Client Alert – June 2020

Do you or your business need help?

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

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.

ATO concessions

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.

Financial institutions

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.

Client Alert – May 2020

Do you or your business need help?

TIP: Specific rules are in place, and the ATO is on the lookout for contrived arrangements and schemes aimed at cheating eligibility criteria or artificially maximising payment amounts, like restructuring a business, changing the way workers are paid or increasing wages paid in a particular month.

Federal Budget night shifts to 6 October 2020

The Australian Government recently announced that this year’s Federal Budget will not be handed down until 6 October 2020. In making the announcement, Treasurer Josh Frydenberg said that this postponement is intended to “provide more time for the economic and fiscal impacts of the coronavirus, both in Australia and around the world, to be better understood”.

Since 1994, with a few exceptions, Australia’s Federal Budget has been handed down by the Treasurer on the second Tuesday in May. Exceptions were made in 1996, when an election and a change of government occurred in March and the Budget was handed down in August; in 2016, when the Budget was handed down on the first Tuesday in May because the government was considering calling call a double dissolution election; and most recently in 2019, when a Federal election was called for 18 May and the Budget was presented on 2 April.

Between 1901 and 1993 the Budget was presented in August, on the first Tuesday night of Parliament’s spring session.

Coronavirus cash flow boost payments explained

As of the second round of economic stimulus in response to the COVID-19 pandemic, the Australian Government has legislated a measure to boost cash flow for employers. However, small to medium employers who intend to claim the “cash flow boost payment” in the hope of receiving an injection of cash should beware. The “payment” is not actually a payment, but a credit that will be offset against the liabilities that appear on the business activity statement (BAS) and any debits in your running balance account (RBA). While this is still likely to support employment by reducing the amount some businesses have to pay to the ATO, anyone hoping to get a cash injection will be sorely disappointed.

Eligible employers will receive an offset equal to three times the amount of tax withheld from ordinary salary and wages as disclosed in the March monthly BAS, or equal to the amount of tax withheld from ordinary salary and wages for the quarter. Both are subject to a minimum of $10,000 and a maximum of $50,000. The payment is due on 28 April 2020 and other payments will follow later this year.

These cash flow boost payments are only available to entities that qualified as small or medium entities (i.e. with turnover less than $50 million) for the income year most recently assessed. There is also a withholding requirement – the payment will only be made to entities that first notify the ATO that they have a withholding obligation through the lodgement of a BAS or an instalment activity statement (IAS) for the period.

Understanding the JobKeeper Payment scheme

The JobKeeper Payment scheme is now open to eligible employers, sole traders and other entities to enable them to pay their eligible employees’ salary or wages of at least $1,500 each (before tax) per fortnight. You can enrol for the JobKeeper Payment through the ATO’s Business Portal, in ATO online services using myGov if you are a sole trader, or through a registered tax or BAS agent.

There are special rules that enable sole traders (entities that do not have employees as such) to obtain the JobKeeper Payment.

The JobKeeper Payment scheme commenced on 30 March and will finish on 27 September 2020, operating on a fortnightly basis. Employers and eligible recipients must qualify on a (rolling) fortnightly basis.

Decline in turnover

Businesses (including sole traders and charities) must have suffered a “substantial decline” in turnover due to the COVID-19 pandemic to be entitled to the payment of $1,500 for each eligible employee.

The decline in turnover test requires you to measure the business’s projected GST turnover and compare it to a “relevant comparison period”. To be eligible, the turnover must have declined by:

for ACNC-registered charities: 15%;
for entities with turnover less than $1 billion: 30%;
for entities with turnover greater than $1 billion: 50%.

Wage condition

Critically, it is a condition of entitlement that the business has paid salary and wages of at least the amount of $1,500 (before tax) to each relevant employee in the fortnight.

TIP: Employers and other eligible recipients that enrol by 31 May can claim for the fortnights in April and May if you meet all the requirements for each fortnight. This includes having paid employees by the appropriate dates. For the first two fortnights the ATO will accept that the minimum payment has been paid even if it occurred late, provided it was paid by the end of April.

Employee conditions

An individual must be employed during a JobKeeper fortnight to be eligible for that fortnight (but does not need to be employed for the full fortnight). In addition, they must, as at 1 March 2020, be aged 16 or over, be an employee or a long-term casual employee (12 months of regular and systematic employment) and be an Australia resident for tax purposes.

