Category: Business Tax

Instant Asset Write-Off – Extension Announced

Businesses will be able to access the boosted $150,000 instant asset write-off scheme for a further six months to the end of the year. 

By way of background, as part of its emergency COVID-19 fiscal package, the government quin­tupled (from $30,000) the value of assets businesses were able to instantly write -off for the ­period of March 12 to June 30, and expanded the eligibility to cover  businesses with turnover of less than $500m (up from $50m ­previously). 

Today the government will announce that the more than 3.5 million eligible businesses will now be given until December 31, 2020 to take advantage of this measure. The asset must be installed ready for use by this date. 

Although it is anticipated that this extension will be supported by Parliament, it is subject to the passage of legislation. 

 

JobKeeper Payment Rules Released 10/4/20

Late on Friday April 10, explanatory materials were released in relation to the JobKeeper payment that has now been passed into law. The explanatory material clarifies one key aspect of the new legislation:

Establishing a downturn

 

By way of background, to qualify for the JobKeeper wage subsidy, one of the eligibility criteria is that:

  • for businesses that have an annual aggregated turnover of less than $1 billion, they estimate their GST turnover has fallen or will likely fall by 30% or more or
  • for businesses that have an annual aggregated turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more), they estimate their GST turnover has fallen or will likely fall by 50% or more.

Treasury has revealed that the comparison period is for either (a) any monthly period from April 2020 to the end of September 2020 or (b) any quarterly period from April to June or July to September…compared to the same monthly or quarterly period in 2019.

Importantly, once this test is met for either (a) a monthly period or (b) any quarterly period, there is no requirement to re-test in later months or quarters. For example, if a business assesses that its turnover will fall by 30% in April 2020 compared to April 2019…then it retains its eligibility until the JobKeeper payments stop for all businesses at the end of September 2020. This is irrespective of its turnover in the months subsequent to April 2020. It is not required to estimate or determine turnover for subsequent periods.

Where an entity does not qualify in the month of April 2020, for example, or the April to June quarter, it can re-test in later months or quarters, but will only be eligible for the JobKeeper payments from the period of qualification onwards (the payment won’t be backdated to the commencement of scheme).

Alternative tests

The explanatory material acknowledges that comparing monthly or quarterly periods from April 2020 and onwards, to April 2019 and onwards, may not always be possible or made lead to unfair outcomes. To this end, where the ATO is satisfied that there is no such comparison period in 2019, or there is not an appropriate relevant comparison period, the ATO Commissioner may, by legislative instrument, determine an alternative decline in turnover test.

The two alternative test examples cited in the explanatory materials relate to:

  • businesses that were not in existence for the whole of the comparison period in 2019. In the explanatory materials, the business is permitted to average its actual turnover from October 2019 when it came into existence to March 2020, and compare that average it to its estimated turnover in April 2020.
  • businesses that were impacted by a natural disaster during the 2019 comparison period. In the explanatory materials, the business is permitted to go back to 2017 (the most recent year when its turnover was not impacted by drought) and compare its turnover to the same eligible period in 2020.

The Commissioner retains flexibility to apply other alternative tests and take into account other unique circumstances (aside from natural disaster and start-up businesses) confronted by a business, should the 2019 comparison period not be reflective of typical turnover. Treasury, in a separate fact sheet Supporting Business to Retain Jobs, has stated that these alternative tests may include, for example, eligibility being established as soon as a business ceases or where a business significantly curtails its operations.

Businesses and their advisors should contact the ATO where they believe they warrant special consideration in this regard.

 

JobKeeper Payment – Fresh Guidance on Establishing a Downturn

We’ve received many questions from subscribers around how a “downturn of turnover” will be measured for the purposes of eligibility for the coronavirus-related Job Keeper Payment.

Last night there was fresh guidance from Treasury. 

By way of background, one of the eligibility criteria for Job Keeper is that: 

• for businesses that have an annual turnover of less than $1 billion, they estimate their turnover has fallen or will likely fall by 30% or more; or  
• for businesses that have an annual turnover of $1 billion or more (or is part of a consolidated group for income tax purposes with turnover of $1 billion or more) they estimate their turnover has fallen or will likely fall by 50% or more; and  
• the business is not subject to the Major Bank Levy. 

