payment changes, and personal use of short-term accommodation like holiday houses.
JobKeeper: measuring decline in turnover
Businesses (including sole traders and charities) must have suffered a “substantial decline” in turnover to qualify for the JobKeeper Payment of $1,500 per eligible employee. The basic decline in turnover test requires an entity to measure its projected GST turnover for a turnover test period in 2020 and compare this to the current GST turnover for a relevant comparison period in 2019. In particular, the entity needs to allocate supplies made, or likely to be made, to a turnover test period or relevant comparison period based on when the supply is made or is likely to be made, and to then determine the value of those supplies. Any shortfall is to be expressed as a percentage. If this equals or exceeds specified thresholds, the entity satisfies the decline in turnover test.
The ATO has recently issued Law Companion Ruling LCR 2020/1, a non-binding ruling that explains various aspects of the test and sets out practical compliance approaches for calculating turnover.
STP exemption for small employers extended to July 2021
The ATO has extended the Single Touch Payroll (STP) exemption for small employers in relation to closely held payees from 1 July 2020 to 1 July 2021 in response to COVID-19.
tip: A “small employer” is one that has 19 or fewer employees, and a “closely held payee” is someone who is directly related to the business, company or trust that pays them, such as family members of a family business, directors or shareholders of a company or beneficiaries of a trust.
This STP exemption for closely held payees applies automatically and small employers do not need to apply to the ATO to access it. However, employers should keep records to support their decision to apply the concession.
Processing of super early releases resumes with extra risk filters
Processing of COVID-19 early release of superannuation applications has now resumed, with the ATO adding extra risk filters for all files that are delivered to super funds. These release requests had been temporarily paused between 8 May and 11 May 2020 so that the ATO could consider enhancements to its systems to help protect individuals’ personal data.
Assistant Treasurer Michael Sukkar recently reported that the ATO had identified a small number of third parties who could be susceptible to new techniques that criminals are using to try to steal personal data. The ATO has now worked with these third parties to help them make security enhancements, Mr Sukkar said, and the resulting additional risk filters will be applied on all files before they are delivered to super funds.
Tip: You should always be vigilant about how you store and share your personal information. Your myGov login details should never be shared with anyone, and you should be wary of phone calls, emails or text messages that request personal information. The ATO will never send you a direct link to log on to MyGov or other ATO online services.
Directors’ duties still apply despite COVID-19 relief
The Australian Securities and Investments Commission (ASIC) has reminded companies, directors and officers faced with COVID-19 challenges to reflect on their fundamental duties to act with due care, skill and diligence, and to act in the best interests of the company.
ASIC Commissioner John Price has said the impacts of COVID-19 will require many companies to focus on and, most likely, recalibrate aspects of their corporate strategy, risk-management framework, and funding and capital management, among other things. This will require directors to reflect on which stakeholders’ interests need to be factored into decisions – including employees, investors and creditors. This is still the case even in areas where temporary relief has been provided from specific obligations under the law.
ASIC will maintain its enforcement activities and continue to investigate and take action where the public interest warrants it. Whether action is taken depends on the assessment of all relevant circumstances, including what a director or officer could reasonably have foreseen at the time of taking relevant decisions or incurring debts.
Year end tips for business owners
Review fixed assets useful life and determines if there are any benefits in scrapping or trading in assets.
Stocktake and write off obsolete inventory
The year-end stock-take should involve a review of all inventories. Obsolete stock may be scrapped or valued below cost subject to specific guidelines.
Small business CGT concessions
Individuals and Entities operating a small business may be eligible for CGT concessions on the sale of business assets.
Capital expenditure vs repairs
Review all spending during the year to determine if all items are deductible or if they are capital by nature and need to be depreciated.
Benchmarks for specific industries have been developed by the ATO to identify taxpayers who report income or expenses different to similar businesses.
Businesses should be aware of any ATO changes that have occurred throughout the year as penalties can apply for those businesses who fail to be compliant.
Quarterly Super contributions
The super guarantee rate is 9.5%.
The super guarantee (SG) requires employers to provide sufficient super support for their employees. For the quarter period of 1 April to 30 June, SG contributions must be paid by 28 July. To qualify for a tax deduction in the 2019-20 financial year, contributions must be paid by the quarterly due date.
You can make voluntary employer contributions of more than the required amount to increase benefits.
Write off bad debts before year end. It must be bad, not merely doubtful and must have been previously included as assessable income.
Review unpaid expenses
Businesses who are falling behind in their rent and other expenses that work on an accruals basis may claim the arrears amount as a tax deduction.
Trustees of discretionary trusts must make and document resolutions before 30 June 2019 about how trust income will be distributed among the beneficiaries. If you have not already done so, setting up an interim financial statement can assist with distributing trust funds.
Higher instant asset write-off threshold for small business extended
|Eligible businesses||Date range for when asset first used or installed ready for use||Threshold|
|Less than $500 million aggregated turnover||12 March 2020 to 30 June 2020||$150,000|
|Less than $50 million aggregated turnover||7.30pm (AEDT) on 2 April 2019 to 11 March 2020||$30,000|
Tax Tips for Property investors
Owning an investment property can provide great benefits, including additional income and entitlement to tax deductions.
Now is the time for property investors to take advantage of the tax strategies available to them this 2019-20 financial year.
In order to maximise your tax bill this financial year, bring forward any maintenance expenditure that will need to be completed by 30 June. Ensure to distinguish between what the ATO considers a ‘repair’ and an ‘improvement’,as improvements are non-deductible.
Prepay interest on property investment loans if you have adequate cash flow in order to claim an immediate deduction.
Investors may choose to pay interest in advance in order to simplify finances by making one prepayment of interest upfront or protect against possible interest rate rises over the 12 month period.
Investors must maintain a sufficient filing system to substantiate any claims made. The ATO requires you to keep up-to-date records of things such as proof of earned rental income, all incurred expenses, periods of private use by you or your friends, periods the property was used as your main residence, loan documents
and efforts to rent out the property.
A depreciation schedule can be provided by a qualified quantity surveyor, outlining the tax deductions that are available and help to provide a significant return. The
cost of a depreciation schedule is also tax deductible.
Complying Fund 15% Non-complying fund 45%
2019-2020 $25,000 each year (regardless of age)
From 1 July 2017, the amount you can contribute to your super from your after-tax income without paying extra tax is $100,000 each year. This is called your non-concessional contributions cap. However, if your total super balance is $1.6 million or more as at 30th June or thereafter your cap is nil.
Pension $1.6 million transfer balance cap
The total amount of accumulated superannuation an individual can transfer into retirement phase (where earnings on assets are tax-exempt) is capped at $1.6 million from 1 July 2017.
Deducting personal contributions
All individuals up to age 75 will be able to deduct personal superannuation contributions, regardless of their employment circumstances. Of course, such deductible contributions would still effectively be limited by the concessional contributions cap of $25,000.
Those aged 65 to 74 will still need to meet the work test in order to be eligible to make a contribution and claim a tax deduction.
Allowing catch-up concessional superannuation contributions
Individuals with superannuation balances of less than $500,000 will be able to access their unused concessional contributions cap space to make additional concessional (before-tax) contributions.
Individuals will be able to access their unused concessional contributions cap space on a rolling basis for a period of 5 years. Amounts carried forward that have not been used after 5 years will expire. Only unused amounts accrued from 1 July 2018 can be carried forward.
Please contact John Phillips email@example.com or Vikram Jain firstname.lastname@example.org via email or phone 03 86138100 should you need any clarification in relation to the issues discussed in the above newsletter