The 1 March date is important, as it allows employees who were retrenched after that date but then subsequently rehired to be eligible for the JobKeeper Payment. However, if an employee was only engaged after 1 March, they are not eligible.

Eligible employees must have provided a notice to their employer agreeing:

to be nominated by the employer as an eligible employee of that employer under the JobKeeper scheme;
that they have not agreed to be nominated by another employer; and
that (if employed as a casual employee) they do not have permanent employment with another employer.

An eligible employee who is employed by one or more qualifying employers will need to choose one employer that will receive the JobKeeper Payments.

Once an employee has nominated an employer, the employer has received JobKeeper Payments and has paid the employee, the employee cannot nominate a different employer. This includes where the employment relationship ends (although the ex-employee may then be eligible for the separate JobSeeker Payment).

Payment

The government will pay the JobKeeper Payment within 14 days of the end of the calendar month in which the fortnight ends. This means that the first JobKeeper Payment will not be made until (at least) the first week of May.

ATO opens applications for early release of super

The ATO has released its application form for the early release of superannuation by individuals impacted by COVID-19. From 20 April, an individual can make one application to access up to $10,000 of their super (tax-free) in the 2019–2020 financial year, and a second application for up to $10,000 in the 2020–2021 year until 24 September 2020.

TIP: The ATO has run a social media campaign asking people to observe the intention of the legislation and only apply to release their super to deal with the adverse economic effects of COVID-19. You should not withdraw your super early and recontribute it to gain a personal tax deduction.

If you are eligible, you should carefully check your super account balances to ensure there are sufficient funds available to claim. If you make an application and the fund has insufficient money to fulfil the application, you will not be able to make a second application for the balance from another fund/account in that financial year or ask for an amount above the $10,000 cap in the 2020–2021 financial year.

It takes one to two business days for super funds to receive notifications directly from the ATO about their members. The government then expects funds to process the payments and release the amounts to individuals “as soon as possible”.

If your application is rejected by the ATO, you will be notified via your MyGov account in two to three days.

Separate arrangements apply for applications by members of self-managed super funds (SMSFs). The ATO will issue a determination to you as the fund member (instead of to the super fund) advising of your eligibility to release an amount. When the SMSF receives the determination from you, the SMSF trustee is then authorised to make the payment.

Client Alert – April 2020

Do you or your business need help?

ATO coronavirus administrative support

A series of administrative measures to assist businesses experiencing financial difficulty as a result of the COVID-19 pandemic has been announced by the ATO. These include deferring the payment date and amounts due on Business Activity Statements (BASs), income tax assessments, FBT assessments and excise by up to four months. Businesses will also be allowed to change payment and reporting cycles for GST and vary PAYG instalment amounts. Any interest or penalties applied to tax liabilities incurred after 23 January 2020 may be remitted.

The measures that will apply are similar to those for taxpayers affected by the recent Australian bushfires. However, one important point of difference is that while the bushfire measures applied automatically to particular geographical areas, assistance for those impacted by COVID-19 will not be automatically implemented. Taxpayers who have been affected will need to contact the ATO to discuss their situation in order to come up with a tailored support plan.

The ATO has also clarified that emergency accommodation, food, transport, medical or other assistance provided by employers to employees affected by COVID-19 may be exempt from FBT, depending on the circumstances. However, employers will still need to meet their ongoing super guarantee obligations for their employees. The ATO says that by law, it cannot vary the contribution due date or waive the superannuation guarantee charge where super guarantee payments are late or unpaid.

Coronavirus stimulus: what’s in it for you?

In an effort to combat the economic effects of the global coronavirus pandemic, on 12 March 2020 the Federal Government announced an economic stimulus package worth $17.6 billion, which it said is expected to provide direct support for up to 6.5 million individuals and 3.5 million businesses. The package includes business investment initiatives, cash flow assistance payments to small and medium entities (SMEs), household stimulus payments and support for impacted sectors, regions and communities, as well as tax administration relief.

Business initiatives

The instant asset write-off threshold will be increased from $30,000 to $150,000 and expanded to include access for businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020.

A time-limited 15-month investment incentive (through to 30 June 2021) will also be provided to support business investment by accelerating depreciation deductions.

Eligible small and medium entities will receive a Boost Cash Flow for Employers payment of up to $25,000.

