Tag: Business

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. 

 

2019 Federal Budget Wrap

Following is a brief summary of some of the headline Budget measures.

BUSINESS

*         Instant Asset Write-Off Boosted and Expanded – Two key changes have been made:

o    The write-off has been extended to medium-sized businesses (those with an aggregated annual turnover of less than $50 million.

o    The threshold has been increased to $30,000.

Therefore, subject to legislation, businesses with an aggregated turnover of less than $50 million will be able to immediately deduct purchases of eligible assets costing less than $30,000 that are purchased and then first used, or installed ready for use, from Budget night (2 April 2019) to 30 June 2020.

*         Division 7A Changes Deferred – The Government’s proposed Division 7A changes will be deferred by 12 months to 1 July 2020. To recap, Division 7A is designed to prevent profits or assets being provided to shareholders or their associates tax-free. You can read more about these proposed changes – which are not yet even in draft legislative form – on the ATO website.<https://www.ato.gov.au/General/New-legislation/In-detail/Other-topics/Targeted-amendments-to-Division-7A/>

*         Crackdown on Unpaid Tax and Super by Larger Businesses – The Government will provide more than $40 million to the ATO to recover unpaid tax and Superannuation Guarantee owed by larger businesses.

*         Strengthening ABN Rules – This measure imposes new compliance obligations on ABN holders to retain their ABN. From 1 July 2021, ABN holders with an income tax return obligation will be required to lodge their income tax return and from 1 July 2022 confirm the accuracy of their details on the Australian Business Register annually.

*         Tackling Sham Contracting – The Government will provide more than $9 million to establish a dedicated unit within the Fair Work Ombudsman to address sham contracting. This is where employers seek to avoid statutory obligations and employment entitlements (such as paid leave and superannuation) by misrepresenting employer/employee relationships as independent contracts.

PERSONAL TAX CHANGES

*         Income Tax Cuts by Increasing Tax Offset – Subject to the passage of legislation, tax relief will be granted to individuals via the non-refundable low and middle income tax offset (LMITO). The LIMTO will increase from a current maximum of $530 per year to $1,080. Further, the base rate will increase from $200 to $255 per year for 2018/2019 through to 2021/2022. Depending on your level of income, the changes will benefit individuals as follows:

o    The LMITO will now provide a reduction in tax of up to $255 for taxpayers with a taxable income of $37,000 or less.

o    Between taxable incomes of $37,000 and $48,000, the value of the offset will increase at a rate of 7.5 cents per dollar to the maximum offset of $1,080.

o    Taxpayers with taxable incomes between $48,000 and $90,000 will be eligible for the maximum offset of $1,080.

o    For taxable incomes of $90,000 to $126,000 the offset will phase out at a rate of 3 cents per dollar.

The LMITO will be enjoyed straight after individuals lodge their income tax returns for the above years.

*         Income Tax Cuts via Rate and Threshold Changes – The following changes are slated for future income years:

o    From 1 July 2022, an increase to the top threshold of the 19% personal income tax bracket from$41,000 to $45,000.

o    From 1 July 2022, an increase in the low income tax offset (LITO) from $645to $700.

*         New Deductible Gift Recipients (DGRs) Approved – The following organisations have been granted DGR status from 1 July 2019 to 30 June 2024: Australian Academy of Law, China Matters Limited, Foundation Broken Hill Limited, Motherless Daughters Australia Limited, Superannuation Consumers Centre Limited, and The Headstone Project (Tasmania) Incorporated. The Government will also establish a deductible gift recipient (DGR) general category to enable Men’s Sheds and Women’s Sheds to access DGR status from 1 July 2020.

SUPERANNUATION CHANGES

  *   Removal of Work Test for Certain Taxpayers – The current superannuation work test will be removed for people aged 65 and 66 from 1 July 2020.

  *   Extending Eligibility for the Bring-Forward Cap – From 1 July 2020, access to the bring-forward cap will be extended from taxpayers aged less than 65 years of age to those aged 65 and 66.

  *   Increase to Age Limit for Spouse Contributions – The age limit for spouse contributions will increase from 69 to 75 from 1 July 2020.