tax-data-cross-link

Extension of the JobKeeper Payment

Sadly, many Australian businesses are a long way from trending back to ‘normal’ as we approach 27 September 2020, the original date that JobKeeper was set to end.  Thankfully the government has announced an extension of the JobKeeper Payment, with additional turnover qualifications.

The JobKeeper Payment, which was originally due to run until 27 September 2020, will now continue to be available to eligible businesses (including the self-employed) and not-for-profits until 28 March 2021.

The payment rate of $1,500 per fortnight for eligible employees and business participants will be reduced to $1,200 per fortnight from 28 September 2020 and to $1,000 per fortnight from 4 January 2021.  From 28 September 2020, lower payment rates will also apply for employees and eligible business participants that worked fewer than 20 hours per week.

From 28 September 2020, businesses and not-for-profits seeking to claim the JobKeeper Payment will be required to demonstrate that they have suffered an ongoing significant decline in turnover using actual GST turnover (rather than projected GST turnover).  Businesses and not-for-profits will be required to reassess their eligibility with reference to their actual GST turnover in the June and September 2020 quarters.  They will need to demonstrate that they have met the relevant decline in turnover test in both of those quarters to be eligible for the JobKeeper Payment from 28 September 2020 to 3 January 2021.

From 4 January 2021, businesses and not-for-profits will need to further reassess their turnover to be eligible for the JobKeeper Payment. They will need to demonstrate that they have met the relevant decline in turnover test with reference to their actual GST turnover in each of the June, September and December 2020 quarters to remain eligible for the JobKeeper Payment from 4 January 2021 to 28 March 2021.

To be eligible for JobKeeper Payments under the extension, businesses and not-for-profits will still need to demonstrate that they have experienced a decline in turnover of at least:

  •  50 per cent for those with an aggregated turnover of more than $1 billion;
  •  30 per cent for those with an aggregated turnover of $1 billion or less;
  •  15 per cent for Australian Charities and Not for profits Commission-registered charities (excluding schools and universities).

If a business or not-for-profit does not meet the additional turnover tests for the extension period, this does not affect their eligibility prior to 28 September 2020.

The JobKeeper Payment will continue to remain open to new recipients, provided they meet the existing eligibility requirements and the additional turnover tests during the extension period.

news-1

COVID-19 and Division 7A relief

The ATO has announced some limited relief for private companies that have loans to their shareholders or related parties that are governed by what are referred to as “complying loan agreements”.

A complying loan agreement is entered into to avoid triggering an assessable deemed dividend that could potentially be equal to the amount of the loan from the private company.

When there is a complying loan agreement between a private company and a borrower, the borrower must make the minimum yearly repayment (MYR) by the end of the private company’s income year.  This avoids the borrower being considered to have received an unfranked dividend, generally equal to the amount of any MYR shortfall.

As a result of the COVID-19 situation, the ATO understands that some borrowers are facing circumstances beyond their control.  To offer more support, the ATO will allow an extension of the repayment period for those borrowers who are unable to make their MYR by the end of the lender’s 2019–20 income year (generally 30 June).

Requesting the extension

A request for a 12-month extension can be made through the completion of an online application.  Borrowers will be asked to confirm the shortfall, that the COVID-19 situation has affected them and that they are unable to pay the MYR as a result.

When the ATO approves an application, it will let the borrower know they will not be considered to have received an unfranked dividend.  This is subject to the shortfall being paid by 30 June 2021. It will not be necessary to submit further evidence with the application.

This particular streamlined process established by the ATO only applies to applications for an extension of up to twelve months for COVID-19 affected borrowers.   It is still open to a borrower to apply to obtain a longer extension of time outside the streamlined process.

Editor: If you have been affected by the COVID-19 situation and need more to time to make your minimum yearly repayment (MYR) in relation to complying loans from private companies, contact our office for assistance.

Superannuation-changes-passed-by-Parliament

Regulations confirm no SG obligation on JobKeeper payments where work is not performed

The federal government has registered the Superannuation Guarantee (Administration) Amendment (Jobkeeper) Payment Regulations 2020.