The tax-free payment will provide cash flow support to businesses with a turnover of less than $50 million that employ staff between 1 January 2020 and 30 June 2020. Businesses will receive payments of 50% of their Business Activity Statement (BAS) or Instalment Activity Statement (IAS) from 28 April 2020, with refunds to be paid within 14 days.

Eligible small businesses employers can apply for a wage subsidy of 50% of an apprentice’s or trainee’s wage for up to nine months from 1 January 2020 to 30 September 2020. Where a small business is not able to retain an apprentice, the subsidy will be available to a new employer that employs that same apprentice.

Household stimulus for pensioners

A one-off $750 stimulus payment will be made to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Payments will be made from 31 March 2020 on a progressive basis, with over 90% of payments expected to be made by mid-April. This payment will be tax-free and not count as income for social security, farm household allowance and veteran payments.

TIP: In addition to this initial $750 stimulus payment, the Government announced on 22 March that a further $750 payment will be provided (as part of a secondary stimulus package) to social security and veteran income support recipients and eligible concession card holders. Payments of the secondary $750 amount will be made automatically from 13 July 2020.

There will be one payment per eligible recipient under the first stimulus package, and one payment under the second. If a person qualifies for either or both payments in multiple ways, they will still only receive each payment once (ie there will be a maximum of two $750 payments per eligible person).

Coronavirus stimulus: round 2

To further support businesses and workers in riding out the COVID-19 pandemic and minimise the impact on the overall economy, on 22 March 2020 the Federal Government announced a second round of stimulus measures in addition to the initial announced on 12 March. This second package includes support for individuals and households, including casual workers, sole traders, retirees and people who receive income support payments.

Business measures

Cash payments for small to medium employers

Tax-free payments of up to $100,000 (with a minimum payment of $20,000) will be available for eligible small and medium entities (SMEs) and not-for-profits that employ people and have an aggregated annual turnover under $50 million. Employers will receive a payment equal to 100% of the withholding tax liability on their salary and wages, subject to monetary limits. This payment will be available to most employers from 28 April 2020.

SME loan guarantee scheme

A Coronavirus SME Guarantee Scheme will be established to support SMEs in getting access to working capital. Under the scheme, the government will guarantee 50% of new loans issued by eligible lenders. The scheme is able to support $40 billion worth of lending to SMEs.

Personal measures

Increase in income support payments supplement

A new temporary “Coronavirus Supplement” of $550 per fortnight will be implemented for people receiving certain income support payments. Eligible recipients will receive the full amount of $550 on top of their payment each fortnight, effectively doubling the current payment amount. The supplement will be paid for the next six months to existing and new recipients of the various Centrelink payments including the JobSeeker Payment (formerly called Newstart Allowance), Youth Allowance Payment for job seekers, Parenting Payment, Farm Household Allowance and Special Benefit Payments.

Further $750 for pensioners

In addition to the initial $750 stimulus payment previously announced, a further $750 payment will be provided to social security and veteran income support recipients and eligible concession card holders. This does not apply to those receiving the temporary Coronavirus Supplement.

Superannuation early release

Individuals in financial distress as a result of the pandemic will be allowed to access a tax-free payment of up to $10,000 from their superannuation in 2019–2020 and a further $10,000 in 2020–2021. Eligible individuals will need to apply online to the ATO through myGov before 1 July 2020 to receive the payment for the 2019–2020 income year.

TIP: Amounts withdrawn from super in this way will not affect any Centrelink payments.

Coronavirus concessions: state governments

Some states, including New South Wales, Queensland, Western Australia and Tasmania, have followed in the Federal Government’s footsteps to provide their own stimulus and concessions for mostly small to medium businesses and in some cases to individuals and families. Most of the measures are payroll-tax-related, aimed at giving small to medium businesses a cash flow boost during this difficult time, while other measures including fee waivers, grants, relief payments and concessional loans.

ATO’s FAQ helps to clarify coronavirus impacts

The ATO’s COVID-19 frequently asked questions (FAQ) is a resource tool for people and businesses in the community who need clarifications in relation to impacts from the COVID-19 pandemic. The FAQ is broken into common questions for individuals, employers, businesses (including internationals) and self-managed superannuation funds (SMSFs).

Common questions centre around issues relating to the nationwide shutdown – late or deferring payment obligations; deductibles from working from home; residence status due to travel restrictions; GST and FBT impacts from cancellations; and SMSF losses and strategies.