Treasury has indicated that the decline in turnover test is linked to the GST turnover test in particular the projected GST turnover – which will take into account anticipated decline in revenue. The test requires a business to measure its projected GST turnover and compare this to what is termed a relevant comparison period. If this equals or exceeds the following thresholds, the entity satisfied the decline in turnover test: 
• ACNC-registered charities – 15%; 
• entities with turnover less than $1bn – 30%; 
• entities with turnover greater than $1bn – 50%. 
There is scope for the ATO to apply an alternative test to different classes of entities. 
The turnover test period must be a calendar month that ends after 30 March 2020 and before 1 October 2020, or a quarter that starts on 1 April or 1 July 2020. The relevant comparison period must be the period in 2019 that corresponds to this turnover test period. 
Further ATO guidance will be forthcoming 
The turnover numbers must be reported to the ATO before any payments will start, though there is a transitional rule for the first 2 JobKeeper fortnights. 
The key take-away points are while, at this stage, this is Treasury guidance: 

• the test/comparison period vis-à-vis 2019 to 2020– spans from April to the end of September 
• if 2019 is not representative of typical turnover, another comparison period may be considered 
• the ATO is willing to exercise its discretion where there are anomalous cases.

Job Keeper Payment and Establishing a Downturn

Employers will be eligible for the Job Keeper subsidy if: 

  • their business has a turnover of less than $1 billion and their turnover has fallen by more than 30 per cent; or 
  • their business has a turnover of $1 billion or more and their turnover has fallen by more than 50 per cent; and 
  • the business is not subject to the Major Bank Levy. 

Since this measure was announced, we’ve been inundated with questions around how a business can establish that it has suffered a 30 per cent downturn.  

Ultimately, this won’t be clear until at least next Wednesday when the legislation is introduced into Parliament.

The latest guidance from Treasury is as follows:

To establish that a business has faced either a 30 (or 50) per cent fall in their turnover, most businesses would be expected to establish that their turnover has fallen in the relevant month or three months (depending on the natural activity statement reporting period of that business) relative to their turnover a year earlier. Where a business was not in operation a year earlier, or where their turnover a year earlier was not representative of their usual or average turnover, (e.g. because there was a large interim acquisition, they were newly established or their turnover is typically highly variable) the Tax Commissioner will have discretion to consider additional information that the business can provide to establish that they have been significantly affected by the impacts of the Coronavirus. The Tax Commissioner will also have discretion to set out alternative tests that would establish eligibility in specific circumstances (e.g. eligibility may be established as soon as a business has ceased or significantly curtailed its operations). There will be some tolerance where employers, in good faith, estimate a greater than 30 (or 50) per cent fall in turnover but actually experience a slightly smaller fall.

With the legislation to be unveiled next week, we will keep you updated on this very important matter.

 

More Coronavirus Relief for Business

Over the weekend (29/03/2020), more relief was announced for business including:  

  1. Deferral of Loan Repayments 

A little over a week ago, the Australian Banking Association announced a six-month deferral of all loan repayments for small businesses hit by the coronavirus pandemic. 

On the weekend, this relief has now been extended to all businesses that have loans of up to $10 million. That accounts for just on 98% of all Australian businesses that have loans with Australian banks 

  1. Commercial Tenancies 

National Cabinet agreed to a moratorium on evictions over the next six months for commercial and residential tenancies in financial distress who are unable to meet their commitments due to the impact of coronavirus. 

Commercial tenants, landlords and financial institutions are encouraged to sit down together to find a way through to ensure that businesses can survive and be there on the other side. As part of this, National Cabinet agreed to a common set of principles, endorsed by Treasurers, to underpin and govern intervention to aid commercial tenancies as follows: 

  • a short term, temporary moratorium on eviction for non-payment of rent to be applied across commercial tenancies impacted by severe rental distress due to coronavirus;
  • tenants and landlords are encouraged to agree on rent relief or temporary amendments to the lease; 
  • the reduction or waiver of rental payment for a defined period for impacted tenants; 
  • the ability for tenants to terminate leases and/or seek mediation or conciliation on the grounds of financial distress; 
  • commercial property owners should ensure that any benefits received in respect of their properties should also benefit their tenants in proportion to the economic impact caused by coronavirus; 
  • landlords and tenants not significantly affected by coronavirus are expected to honour their lease and rental agreements; and 
  • cost-sharing or deferral of losses between landlords and tenants, with Commonwealth, state and territory governments, local government and financial institutions to consider mechanisms to provide assistance. 