These regulations ensure that amounts of salary or wages that do not relate to the performance of work and are only paid to an employee to satisfy the wage condition for getting the JobKeeper payment are prescribed by the Regulations as excluded salary or wages.

The effect is that these amounts are excluded from the calculations of an employer’s superannuation guarantee shortfall and the minimum compulsory superannuation contribution an employer is required to make in respect of an employee to avoid a superannuation guarantee charge liability.

Likewise, the Regulations recognise that an employer is only entitled to a JobKeeper payment for its employees if the business has suffered a substantial decline in turnover.  In these circumstances, it is appropriate to require employers to only make minimum superannuation contributions in respect of amounts that are required to be paid to an employee for the performance of work.

Employers would not be required to make contributions in relation to additional amounts paid to satisfy the wage condition (for example, the amount by which $1,500 exceeds an employee’s normal pay).

Editor: If you are concerned about the calculation of compulsory superannuation for any employees supported by JobKeeper, please contact our office.

calculation

Treasury Laws Amendment (2019 Measures No 3) Bill 2019

Treasury Laws Amendment (2019 Measures No 3) Bill 2019 has passed both Houses of Parliament and is now law.

Testamentary trusts and minors

This legislation contains amendments to ensure the tax concessions available to minors in relation to income from a testamentary trust only apply in respect of income generated from assets of the deceased estate that are transferred to the testamentary trust (or the proceeds of the disposal or investment of those assets).

Broadly speaking, when a trustee distributes income to a minor it is taxed at the highest marginal rate (plus Medicare levy).  However, there are certain exceptions to this rule.  One such exception is where the trust is a testamentary trust – being a trust that was established as a result of the will of a deceased individual.  Income from a testamentary trust is a type of ‘excepted trust income’ that is generally taxed at ordinary rates.

Prior to this legislation being passed, the previously existing law did not specify that the assessable income of the testamentary trust be derived from assets of the deceased estate (or assets representing assets of the deceased estate).  As a result, assets unrelated to a deceased estate that were injected into a testamentary trust may, subject to anti-avoidance rules, generate excepted trust income that was not subject to the higher tax rates on minors.  This was an unintended consequence, which allowed some taxpayers to inappropriately obtain the benefit of concessional tax treatment.

This legislation clarifies that excepted trust income of the testamentary trust must be derived from assets transferred to the testamentary trust from the deceased estate or from the accumulation of such income.

This change will apply in relation to assets acquired by or transferred to the trustee of a testamentary trust on or after 1 July 2019.

Please contact our office if you have any concerns about testamentary trusts making distributions to minor beneficiaries.

news-47

Treasury Laws Amendment (2020 Measures No 3) Bill 2020

Treasury Laws Amendment (2020 Measures No 3) Bill 2020 has passed both Houses of Parliament and is now law.

Extending the Instant Asset Write-Off

This legislation amends the income tax law to allow a business with an aggregated turnover for the income year of less than $500 million to immediately deduct the cost of a depreciating asset (instant asset write-off).  The asset must cost less than a threshold of $150,000 and be first used or installed ready for use for a taxable purpose by 31 December 2020.  Without these amendments the $150,000 instant asset write-off would have ended on 30 June 2020.

By extending the previous end date of 30 June 2020 to 31 December 2020, the amendments give businesses additional time to access the $150,000 instant asset write-off for their acquisitions of depreciating assets, including those purchases that have been delayed by supply chain disruptions.  Further, the amendments extend cash flow support to businesses through the early stages of the recovery from the economic conditions caused by COVID-19.

It will be interesting to see if this timeframe is further extended at some later point.  Note that, come 1 January 2021, if there is no further extension, the $150,000 threshold for the instant asset write-off for depreciating assets will collapse to $1,000 and the turnover threshold for eligibility for the outright deduction of less than $500 million will fall to a turnover of less than $10 million.

Editor: Please contact our office if you are considering purchasing a depreciating asset for your business and want to know if you will be eligible for the instant asset write-off.

news-48

COVID-19 and tax depreciation reports – are physical inspections necessary?

Property investors and businesses will often engage a specialist quantity surveyor to prepare a tax report on capital works and depreciation deductions available to them under the tax law in respect of their income-producing properties – for example, a rental property, office building or factory.