TIP: The ATO will update this FAQ regularly and welcomes suggestions and more questions. See www.ato.gov.au/Individuals/Dealing-with-disasters/In-detail/Specific-disasters/COVID-19/.

Working from home: what can I deduct?

Have you been directed by your employer to work from home to limit the spread of COVID-19? While working from home has its benefits, there may be extra expenses too, ranging from printing costs to the need for more internet data and perhaps even additional equipment. You may be able to claim a deduction for the additional running costs you incur. The costs you may be able to claim include the work-related portion of any heating, cooling and lighting for the area you’re working from, work-related phone and internet costs, and work-related decline in value of a personally owned computer and associated office equipment. To claim these expenses, you must keep specific records ranging from diary entries to receipts.

Scams targeting natural disaster victims

Victims of the recent natural disasters beware: there is an SMS scam circulating that purports to give you “a bonus” on your 2020 tax return. The scam urges victims to start the process by filling out a form and provides a link to a what looks like the genuine myGov website. According to the ATO, this is a classic case of scammers impersonating the ATO in an effort to collect personal information including names, birth dates, addresses, emails, phone numbers and online banking login details.

Once this information is obtained, scammers can use it to commit identify theft, including porting your phone, accessing your bank account, obtaining a loan in your name, lodging tax returns, stealing your superannuation and committing other types of fraud, or they could on-sell the information to others who may commit these offences.

If you receive a call from someone saying they are from the ATO but you aren’t sure, the best course of action is to hang up and call the ATO back on the appropriate number listed on its website, or to call your tax agent directly on their listed number to seek advice. While the ATO does send SMS messages and emails and calls taxpayers, it’s important to remember that the ATO will never:

send an SMS message or email asking you to click on a hyperlink to log into myGov or other government websites;
ask for personally identifying information in order for you to receive a refund;
use aggressive or rude behaviour, or threaten you with immediate arrest, jail or deportation;

project its number onto caller ID; or
request that you make payments of debt via cardless cash, iTunes or Google Play cards, prepaid Visa cards, cryptocurrency, or direct credit to a personal bank account.

If you’ve fallen victim to this or other tax-related scams, don’t be ashamed, but contact the ATO as quickly as possible. The sooner you notify the ATO, the better the outcome is likely to be.

Independent review of ATO audit position: small business pilot extended and expanded

The ATO has advised that it has extended and expanded its pilot program which offers an independent review service to eligible small businesses disputing income tax related audits. The pilot will continue until 31 December 2020.

The independent review is conducted by an officer from the ATO’s Review and Dispute Resolution business line. This officer will not have been involved in the audit and will bring an independent “fresh set of eyes” to the review. The independent reviewer will consider the documents setting out the taxpayer’s position and the ATO audit position. They will schedule a case conference with the taxpayer and the ATO audit officer generally within one month of receiving the taxpayer’s review request. The case conference is an opportunity for all parties to assist the independent reviewer with understanding the facts and contentions.

The audit case officer will contact a taxpayer if it is eligible for an independent review. A written offer of independent review will also be included in the audit finalisation letter.

TIP: The ATO emphasises that taxpayers will retain their full dispute and objection rights even if they seek an independent review. Taxpayers will also retain these rights if they are not eligible for an independent review or if they choose not to seek an independent review.

Super guarantee amnesty for employers

An amnesty is now on for employers in relation to unpaid employee superannuation entitlements from 1 July 1992 to 1 January 2018. There are certain conditions which have to be met for employers to qualify. The amnesty will allow employers to self-correct super guarantee (SG) underpayments without incurring additional penalties that would normally apply.

During the amnesty period, employers can also claim a tax deduction for payments of SG charge or contributions. The amnesty will end on 7 September 2020, at which time the ATO is set to take a tougher stance on SG underpayments.

To qualify, employers must first disclose the super guarantee shortfall to the ATO in the approved form between 24 May 2018 and 7 September 2020. The shortfall must not have been previously disclosed to the Commissioner, however, additional amounts of SG shortfalls disclosed during the amnesty period may be subject to beneficial treatment.

‘HomeBuilder’ grants now available.

$25k grants for housing construction, renovations to bolster industry. The Federal Government will give eligible Australians $25,000 to build or substantially renovate their homes.