 

COVID-19 Business Support Summary

Support from the Federal Government 

For Sole Traders: 

▪️Increased & accelerated income support: you’re able to access the $550 per fortnight Coronavirus supplement payment through JobSeeker, Youth Allowance Jobseeker or Parenting Payment with the waiting period and asset testing waived 

▪️The increased instant asset write-off: The Government has lifted the threshold for instant asset write-off from $30,000 to $150,000 

▪️Backing Business Investment: A time limited 15 month investment incentive (through to ‪30 June 2021‬). Businesses with a turnover of less than $500 million will be able to deduct 50% of the cost of an eligible asset on installation 

▪️Early access to superannuation: You can access $10,000 of your superannuation in 2019-20 and a further $10,000 in 2020-21. You can apply for early release of your super from mid-April 2020 

▪️Find out more here: https://business.gov.au/…/support-available-for-sole-traders 

For Employers and Companies: 

▪️Temporary cash flow support: employers will receive a payment equal to 100% of their salary and wages withheld, with a maximum payment of $50,000 and minimum payment of $10,000. Not for profits are also eligible. An additional payment is being introduced which means eligible businesses will receive at least $20,000 up to a total of $100,000 under the two payments 

▪️Help to pay the wages of apprentices or trainees: eligible employers can get a wage subsidy of 50% of the apprentice’s or trainee’s wage paid during the 9 months ‪from 1 January to 30 September 2020‬ 

▪️There is also relief for companies and directors by lifting the threshold of payments to creditors, and for personal liability for directors for trading while insolvent 

▪️Find out more here: https://business.gov.au/…/coronavirus-information…/employers

You can get the full details of all the support available here: https://business.gov.au/…/coronavirus-information-and-suppo…

 

COVID-19 Additional Help for Business

As the anticipated economic impact from the Coronavirus worsens, the Government on the weekend beefed up its assistance package that was originally announced last week as follows:

PAYG cash credits to SME employers and charities up to $100k (minimum $20k) 

The Government announced on the weekend that it will boost last week’s cash credit to employers. It will now provide a tax-free credit up to $100,000 for eligible small and medium sized entities (SMEs), and not-for-profits (including charities) that employ people, with a minimum credit of $20,000. These tax-free credits seek to help businesses’ and NFPs’ cash flow so they can keep operating, pay their rent, electricity and other bills and retain staff. 

Under the enhanced scheme from last week’s first stimulus package, employers will receive a credit equal to 100% PAYG withholding from employee salary and wages (up from 50%), with the maximum credit being increased from $25,000 to $50,000. In addition, the minimum credit will be increased from $2,000 to $10,000. 

SMEs with aggregated annual turnover under $50m and that employ workers are eligible. NFPs entities, including charities, with aggregated annual turnover under $50m and that employ workers will now also be eligible. This will support employment at a time where NFPs are facing increasing demand for services. 

The cash flow credit for employers will be available from 28 April 2020. 

For example, if an employer lodging their quarterly March Activity Statement was ordinarily due to withhold $40,000 in PAYG withholding from their employee’s salaries in that quarterly period, then they would just keep this money themselves (being 100% of the withholding that was due) rather than sending it to the ATO and it would be tax-free. The rest of that Activity Statement would be dealt with normally, for instance it may be the case that GST may be owed for that quarter. 

We can see from this example, that the benefit is by way of the withholding that would normally be owed to the ATO, and that withholding amount is tax-free to the employer. Therefore, it is not a cash payment from the ATO as such, but rather retaining the withholding which would otherwise be payable. 

An additional credit is also being made from 28 July 2020. Eligible entities will receive an additional credit equal to the total of all of the Boosting Cash Flow for Employers payments received. The credits are tax-free, there will be no new forms and payments will flow automatically from the ATO. 

Temporary Relief for Financially Distressed Businesses  

The Government is temporarily increasing the threshold to $20,000 (up from $2,000) at which creditors can issue a statutory demand on a company and the time companies have to respond to statutory demands they receive (21 days to 6 months). Temporary relief will also be provided for directors from any personal liability for trading while insolvent. The Corporations Act 2001 will also be amended to provide temporary and targeted relief for companies to deal with unforeseen events that arise as a result of the Coronavirus. 

 

ATO Coronavirus Support Measures

The ATO earlier this week announced a series of administrative concessions for taxpayers impacted by the coronavirus (COVID-19), as follows: 

  • deferring by up to four months the payment of tax amounts due through the BAS (including PAYG instalments), income tax assessments, FBT assessments and excise 
  • allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to any GST refunds. Businesses can only make this change from the start of a quarter. Therefore, a change now would only take effect from 1 April 2020. 

