Employers looking to enrol for the first two JobKeeper fortnights have now been granted a further extension of time to enrol and pay employees.
The ATO has now announced an extension of time for employers who wish to enrol for the first two JobKeeper fortnights to 31 May, an extension from 30 April.
Crucially, for the first two fortnights that run from 30 March to 12 April, and 13 April to 26 April, the ATO will now accept the late payments of the minimum $1,500 per fortnight as long as they are paid by 8 May.
“This means that you can make two fortnightly payments of at least $1,500 per fortnight by 8 May, or a combined payment of at least $3,000,” said the ATO in an update on Monday.
The Institute of Public Accountants general manager of technical policy Tony Greco said the payment extension was particularly welcome, considering how the previous deadline of 30 April was hard for employers to meet.
“The onus was on the employer to make the payment and then hope the employee is eligible, so they are taking a leap of faith and if they didn’t make the payment, they wouldn’t get the reimbursement,” Mr Greco said.
“If this date is not met, then the employer will lose the JobKeeper reimbursement and, more importantly, their employees may also be denied the benefit of the first two fortnight payments which will be an unnecessary loss assuming both the employer and employee are eligible.”
The extension in time to meet the wage condition comes after the ATO registered the alternative tests late last week and the Treasurer revealing that further changes would be made to the JobKeeper rules.
Assistant Treasurer Michael Sukkar said the extension would help the 500,000 businesses that have now enrolled for the JobKeeper scheme pay more than 3 million employees in time.
“This extension allows businesses further time to consider their circumstances and remove any cash-flow pressures arising from financing arrangements that have not been finalised,” Mr Sukkar said.
“Importantly, this extension does not negate the obligation on businesses to ensure they continue to pay eligible employees $1,500 in each JobKeeper fortnight.
“Businesses have until 31 May 2020 to formally enrol to claim JobKeeper payments. However, the sooner an employer pays their staff for April and enrols, the sooner the ATO can reimburse them the JobKeeper payments.
With the major banks now stepping up with dedicated JobKeeper hotlines to provide bridging finance to businesses ahead of the ATO’s reimbursement, Mr Greco said it was pleasing to see the Tax Office adopt a flexible approach to give employers more time to meet the first payment date.
“There are a lot of dates flying around and this could be lost in translation,” he said. “It is a very simple message, but I think everyone is working at a rate of knots that simple messages have just been lost.”
28th April 2020
Businesses will be able to use their usual cash or accruals method to calculate projected and current GST turnover for the JobKeeper turnover test, as the ATO provides updated guidance.
The Tax Office has now released further guidance on the basic decline in turnover test based on GST turnover.
According to the ATO, an entity will need to follow five steps to satisfy the test, namely: identify the turnover test period; identify the relevant comparison period; work out the relevant GST turnover; determine which shortfall percentage applies; and determine if GST turnover has fallen by the specified shortfall percentage.
In clarifying the method to account for GST, the ATO highlights that entities “may use an accruals basis of accounting to calculate both the current GST turnover and projected GST turnover as both calculations require you to include sales that you have made or are likely to make without any reference to when you are paid”.
“However, if you prepare your activity statements on a cash basis, the ATO will allow you to calculate both the current and projected GST turnovers on a cash basis. The basis used must be the same for calculating your projected and current GST turnover,” the ATO said.
Businesses with an aggregated turnover of $1 billion or less will need to determine a shortfall of 30 per cent or more in turnover, while those with a turnover of more than $1 billion will need to confirm a 50 per cent fall in turnover, and ACNC-registered charities will need to show a shortfall of 15 per cent or more.
Waiting on further guidance
While enrolment for the JobKeeper payment starts today, the profession continues to wait on clarification on how the turnover test will apply to those who are not registered for GST.
Likewise, information on the alternative test for entities where there is not an appropriate relevant comparison period has yet to be released.