A thorough physical inspection of the property by a quantity surveyor plays a vital role in this process in order to, amongst other things:

  • identify all possible deductions available under the tax law;
  • provide accurate valuations of qualifying plant and building works;
  • provide supporting documentation of a taxpayer’s claims for depreciation and capital works deductions, which is prudent in the event of an ATO audit.

We have become aware that some quantity surveyors are promoting tax depreciation reports that do not include a physical inspection of the property due to COVID-19 precautions.

Usually the reports are provided, with an offer to do an inspection at a later time when it is possible to do so.

However, in some cases, no offer of a site inspection is made at all.

Where a physical inspection of premises is not performed, this increases the risk of deductions being missed or errors being made.  This could result in costly adjustments if a taxpayer has to subsequently amend their tax return or is audited.

Editor: Please contact our office if you require more information about using quantity surveyor tax depreciation reports.

Please Note: Many of the comments in this publication are general in nature and anyone intending to apply the information to practical circumstances should seek professional advice to independently verify their interpretation and the information’s applicability to their particular circumstances.

news-47

Guidance on JobKeeper reporting via STP

The ATO has issued guidance to help employers reporting eligible employees and JobKeeper top-up payments through Single Touch Payroll (‘STP’).

For each eligible employee, employers must notify the ATO:

  • when an eligible employee started being paid JobKeeper payments;
  • top-up payments to employees earning less than $1500 per fortnight; and
  • when an employee is no longer eligible and JobKeeper payments need to be stopped.

The ATO says this process will be managed through the ‘STP Pay Event’ by entering the relevant JobKeeper description (as outlined below) in the ‘Other Allowances’ field.

To report the JobKeeper start fortnight for an eligible employee:

Use the description ‘JOBKEEPER-START-FNXX’ where ‘XX’ represents the JobKeeper fortnight from which the first payment is made.

Report the amount as ‘zero’, or as $0.01 if the software does not support reporting ‘zero’.

To report a top-up payment for an eligible employee ordinarily earning less than $1,500 per fortnight:

Use the description ‘JOBKEEPER-TOPUP’ for the top-up amount.

To report the first full JobKeeper fortnight an employee became ineligible:

Use the description ‘JOBKEEPER-FINISH-FNXX’ where ‘XX’ represents the JobKeeper fortnight in which the last payment is made.

For example, an employee resigns, and their last payment was on 13 May 2020.  As this falls in JobKeeper fortnight 04 (being 11/05/2020 – 24/05/2020), the description ‘JOBKEEPER-FINISH-FN04’ should be used to notify the ATO that the employee is not eligible for JobKeeper from FN05.

Making corrections to (previously reported) JobKeeper start and finish information

The ATO’s guidance identifies several situations where errors made in reporting the JobKeeper start or finish information may need correction and sets out options for doing so.

In particular, guidance is provided for making corrections where:

  • the wrong employee was reported as starting or finishing;
  •  a later start or finish fortnight is incorrectly reported;
  •  an earlier start or finish fortnight

The ATO is urging employers to exercise extreme caution to ensure the accuracy of originally reported information as multiple corrections cannot be made through the STP Pay Event, ‘Other Allowances’ field.

Editor: Please contact our office if you require more information or assistance on reporting JobKeeper payments through STP.

news-8

ATO reminder for employers – Finalise STP data for 2020

The ATO has issued a reminder to employers who report through Single Touch Payroll (‘STP’) – which should be all employers, unless an exemption or deferral applies – that they will need to finalise payroll information for the 2020 income year by making a declaration.

The due date for making finalisation declarations is:

  • 14 July 2020 for employers with 20 or more employees; and
  • 31 July 2020 for employers with 19 or fewer employees.

Employers that finalise through STP are not required to provide payment summaries to employees and lodge a payment summary annual report to the ATO.

Instead, employees will be able to access their payroll information (for preparation of their 2020 tax return) through a registered tax agent or via ATO online services.