The change in cycle to monthly does not mean that a business must change its PAYGW reporting cycle also. Rather, this should be managed by specifying the roles that the business is changing. Once a business has made the choice to report and pay its GST monthly, it must keep reporting monthly for at least 12 months before it can switch back to reporting quarterly. 

  • allowing businesses to vary PAYG instalment amounts to zero for from the March 2020 quarter (the current quarter). Businesses that vary their PAYG instalment to zero can also claim a refund for any instalments made for the September 2019 and December 2019 quarters. 

If a business is a monthly PAYG instalments payer and has a base assessment instalment income of $500m or less, and they want to vary their instalment rate and claim a refund on previous instalments paid, the ATO says the taxpayer will need to phone the ATO (13 72 26) to discuss the matter. If a taxpayer realises that they have made a mistake working out their PAYG instalment, the ATO says they can correct it by lodging a revised activity statement or varying a subsequent instalment. 

  • remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities and 
  • allowing affected businesses to enter into low-interest payment plans for their existing and ongoing tax liabilities. 

Importantly, these measures will not be implemented automatically by the ATO (unlike the relief measures for the recent bushfires). 

Therefore, anyone impacted is required to contact the ATO Emergency Support Infoline (1800 806 218) when they are ready to request assistance. Once a taxpayer contacts the ATO, the Commissioner says a support plan will be tailored for the taxpayer/business. 

Economic Stimulus Package Released by the PM

The Morrison Government has today announced a $17.6 billion economic plan to keep Australians in jobs, keep businesses in business and support households and the Australian economy as the world deals with the significant challenges posed by the spread of the coronavirus. 

Our targeted stimulus package is focused on keeping Australians in jobs and helping small and medium sized businesses to stay in business.  

The package has four parts: 

  • Supporting business investment 
  • Providing cash flow assistance to help small and medium sized business to stay in business and keep their employees in jobs 
  • Targeted support for the most severely affected sectors, regions and communities; 
  • Household stimulus payments that will benefit the wider economy 

The measures are all temporary, targeted and proportionate to the challenge we face.  Our actions will ensure we respond to the immediate challenges we face and help Australia bounce back stronger on the other side, without undermining the structural integrity of the Budget. 

Prime Minister Scott Morrison said as part of the plan up to 6.5 million individuals and 3.5 million businesses would be directly supported by the package. 

“Just as we have acted decisively to protect the health of the Australian people, based on the best evidence and medical advice, our support package responds to the economic challenges presented by this pandemic in a timely, proportionate and targeted way,” the Prime Minister said. 

“Our plan will back Australian households with a stimulus payment to boost growth, bolster domestic confidence and consumption, reduce cash flow pressures for businesses and support new investments to lift productivity. 

“Australia is not immune to the global coronavirus challenge but we have already taken steps to prepare for this looming international economic crisis. 

“We’ve balanced the budget and managed our economy so we can now use this to protect the health, wellbeing and livelihoods of Australians. 

“Our targeted stimulus package will focus on keeping Australians in jobs and keeping businesses in business so we can bounce back strongly. 

“The economy needs temporary help right now to bounce back better so the livelihoods of all Australians are protected.” 

Treasurer Josh Frydenberg said Australia is approaching the economic challenge from the Coronavirus from a position of strength with IMF and the OECD both forecasting Australia to grow faster than comparable countries including the UK, Canada, Japan, Germany and France. 

“Our plan keeps businesses operating, supports jobs and provides a stimulus to households,” the Treasurer said. 

“The Government has worked hard over the last six and a half years to return the budget to balance so we have the flexibility to respond to the serious economic challenges posed by the Coronavirus.” 

“Given Australia’s strong economic and fiscal position, the international credit rating agency Standard and Poor’s indicated that temporary stimulus would be “unlikely to strain Australia’s creditworthiness. 

“In our response, we have been very careful not to repeat the mistakes of previous stimulus programs and not undermine the structural integrity of the budget. 

“Today’s announcement will provide the support businesses need to stay in business and keep Australians in a job. 

“By acting decisively this package will put Australia in the strongest possible position to deal with the economic challenges we face and to make sure our economy bounces back even stronger.” 