However, the ATO will soon be making a legislative instrument to determine eligibility for new businesses in operation for less than a year, and some other circumstances such as businesses who had a temporary fall in turnover in 2019 due to drought.
“This is applicable to situations where there is something out of the ordinary about the relevant comparison period in 2019 that means it is not appropriate for the purpose of an entity in the class of entities satisfying the fall in turnover test,” the ATO said.
“For example, an entity being subject to a severe drought from 2018 until September 2019 that reduced the amount of its crop that it could grow.
“Similarly, a relevant comparison period may not be appropriate for a business where it has had major structural business changes after the relevant comparison period.”
20th April 2020
The government’s $130 billion JobKeeper program has now passed both houses of parliament as the profession continues to wait on further guidance from the Treasurer and the Commissioner of Taxation.
A special one-day sitting of Parliament has now approved the Coronavirus Economic Response Package (Payments and Benefits) Bill 2020 late Wednesday evening, giving rise to the centrepiece of the government’s $214 billion economic stimulus package.
The JobKeeper program will see up to 6 million Australians benefiting from a $1,500 wage subsidy, paid to their employers on a fortnightly basis.
Speeding through the parliamentary process with bipartisan support, the legislation provides the Treasurer with the power to make rules to provide for payments administered by the Commissioner of Taxation.
These rules, which set out the eligibility criteria and reporting obligations, were initially released by Treasury in the form of an exposure draft but have since been pulled down as of Wednesday evening.
It remains to be seen when Treasury will make the rules available on its website.
The legislation also provides the Treasurer to give extensive powers to the commissioner in order to provide flexibility to the program in the face of rapidly changing circumstances.
One particular area of discretion for the commissioner will be the application of an alternative turnover test for businesses that demonstrate there is no appropriate comparison period for the decline in turnover test.
Leading tax lawyer Clint Harding of Arnold Bloch Leibler believes the commissioner will now be pushed to provide clear guidance on the rules, particularly around the eligibility criteria when employers do not meet the decline in turnover test.
“The need for timely and clear guidance from the commissioner has arguably never been so important,” Mr Harding said.
“I think providing clarity around the testing for eligibility and what additional information he will consider when determining if a business has been adversely impacted by the coronavirus will be high on the commissioner’s list for urgent guidance.
“Some guidance around the timing of that eligibility testing will also be critical.”
Likewise, TaxBanter senior tax trainer Robyn Jacobson believes the ATO will have its work cut out as it races against time to provide guidance to the profession.
“Ordinarily, it would be outrageous for legislation to be tabled, debated and passed in one day without being first released in exposure draft form to provide the profession with an opportunity to provide comment and make submissions, but we understand why this is the case,” Ms Jacobson said.
“Clearly, the legislative framework will be put in place as quickly as possible by Parliament, but it provides the ATO with a very small window in which to get their head around the rules and provide the necessary guidance to practitioners.”
CPA Australia’s Paul Drum said the professional bodies would now work closely with the Treasurer and the ATO on the delivery phase of the JobKeeper program.
“In these unprecedented times, the legislation introduces wide-ranging powers for both the Treasurer and the Tax Commissioner,” Mr Drum said.
“The Treasurer now has the power to determine amounts, recipients and thresholds for the scheme, and to sub-delegate the power to issue legislative or administrative instruments to the commissioner until 31 December 2020.
Importantly, this will enable nuances to be fixed and for calibration where necessary.”
Contrived schemes and consequences
The legislation also makes clear that anyone who enters into or carries out a scheme for the sole or dominant purpose of obtaining a coronavirus economic response payment will face a wide range of administrative and criminal sanctions, including up to 10 years’ imprisonment.
“Inevitably, there’ll be shonks touting contrived schemes designed to exploit JobKeeper,” said Chartered Accountants Australia and New Zealand tax leader Michael Croker.
“However, the legislation empowers the commissioner to call out ‘any change in the financial position of any entity’ as part of a scheme designed to improperly pocket JobKeeper cash, and the ATO has extensive payback powers.