How it will work

It will be restricted to substantial renovations and the construction of new homes, with recipients required to spend at least $150,000 before being eligible.
The grants will be means-tested to exclude couples making more than $200,000 per year and individuals making more than $125,000 per year, while limits will also be placed on the value of the property the grants go towards.
New builds will be capped at $750,000, while renovations can cost anywhere between $150,000 and $750,000, but will only be subsidised if the house being altered is valued at less than $1.5 million.
The scheme will not apply to investment properties or owners who intend on building or renovating on their own without the help of builders.
Renovation work will not include structures separate to the main property, such as swimming pools, tennis courts and sheds.
To be eligible for the grants, homeowners will need to enlist a licensed builder to complete the works.

“This is about targeted taxpayer support for a limited time using existing systems to ensure the money gets used how it should by families looking for that bit of extra help to make significant investments themselves,” Mr Morrison said.

The grants are available from today, 4^th June 2020, and will run until the end of the year.

Source: Federal Government

Tax Time Checklists – Individuals; Company; Trust; Partnership; and Super Funds

Working from home because of COVID-19 means most will have more deductions than in a normal year. These checklists will help your tax agent ensure you don't miss any deductions. Simply print, complete and return.

Please click on the following links to access the checklists most appropriate to your needs.

Individuals

Company Trust Partnership

Superannuation Funds

JobKeeper documentation ‘absolutely critical’ in ATO audit

Practitioners have been advised to keep contemporaneous documentation of their calculations and advice around the JobKeeper payment scheme to avoid inevitable audit scrutiny in the near future.

While the ATO has declared that it will take an “understanding and sympathetic” compliance approach when reviewing JobKeeper turnover projections, practitioners have now been urged to document their work as much as possible to cover all the bases when the ATO comes knocking.

“[The payments are going to flow] without much testing going on; in other words, the Tax Office isn’t going to be able to sit there and scrutinise everybody’s JobKeeper application now,” the Tax Institute’s senior tax counsel, Professor Robert Deutsch, said on Accountants Daily Insider.

“What will happen is that some months from now, probably three to six months from now, they will start to look at a number of claims, particularly the larger ones, and start to investigate in a sort of audit way to try to understand if everyone has been doing the right thing, whether there have been people who have been claiming when they shouldn’t be.

“It is very important that taxpayers who are now claiming the JobKeeper payment document exactly what it is that they have worked out that enabled them to confidently say they are entitled to the JobKeeper payment.

“In particular, the turnover issue: How did you establish your turnover for a particular period in 2020? How did you show that the turnover was down 30 per cent on last year?”

The ATO’s recently published LCR 2020/1 has stated that the Tax Office will allow for some tolerance around turnover projection predictions.

Likewise, the Tax Practitioners Board has now confirmed that tax agents will not necessarily be in breach of the Code of Professional Conduct if there is a mistake in their client’s turnover projection.

“Where information provided by a client seems credible (and, for existing clients, is consistent with previous statements) and you have no basis on which to doubt the information supplied, you may discharge your responsibility under the code by accepting the statement provided by the client without further checking,” the TPB said.

“However, if the information does not seem credible or appears to be inconsistent with a previous statement, further enquiries would be required. In this case, taking reasonable care may mean asking questions of your client or examining the client’s records, or both.”

Professor Deutsch believes “coherent and cogent” documentation will be a practitioner’s best defence should the ATO start asking for information.

“Practitioners should be helping clients to do that documentation because that’s really the vital part in this whole jigsaw puzzle — it is being able to say to an auditor six months from now, ‘Here’s a piece of paper that explains the whole thing’,” Professor Deutsch said.

“If it is coherent and cogent, the auditors will probably say, ‘Thank you very much, I’ll take a copy of this’, go away and leave you alone.

“A mistake that a lot of taxpayers make is saying I’ll worry about that when I get there.

“The problem of worrying about it when you get there is that when you get there, you can’t remember much about this because so much has happened in the interim, so document it now.”

Jotham Lian
13 May 2020
accountantsdaily.com.au

ATO updates JobKeeper compliance approach

The Tax Office has now updated its JobKeeper compliance guidelines with new examples of schemes where there will be a high risk of the commissioner devoting his compliance resources to.

Practical Compliance Guideline 2020/4, which sets out when the ATO will apply its compliance resources to schemes to obtain access or to increase the amount of the JobKeeper payment, has now been updated to clarify its application and to provide additional examples.

