Category: News

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.

 

Job Keeper Plan Announced


Prime Minister Scott Morrison, on 30/03/2020, has announced a $130 billion support package to help employers and employees.  

The idea behind these measures is that employers will retain their employees and have them working where they can.  However, if there is no work available due to Coronavirus related downturn or closures, then these employers retain their employees on this payment for up to six months so that employees stay connected to their employers.  

There will be a $1,500 per fortnight Job Keepers Payment. 

  • This will be paid to the employer, who will then pay their employee; 
  • An individual cannot received the Job Seekers Payment as well as the Job Keepers Payment; 
  • This is a flat rate for everyone; 
  • This applies to full time workers, part time workers, sole traders and casual employees that have been with their employer for more than 12 months; 
  • Any employee that has been stood down from 1 March 2020 can be eligible for these payments; 
  • Payments will be made from 1 May 2020 onwards, however, they will be backdated to today, 30 March 2020; 
  • Employers can start making these payments as of today from their own funds, and they will be reimbursed back to today’s date; 
  • Every business will be eligible where they have seen a decrease in turnover of 30% of more (50% if your business turnover is more than $1.1 billion); 
  • Employers must register with the Tax Office to receive these payments (businesses can do this themselves directly on the ATO website, alternatively your bookkeeper can provide assistance, if you do not utilise the services of a bookkeeper, your accountant can provide this assistance); 
  • The ATO will have a registration button on their website ato.gov.au very soon; 
  • The Single Touch Payroll system will be used to process payments to employees; 
  • New Zealander’s on a 444 Visa will be eligible for these payments; 
  • This is intended to be a scheme that lasts for up to six months; 
  • Employers can top up their employees wages; 
  • There is no Super Guarantee paid on this payment. 

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. 

 

Coronavirus stimulus package worth $84 billion passed without objection by Parliament

23/03/20 The Federal Parliament has rushed through $84 billion in financial support for workers, students and businesses affected by the coronavirus outbreak, before wrapping up for a five-month-long break. 

A bare minimum of MPs and Senators came to Canberra for a single day to vote on legislation for the Government’s two rounds of stimulus measures. 

The bills were passed late Monday night without objection in both the House of Representatives and the Senate after some amendments were made. 

“The measures that have been passed by the Parliament today represent the most significant support for the Australian economy and community since the war,” said Treasurer Josh Frydenberg. 

The legislation supports both the first coronavirus economic stimulus package, worth $17.6 billion, and the $66 billion in direct financial support announced in the second package on the weekend

It also includes a raft of other measures to support the economy more broadly, as well as giving the Government flexibility to respond to changing circumstances without needing further legislation. 

Under pressure from Labor and the Greens, the Coalition amended its own legislation to give the social services minister the power to make changes to the stimulus payments, including rates, means testing, eligibility and residency requirements. 

The Government will immediately use those powers to extend the $550 coronavirus supplement to students receiving Youth Allowance, Austudy and Abstudy payments. 

Other than the income test, “there are really very few other requirements” students will have to meet to get support, said Social Services Minister Anne Ruston. 

The Government estimates up to 236,000 students could benefit from the change. 

https://www.abc.net.au/news/2020-03-23/coronavirus-economic-stimulus-passes-parliament/12080388

Key Points
Changes to the Government’s stimulus package include:

Extending the $550 per fornight coronavirus payment to students
New powers to increase or expand payments as needed, including for pensioners, those on disability support payments and carers, jobseekers and people who fall through the cracks
Making it easier for people who lose their job to get support by relaxing the test on their partner’s income

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. 

Low and Middle Income Tax Offset Now Law

The Federal Government’s Personal Income Tax Plan is now officially law. For 2018/2019 (the financial year just gone) the centrepiece of this plan was an increase to the low and middle income tax offset (LMITO) from a maximum $530 to $1,060. 

Taxpayers with a taxable income:  

  *   of $37,000 or below can now receive a LMITO of up to $255  

  *   above $37,000 and below $48,000 can now receive $255, plus an amount equal to 7.5% to the maximum offset of $1,080  

  *   above $48,000 and below $90,000 are now eligible for the maximum LMITO of $1,080  

  *   above $90,000 but is no more than $126,000 are now eligible for a LMITO of $1,080, less an amount equal to three per cent of the excess.  

With Tax Time 2019 just over a week old, 810,000 individual tax returns have now been lodged, an 88% increase from the same time last year – an increase largely attributable to anticipated refund as a result of the increased LMITO. 

Despite the increase, ATO commissioner Chris Jordan has sought to reassure taxpayers that returns will begin flowing through from the end of this week. 

“We were able to work over the weekend to make changes to our systems once the legislation was passed last week,” Mr Jordan said on Tuesday. 

“All safety nets have been lifted from our processing, so our processing is now working absolutely full bore, 100%.” 

“People do not need to do anything special; they just put their return in, and we will calculate their offsets and money will be hitting people’s bank accounts by Friday this week.” 

Now the law has been passed, you may wish to get your 2018/2019 records to your Tax Agent and instruct them to lodge early rather than in the first part of next year (which is the normal lodgement time if lodging with a Tax Agent). By doing so, all other things being equal, you will bring forward your LMITO entitlement with a potential additional refund of up to $1,080 (subject to the above income limits, and subject to not otherwise having underpaid tax during the year). 

If you lodge your own tax return, then remember you do not need to claim the LMITO separately – rather the ATO will process your claim automatically upon lodgement.