“The legislation has clawback rules empowering the ATO to recover overpaid amounts and target those who weren’t entitled to payments received, plus interest.”
Treasury’s simplified JobKeeper outline
The JobKeeper payment is intended to assist businesses affected by the coronavirus to cover the costs of wages of their employees.
The JobKeeper scheme starts on 30 March 2020 and ends on 27 September 2020.
A business that has suffered a substantial decline in turnover can be entitled to a JobKeeper payment of $1,500 per fortnight for each eligible employee. It is a condition of entitlement that the business has paid salary and wages of at least that amount to the employee in the fortnight.
A business can also be entitled to a JobKeeper payment of $1,500 per fortnight for one business participant who is actively engaged in operating the business.
The JobKeeper scheme is administered by the Commissioner of Taxation.
The commissioner pays the JobKeeper payment to entities shortly after the end of each calendar month, for fortnights ending in that month.
Treasury guidance and fact sheets can be accessed on the following link: –
You can register your interest for the JobKeeper payment with the ATO on the following link: – https://www.ato.gov.au/general/gen/JobKeeper-payment/
Small and medium businesses will now be granted rental waivers and deferrals under a mandatory Code of Conduct unveiled by Prime Minister Scott Morrison
Under the Code of Conduct, landlords will be required to reduce rent proportionate to the trading reduction in the tenant’s business caused by the coronavirus pandemic through a combination of waivers of rent and deferrals of rents.
Landlords must offer waivers of rent no less than 50 per cent, while the balance must be in the form of a rental deferral.
The payment of the rental deferrals must be amortised over the balance of the lease term and for a period of no less than 24 months.
The code will cover commercial tenancies, including retail, office and industrial, and will be eligible for SME tenants with an annual turnover of up to $50 million.
These SME tenants must also qualify for the government’s JobKeeper program.
The code will come into effect in all states and territories from 3 April and will run for the period the JobKeeper program remains operational.
Mr Morrison said the arrangements would be overseen through a binding mediation process run by the states and territories.
“The point here is simple: it’s the same request we made of landlords and tenants about 10 days or so ago when I stood up on this issue, and that is that they sit down and they work it out,” Mr Morrison said.
“Landlords must not terminate the lease or draw on a tenant’s security. Likewise, tenants must honour the lease.
“What this does is it preserves the lease, it preserves the relationship, it keeps the tenant in their property and it keeps a tenant on the lease, which is also good for the landlord, and it preserves the lease that is in place that underpins the value of those assets.
“This is seen as a proactive, a constructive and co-operative mechanism for landlords and tenants to see this through together.”
JOBKEEPER PAYMENT — INFORMATION FOR EMPLOYERS
Last updated: 30 March 2020
ECONOMIC RESPONSE TO THE CORONAVIRUS
OBLIGATIONS ON EMPLOYERS
To receive the JobKeeper Payment, employers must:
- Register an intention to apply on the ATO website and assess that they have or will experience the required turnover decline.
- Provide information to the ATO on eligible employees. This includes information on the number of eligible employees engaged as at 1 March 2020 and those currently employed by the business (including those stood down or rehired). For most businesses, the ATO will use Single Touch Payroll data to pre-populate the employee details for the business.
- Ensure that each eligible employee receives at least $1,500 per fortnight (before tax). For employees that were already receiving this amount from the employer then their income will not change. For employees that have been receiving less than this amount, the employer will need to top up the payment to the employee up to $1,500, before tax. And for those employees earning more than this amount, the employer is able to provide them with a top-up.
- Notify all eligible employees that they are receiving the JobKeeper Payment.
- Continue to provide information to the ATO on a monthly basis, including the number of eligible employees employed by the business.