The clarification now notes that before the Tax Commissioner looks to apply his compliance resources, the ATO will first seek to ascertain whether the scheme was effective in obtaining access to the JobKeeper payment, or an increased amount of a JobKeeper payment, including by applying the principles set out in Law Companion Ruling LCR 2020/1.

LCR 2020/1 provides guidance on the JobKeeper basic decline in turnover test, and sets out the ATO’s view on how to calculate GST turnover for eligibility to the scheme.

The ATO has also now added two additional examples of schemes that will attract the commissioner’s attention.

The first extra example includes where a company enters into a scheme to defer or reduce the price paid to suppliers so that these suppliers will be eligible for a JobKeeper payment.

The second example also details when a company enters into a scheme where there is a deferral, reduction or waiver of revenue paid to a company so a company can obtain a JobKeeper payment.

Both the additional examples have been labelled as “high risk” for the commissioner to apply his compliance resources.

You can view the full list of examples in PCG 2020/4 here.

Jotham Lian
28 May 2020
accountantsdaily.com.au

COVID-19 hotspots – tax time 2020

Agents have been urged to be proactive as tax time 2020 approaches, with the ATO set to take a closer look at clients’ tax returns through a COVID-19 lens.

With six weeks to go to the end of the financial year, H&R Block director of tax communications Mark Chapman believes practitioners should begin communicating with their clients about their tax-time obligations this year, particularly around the impact of COVID-19 on their tax affairs.

“I think practitioners will need to adjust their mindset to accept that clients on the income side and the deduction side, their affairs are going to look a little bit different this year,” Mr Chapman told Accountants Daily.

“It is probably worthwhile for tax agents to be having that conversation with their clients before we get to the end of the financial year because, if there’s a requirement for clients to produce records, clearly once we get past 30 June, it is really too late to do that.”

With COVID-19 forcing many to work from home, Mr Chapman believes the area of work-related deductions will see significant changes this year and will likely continue to attract ATO scrutiny given its high-risk factor in the ATO’s $8.7 billion tax gap report.

In particular, Mr Chapman believes the ATO’s new flat rate of 80 cents per hour will need to be carefully explained to clients before they look to lodge their returns.

“A lot of the deductions that people commonly claim are likely to go down; work-related travel has been pretty much off the agenda since the beginning of March, so if you take out that four-month period, you’re likely to see those claims go down quite substantially,” Mr Chapman said.

“But counterbalancing that is that working-from-home claims are likely to go up.

“The ATO introduced the flat rate in an attempt to simplify things for taxpayers, but the problem is, there are now three different methods of calculating working-from-home expenses, so in a sense it is not really simplifying things, it is just adding more issues into the mix.

“When tax agents sit down with their clients, there needs to be real thought as to which is going to produce the best outcome for the client and that might be either of the flat rate allowances — it might not be the 80 cents rate or the 52 cents rate; very often, the best outcome for the client is to work out the actual costs they have incurred.

“The problem with that is there is a lot of record keeping required in order for people to claim actual costs, so it’s worthwhile having a conversation with clients now.”

Property hotspot

With property deduction claims a “top priority” for the ATO, Mr Chapman also believes agents will need to be extra careful in a COVID-19 environment this tax time.

“We’re likely to see bigger rental property losses for many clients, and that is something the ATO will be looking at very carefully,” he said.

“They always look closely at investment properties, and I think this year with bigger loss claims, they are likely to be focusing particularly there just to establish that the landlords had genuinely reduced the rent or given the tenants a rent holiday, that the landlords have not actually moved into the property as their quarantine bolthole, which has happened on some instances, and the ATO would not expect to be seeing any deductions in relation to those properties if that’s happened.

“All of those COVID-19 impacts on rental properties are likely to be tested by the ATO this year, and agents will need to ask the important questions to establish the facts before claiming deductions.”

Jotham Lian
20 May 2020
accountantsdaily.com.au

Tax reform to feature heavily in PM’s JobMaker plan

Tax reform to support jobs and encourage investment will be firmly on the government’s agenda as it looks to unveil its JobMaker economic recovery plan.

In an address to the National Press Club today, Prime Minister Scott Morrison revealed a broad overview of the JobMaker plan that would “secure Australia’s future” over the next three to five years.

The JobMaker plan, aimed at rebooting the economy from a pandemic-induced slump, will be revealed in its entirety by the October federal budget.