Editor: Please contact our office if you require more information on finalising STP data.

fsa-accountants

JobKeeper declaration due 14 June

Businesses that have enrolled in the JobKeeper Scheme and identified their eligible employees are reminded that they will need to make a monthly declaration to the ATO to ensure they continue to receive JobKeeper payments.

The monthly declaration must be made by the 14th day of each month to claim JobKeeper payments for the previous month.

As part of the declaration, businesses will need to:

  • ensure they have paid their eligible employees at least $1,500 (before tax) in each JobKeeper fortnight they are claiming for;
  •  re-confirm their eligible employees, including notifying if an eligible employee has changed or left employment; and
  • provide the current and projected GST turnover of the business – note, this is not a retest of the eligibility of the business.

For example, to claim JobKeeper payments for the May 2020 JobKeeper fortnights, businesses must report their GST turnover for the month of May 2020 as well as their projected GST turnover for the month of June 2020 by 14 June 2020.

The monthly declaration can be lodged through the ATO business portal or through STP-enabled software.  Alternatively, tax agents can assist clients by lodging the monthly declaration on behalf of registered clients.

Editor: Please contact our office if you require assistance with making the JobKeeper declaration.

Hanoi cityscape

Cash flow assistance for businesses

The Government is also providing cash flow assistance for eligible businesses in the form of two separate measures.

Boosting cash flow for employers

Small and medium-sized businesses and not-for-profit entities, with an aggregated annual turnover of less than $50 million (usually based on their prior year’s turnover) that employ people, may be eligible to receive a total payment (in the form of a refundable credit) of up to $100,000 (with a minimum total payment of $20,000), based on their PAYG withholding obligations in two stages:

Stage 1 payment (credit)

Commencing with the lodgment of activity statements from 28 April 2020, eligible employers that withhold PAYG tax on their employees’ salary and wages will receive a tax-free payment equal to 100% of the amount withheld, up to a maximum of $50,000.

Eligible employers that pay salary and wages will receive a minimum (tax-free) payment of $10,000, even if they are not required to withhold PAYG tax.

The tax-free payment will broadly be calculated and paid by the ATO as an automatic credit to an employer, upon the lodgment of activity statements from 28 April 2020, with any resulting refund being paid to the employer.  This means that:

–  quarterly lodgers will be eligible to receive the payment for the quarters ending March 2020 and June 2020; and

–  monthly lodgers will be eligible to receive the payment for the March 2020, April 2020, May 2020 and June 2020 lodgments.

Note that, the minimum payment of $10,000 will be applied to an entity’s first activity statement lodgment (whether for the month of March or the March quarter) from 28 April 2020.

Stage 2 payment (credit)

For employers that continue to be active, an additional (tax-free) payment will be available in respect of the June to October 2020 period, basically as follows:

–  Quarterly lodgers will be eligible to receive the additional payment for the quarters ending June 2020 and September 2020, with each payment being equal to 50% of their total initial (or Stage 1) payment (up to a maximum of $50,000).

–  Monthly lodgers will be eligible to receive the additional payment for the June 2020, July 2020, August 2020 and September 2020 activity statement lodgements, with each additional payment being equal to a quarter of their total initial (or Stage 1) payment (up to a maximum of $50,000).

Again, the ATO will automatically calculate and pay the additional (tax-free) payment as a credit to an employer upon the lodgment of their activity statements from July 2020, with any resulting refund being paid to the employer.

Editor: It should be noted that eligibility for the above payments is subject to a specific integrity rule that is designed to stamp out artificial or contrived arrangements that are implemented to obtain access to this measure.  In particular, if an employer or an associate enters into a scheme with the sole or dominant purpose of obtaining or increasing any of the above payments for a particular employer, for a period, the employer will not be eligible for any such payments for the relevant period.

Wages subsidies for apprentices and trainees

Employers with less than 20 full-time employees, who retain an apprentice or trainee (who was in training with the employer as at 1 March 2020) may be entitled to Government funded wage subsidies.

These will be equal to 50% of the apprentice’s or trainee’s wage paid during the nine months from 1 January 2020 to 30 September 2020.

The maximum wage subsidy over the nine-month period will be $21,000 per eligible apprentice or trainee.