BACKGROUND ON JOBKEEPER PAYMENT
Under the JobKeeper Payment, businesses impacted by the Coronavirus will be able to access a subsidy from the Government to continue paying their employees. Affected employers will be able to claim a fortnightly payment of $1,500 per eligible employee from 30 March 2020, for a maximum period of 6 months.
Employers will be eligible for the subsidy if:
- their business has a turnover of less than $1 billion and their turnover will be reduced by more than 30 per cent relative to a comparable period a year ago (of at least a month); or
- their business has a turnover of $1 billion or more and their turnover will be reduced by more than 50 per cent relative to a comparable period a year ago (of at least a month); and
- the business is not subject to the Major Bank Levy.
The employer must have been in an employment relationship with eligible employees as at 1 March 2020, and confirm that each eligible employee is currently engaged in order to receive JobKeeper Payments.
Not-for-profit entities (including charities) and self-employed individuals (businesses without employees) that meet the turnover tests that apply for businesses are eligible to apply for JobKeeper Payments.
Eligible employees are employees who:
- are currently employed by the eligible employer (including those stood down or re-hired);
- were employed by the employer at 1 March 2020;
- are full-time, part-time, or long-term casuals (a casual employed on a regular basis for longer than 12 months as at 1 March 2020);
Last updated: 30 March 2020 2
- are at least 16 years of age;
- are an Australian citizen, the holder of a permanent visa, a Protected Special Category Visa Holder, a non-protected Special Category Visa Holder who has been residing continually in Australia for 10 years or more, or a Special Category (Subclass 444) Visa Holder; and
- are not in receipt of a JobKeeper Payment from another employer.
If your employees receive the JobKeeper Payment, this may affect their eligibility for payments from Services Australia as they must report their JobKeeper Payment as income.
Businesses with employees
Initially, employers can register their interest in applying for the JobKeeper Payment via ato.gov.au from 30 March 2020.
Subsequently, eligible employers will be able to apply for the scheme by means of an online application. The first payment will be received by employers from the ATO in the first week of May.
Eligible employers will need to identify eligible employees for JobKeeper Payments and must provide monthly updates to the ATO.
Participating employers will be required to ensure eligible employees will receive, at a minimum, $1,500 per fortnight, before tax.
It will be up to the employer if they want to pay superannuation on any additional wage paid because of the JobKeeper Payment.
Further details for businesses for employees will be provided on ato.gov.au.
Businesses without employees
Businesses without employees, such as the self-employed, can register their interest in applying for JobKeeper Payment via ato.gov.au from 30 March 2020.
Businesses without employees will need to provide an ABN for their business, nominate an individual to receive the payment and provide that individual’s Tax File Number and provide a declaration as to recent business activity.
People who are self-employed will need to provide a monthly update to the ATO to declare their continued eligibility for the payments. Payment will be made monthly to the individual’s bank account.
Further details for the self-employed will be provided on ato.gov.au. Employer with employees on different wages
Adam owns a real estate business with two employees. The business is still operating at this stage but Adam expects that turnover will decline by more than 30 per cent in in the coming months. The employees are:
• Anne, who is a permanent full-time employee on a salary of $3,000 per fortnight before tax and who continues working for the business; and
• Nick, who is a permanent part-time employee on a salary of $1,000 per fortnight before tax and who continues working for the business.
Adam is eligible to receive the JobKeeper Payment for each employee, which would have the following benefits for the business and its employees:
• The business continues to pay Anne her full-time salary of $3,000 per fortnight before tax, and the business will receive $1,500 per fortnight from the JobKeeper Payment to subsidise the cost of Anne’s salary and will continue paying the superannuation guarantee on Anne’s income;
Early release of superannuation for COVID-19: Details on eligibility
A set of bills now in Parliament, otherwise known as an omnibus bill, spells out the government’s response to the COVID-19 crisis. Schedule 13 of the omnibus bill amends the SIS Regulations and RSA Regulations to allow individuals affected by the coronavirus to have up to $10,000 released from their superannuation or retirement savings account on compassionate grounds.