“Skills, industrial relations, energy and resources, higher education, research and science, open banking, the digital economy, trade, manufacturing, infrastructure and regional development, deregulation and federation reform, a tax system to support jobs and investment,” Mr Morrison said of the JobMaker agenda.

“I will address the many other components of our JobMaker plan in the weeks and months ahead, as we proceed to the budget in October. A process that is one of patiently putting each brick in the wall.”

When pushed to expand on the government’s view on tax reform, Mr Morrison hinted at changes to income tax.

“You ask someone for their opinion on tax, and they can give you volumes, but I’m interested in the stuff that’s going to create jobs and create investment,” Mr Morrison said.

“If we can agree some ways forward there, I suspect more of it is at the federal level — certainly on income tax.

“I don’t mean specifically personal income tax. All those issues, I mean that’s the mix. We know what the mix is.

“I’m not dropping bread crumbs there or anything like that, I’m just saying tax is big. It is a complicated issue. We will work our way through it.”

Skills and industrial relations

Focusing on two initial areas of the JobMaker plan, Mr Morrison outlined plans to overhaul Australia’s training system, including increasing funding and linking it to skills based on what businesses need.

Mr Morrison also vowed to simplify the system and make it more consistent between the states and territories, pointing to the national hospital agreement as a good model to work towards.

“Incorporating national efficient pricing and activity-based funding models would be a real step forward, and this is a system I’ve made very clear to Premiers and Chief Ministers that my government would be prepared to invest more in, but throwing more money into a bad system does not get you results,” he said.

On industrial relations, Mr Morrison revealed that Attorney-General Christian Porter would lead a reform agenda for the industrial relations system, focusing on award simplification and revisiting enterprise agreement making.

“Our current system is not fit for purpose, especially given the scale of the jobs challenge that we now face as a nation,” Mr Morrison said.

“The purpose is simple and honest, to explore and, hopefully, find a pathway to sensible, long-lasting reform with just one goal: make jobs.”

Jotham Lian
26 May 2020
accountantsdaily.com.au

$150k instant asset write-off set for significant drop

The $150,000 instant asset write-off will soon revert to its original threshold of $1,000 in just over four weeks, with businesses urged to consider the measure ahead of the end of financial year.

Announced in the first round of the government’s stimulus package in early March, the instant asset write-off threshold was increased by fivefold, rising from $30,000 to $150,000.

Access to the instant asset write-off was also expanded to businesses with an aggregated turnover of less than $500 million, 10 times more than the previous $50 million limit.

However, the increased and expanded measure will only run until 30 June 2020, before reverting to its legislated $1,000 threshold and reduced eligibility to small businesses with a turnover of less than $10 million.

While the write-off had been extended on a yearly basis in previous budgets, the postponement of this year’s budget to October has raised uncertainty over the future of the incentive, although Prime Minister Scott Morrison has declared that tax measures to encourage investment will be part of his JobMaker plan.

The measure has been historically poorly received and it remains to be seen if business owners will reach for their wallets in the current economic environment.

“To get the immediate benefit of the instant asset write-off, you need to be paying tax. Many businesses will struggle with having a positive taxable income in the current financial year. This will be the main reason that business people may not be so interested in it,” Tax & Super Australia senior tax counsel John Jeffreys said.

“And, of course, you have to have the money to pay for the asset or get someone to lend the money to you. Some business people may prefer to be conservative and save their cash.

“Nevertheless, the drop from $150,000 to $1,000 is very significant, and I doubt that the opportunity will be repeated. You may not be able to use up all of the tax deduction in the current financial year, but if you return to profitability in the year ending 30 June 2021, it can be a nice tax deduction to help you with your tax bill.”

For businesses that do decide to utilise the instant asset write-off, Mr Jeffreys noted that the asset will need to be used or installed ready for use by 30 June 2020.

“Often, more expensive assets have a longer lead time between order and delivery/installation, so businesses that want to claim the deduction need to get their orders in,” Mr Jeffreys said.

“If they have an order made, they will need to watch the date of delivery, particularly with all of the COVID-19 global delivery and manufacturing issues.”

For those who are considering purchasing a car, the ATO has reminded that the instant asset write-off will be limited to car limit of $57,581 for the 2019–20 income tax year, with the excess cost unable to be claimed under any other depreciation rules.

Full details around the expanded instant asset write-off are available here.

Jotham Lian
28 May 2020
accountantsdaily.com.au