Delivering support for business investment 

  • $700 million to increase the instant asset write off threshold from $30,000 to $150,000 and expand access to include businesses with aggregated annual turnover of less than $500 million (up from $50 million) until 30 June 2020. For example, assets that may be able to be immediately written off are a concrete tank for a builder, a tractor for a farming business, and a truck for a delivery business. 
  • $3.2 billion to back business investment by providing a time limited 15 month investment incentive (through to 30 June 2021) to support business investment and economic growth over the short term, by accelerating depreciation deductions. Businesses with a turnover of less than $500 million will be able to deduct an additional 50 per cent of the asset cost in the year of purchase. 

These measures start today and will support over 3.5 million businesses (over 99 per cent of businesses) employing more than 9.7 million employees or 3 in every 4 workers. The measures are designed to support business sticking with investment they had planned, and encouraging them to bring investment forward to support economic growth over the short term. 


Cash flow assistance for businesses 

  • $6.7 billion to Boost Cash Flow for Employers by up to $25,000 with a minimum payment of $2,000 for eligible small and medium-sized businesses. The 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. The payment will be tax free. This measure will benefit around 690,000 businesses employing around 7.8 million people. Businesses will receive payments of 50 per cent of their Business Activity Statements or Instalment Activity Statement from 28 April with refunds to then be paid within 14 days. 
  • $1.3 billion to support small businesses to support the jobs of around 120,000 apprentices and trainees. Eligible employers can apply for a wage subsidy of 50 per cent of the apprentice’s or trainee’s wage for up to 9 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 apprentice. 

Stimulus payments to households to support growth 

  • $4.8 billion to provide a one-off $750 stimulus payment to pensioners, social security, veteran and other income support recipients and eligible concession card holders. Around half of those that will benefit are pensioners. The payment will be tax free and will not count as income for Social Security, Farm Household Allowance and Veteran payments. There will be one payment per eligible recipient. If a person qualifies for the one off payment in multiple ways, they will only receive one payment. 

Payments will be from 31 March 2020 on a progressive basis, with over 90 per cent of payments expected to be made by mid-April. 

Assistance for severely-affected regions 

  • $1 billion to support those sectors, regions and communities that have been disproportionately affected by the economic impacts of the Coronavirus, including those heavily reliant on industries such as tourism, agriculture and education. This will include the waiver of fees and charges for tourism businesses that operate in the Great Barrier Reef Marine Park and Commonwealth National Parks. It will also include additional assistance to help businesses identify alternative export markets or supply chains. Targeted measures will also be developed to further promote domestic tourism. Further plans and measures to support recovery will be designed and delivered in partnership with the affected industries and communities. 

The Government is also offering administrative relief for certain tax obligations, including deferring tax payments up to four months. This is similar to relief provided following the bushfires for taxpayers affected by the coronavirus, on a case-by-case basis.  The ATO will set up a temporary shop front in Cairns within the next few weeks with dedicated staff specialising in assisting small business. In addition, the ATO will consider ways to enhance its presence in other significantly affected regions to make it easier for people to apply for relief, including considering further temporary shop fronts and face-to-face options. 

The Government’s economic support package is proportionate, timely and scalable to respond to the economic challenges presented by the spread of the coronavirus. 

Through our response today and the actions we have taken to bring the Budget back to balance over the last six and a half years, Australians can be confident that our nation is one of the best prepared to respond to the economic impacts of the coronavirus. 

MEDIA RELEASE
12 Mar 2020

Superannuation Amnesty – Now Law

This week the Parliament passed legislation to enact the Superannuation Amnesty. 

The Amnesty is designed to encourage employers to come forward and disclose past quarters (from 1 July 1992 to 24 May 2018) where they have not paid Superannuation Guarantee (SG) to employees in full (i.e. an SG shortfall still exists). 

The Amnesty period in which employers can come forward is from 24 May 2018 and ends six months after the date the legislation receives Royal Assent (therefore until at least late August 2020). 

Under the Amnesty, the employer in coming forward will enjoy the following benefits: 

  • Tax deductions for payments of the SG Charge (these would otherwise not be tax deductible) 
  • No administrative penalty of $20 per employee 
  • No Part 7 penalties (which could otherwise be 200% of the SG Charge owing). 

It is anticipated more than 7,000 additional employers will come forward now that the legislation has passed. 

Given that SG non-compliance can now be more easily detected by the ATO, non-complying employers should strongly consider their options. 

Employers who do wish to take advantage of the Amnesty should contact the ATO.