Each person is permitted to apply for determinations to have up to two releases — one for an application made during the 2019-20 financial year and another for an application made during the 2020-21 financial year. This means a person may have up to $20,000 released in total over the two income years.
Schedule 13 also amends the Income Tax (Transitional Provisions) Act 1997 to ensure that any such amounts that are released are not subject to tax.
These measures will take effect on the day after the omnibus bill receives royal assent.
The legislation states that to apply for the determination for such early releases, the person must satisfy any one of the following requirements about their employment or business status.
At the time the person applies for the determination, they are:
- eligible to receive a job seeker payment, youth allowance for jobseekers,
- parenting payment (which includes the single and partnered payments) or
- special benefit under the Social Security Act; or
- eligible to receive the farm household allowance under Farm Household
- Support Act 2014; or
- On or after 1 January 2020 the person:
- was made redundant;
- their working hours were reduced by 20% or more; or
- if the person is a sole trader – their business was suspended or there was a reduction in their turnover of 20% or more.
The government says these requirements ensure that access to the early release of superannuation on this additional compassionate ground is targeted to those individuals who have been affected by the adverse economic impacts of COVID-19.
Steps the ATO is taking through COVID-19 to help Australian taxpayers
The ATO has committed to implement a series of administrative steps to help Australian taxpayers who will go through financial difficulty as a result of the COVID-19 pandemic.
The Commissioner Chris Jordan is encouraging businesses affected by the coronavirus to get in touch with the ATO to discuss relief options. “We know that many businesses and communities are being heavily affected by the challenging economic conditions created by the outbreak ofCOVID-19,” he said.
“The ATO will work shoulder-to-shoulder with businesses to assist them through this difficult period and do what we can to ease the pressure. Once you contact us, we’ll tailor a support plan for your needs and circumstances,” Jordan said.
“Support measures could include deferral of some payments, quicker access to GST refunds, and options to enter low interest payment plans for existing or future tax debts.”
The ATO flags that it understands this is a time of significant uncertainty, and that it realises it will need to be flexible in how it helps out businesses.
It reminds that the following options available to assist businesses impacted by COVID-19.
- Deferring by up to six months the payment date of amounts due through a BAS (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise
- Allow businesses on a quarterly reporting cycle to opt into monthly GST reporting in order to get quicker access to GST refunds they may be entitled to Allowing businesses to vary Pay As You Go (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 for the September 2019 and December 2019 quarters
- Remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities The ATO will work with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
- Employers will still need to meet their ongoing SG obligations for their employees.
To make it easier for people to apply for relief, the ATO will be increasing its presence in the areas of highest impact. It says a temporary shopfront with staff specialising in assisting small business will be established in Cairns within the next few weeks. In addition, it is looking at the ways it can enhance its presence in other significantly affected regions, making it easier for people to apply for relief. Additional temporary shopfronts and face-to-face options are currently under consideration.
The ATO will also continue to work with the tax profession, other government agencies and local organisations to make sure other affected communities are also supported during this time. It says it will “ensure its services are tailored to the needs of the community and will work with taxpayers and their tax agents to tailor support to their individual circumstances”.
Outside of business, the ATO will also work with individuals experiencing financial hardship, and their tax agents, and will apply appropriate tax relief measures for serious and exceptional circumstances, such as where people cannot pay for food or accommodation.
Unlike the bushfire relief measures, which applied automatically to particular geographic areas, assistance measures for those impacted by COVID-19 will not be automatically implemented.
Anyone impacted by COVID-19 is advised to contact the ATO to request assistance on its Emergency Support Infoline 1800 806 218, when they are ready, to discuss their situation.
Government’s Stimulus Package in response to the Coronavirus
Editor: What a changed world we are living in as we all try to navigate the challenges arising from the current Coronavirus Pandemic, including protecting the health and safety of our friends and family, and the viability of our businesses, employment and investments.