Employers can register for the subsidy from early April 2020.

Increasing the instant write-off threshold for business assets 

Broadly, the depreciating asset instant asset write-off threshold will be increased from $30,000 (for businesses with an aggregated turnover of less than $50 million) to $150,000 (for businesses with an aggregated turnover of less than $500 million) until 30 June 2020.

The measure applies to both new and second-hand assets first used or installed ready for use in the period beginning on 12 March 2020 (i.e., the date on which this measure was announced) and ending on 30 June 2020.

Small Business Entities (‘SBEs’)

Editor: These are businesses with aggregated turnover of less than $10 million.

SBEs will be able to claim an immediate deduction for depreciating assets that cost less than $150,000, provided the relevant asset is first acquired at or after 7.30 pm on 12 May 2015, by legal time in the ACT, and first used or installed ready for use on or after 12 March 2020, but before 1 July 2020.

Additionally, SBEs will also be able to claim an immediate deduction for the following:

–       An amount included in the second element of the cost of (i.e., an improvement to) a depreciating asset that was first used or installed ready for use in a previous income year.  The amount of the second element cost must be less than $150,000 and the cost must be incurred on or after 12 March 2020, but before 1 July 2020.

–       If the balance of an entity’s general small business pool (excluding current year depreciation) is less than $150,000 at the end of the 2020 income year, a deduction can be claimed for this balance.

Medium Business Entities (‘MBEs’)

Editor: These are businesses with turnover of at least $10 million and less than $500 million.

MBEs can immediately deduct the cost of an asset in an income year if the asset has a cost of less than $150,000 and it was first acquired in the period beginning at 7:30pm, by legal time in the ACT, on 2 April 2019 and ending on 30 June 2020, and the taxpayer starts to use or have the asset installed ready for use for a taxable purpose in the period beginning on 12 March 2020 and ending on 30 June 2020.

Additionally, MBEs can also claim a deduction for certain amounts included in the second element of the cost of a depreciating asset, where the amount of the second element cost is less than $150,000, and is incurred on or after 12 March 2020 but before 1 July 2020.

The threshold will generally be applied to the GST-exclusive cost of an eligible asset (i.e., assuming the relevant business is entitled to an input tax credit for any GST included in the acquisition cost).

Importantly, this increased threshold also continues to operate on a ‘per asset’ basis, which means that eligible businesses can immediately write-off multiple assets (as long as each of the assets individually satisfy the relevant eligibility criteria).

Currently, the instant asset write-off threshold is due to revert to $1,000 for small businesses (i.e., those with an aggregated turnover of less than $10 million) from 1 July 2020.

Accelerating depreciation deductions for new assets

Broadly, a new time-limited 15-month investment incentive (available for eligible assets acquired from 12 March 2020 up until 30 June 2021) will also be introduced to accelerate certain depreciation deductions for businesses with an aggregated turnover below $500 million.

The amount that an eligible entity can deduct in the income year in which an eligible depreciating asset is first used or installed ready for use is:

–       50% of the cost (or adjustable value where applicable) of the asset; and

–       the amount of the usual depreciation deduction that would otherwise apply (if it were calculated on the remaining cost of the asset).

Different rules will apply where an SBE is using the general small business pool (i.e., for assets not qualifying for the instant asset write-off).  In this case, an SBE may deduct an amount equal to 57.5% (rather than 15%) of the business-use portion of the cost of an eligible depreciating asset in the year is it allocated to the pool.

Unless specifically excluded, an eligible asset is a new asset that can be depreciated under Division 40 of the ITAA 1997 (i.e., plant and equipment and specified intangible assets, such as patents), where the asset satisfies all of the following conditions:

–       The asset is new and has not previously been held (and used or installed ready for use) by another entity (other than as trading stock or for testing and trialling purposes).

–       No entity has claimed depreciation deductions (including under the instant asset write-off) in respect of the asset.

–      The asset is first held, and first used or installed ready for use, for a taxable purpose, between 12 March 2020 and 30 June 2021 (inclusive).

Note that a depreciating asset is not an eligible asset where a commitment to acquire or construct the asset was entered into before 12 March 2020.