The purpose of this communication is to provide you with an update relating to the Government’s Economic Stimulus Package in response to the Coronavirus. Our office will continue to apply its available resources to assist and support you where we can through this uncertain period as we attempt to survive the ever changing restrictions we are all dealing with.
The following is a broad summary of the key aspects of the Federal Government’s stimulus package in response to the Coronavirus, as recently announced and enacted.
These measures were implemented via various Bills introduced into Parliament, which very quickly received Royal Assent on 24 March 2020 (including the Coronavirus Economic Response Package Omnibus Bill 2020), so as to give effect to the Government’s stimulus package.
Income support for individuals
Various measures have been introduced so as to provide a ‘safety net’ for individuals who are financially impacted by the Coronavirus.
The new Coronavirus supplement
A new six-month ‘Coronavirus supplement’ of $550 per fortnight will be paid to individuals who are currently eligible for certain income support payments, including the:
- Jobseeker Payment;
- Youth Allowance; and
- Parenting Payment (Partnered and Single)
Furthermore, it appears that this new (additional) supplement will be paid to eligible individuals as part of their existing income support payments (e.g., Jobseeker Payment and Youth Allowance).
Expanding access (and eligibility) to certain income support payments
For the period that the Coronavirus supplement is paid, the Government will also expand access to certain income support payments (e.g., the Jobseeker Payment, the Youth Allowance Jobseeker and the Parenting Payment) for eligible individuals.
For example, a new category of Jobseeker Payment and Youth Allowance Jobseeker will become available for eligible individuals financially impacted by the Coronavirus.
According to the Government, this could include, for example, permanent employees who are stood down or lose their employment; sole traders; the self-employed; casual workers; and contract workers who meet the income tests, as a result of the economic downturn due to the Coronavirus.
Additionally, asset testing for the JobSeeker Payment, the Youth Allowance Jobseeker and the Parenting Payment will be waived for the period of the Coronavirus supplement. Income testing will still apply to the person’s other payments, consistent with current arrangements.
Tax-free payments of $750 to eligible recipients
The Government will be providing two separate $750 tax-free payments (referred to as ‘economic support payments’) to social security, veteran and other income support recipients and to eligible concession card holders.
The first $750 payment will be available to individuals who are residing in Australia and are receiving an eligible Government payment, or are the holders of an eligible concession card, at any time from 12 March 2020 to 13 April 2020 (inclusive). This payment will be made automatically to eligible individuals from 31 March 2020.
The second $750 payment will be available to individuals who are residing in Australia and are receiving one of the eligible Government payments or are the holders of one of the eligible concession cards on 10 July 2020 (except for those receiving an income support payment that qualifies them to receive the $550 fortnightly Coronavirus supplement). This payment will be made automatically to eligible individuals from 13 July 2020.
Each of the $750 payments will be exempt from income tax and will not count as income for the purposes of Social Security, the Farm Household Allowance and Veteran payments.
Early access to superannuation benefits
The Government will introduce a new compassionate ground of release that will allow individuals to access their superannuation entitlements where those benefits are required to assist them to deal with the adverse economic effects of the Coronavirus, but only where one or more of the following requirements are satisfied:
- The individual is unemployed.
- The individual is eligible to receive the Jobseeker Payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), Special Benefit or Farm Household Allowance.
- On or after 1 January 2020 either:
- the individual was made redundant; or
- the individual’s working hours werereduced by at least 20%; or
- if the individual is a sole trader – their business was suspended or there was a reduction in the business’s turnover of at least 20%.
Under this new compassionate ground of release, eligible individuals will be able to access (as a lump sum) up to $10,000 of their superannuation entitlements before 1 July 2020, and a further $10,000 from 1 July 2020 (subject to a six-month time frame).
Eligible individuals who are looking to access their superannuation entitlements under the above new ground of release will be able to apply directly to the ATO through the myGov website (at www.my.gov.au) and certify that the relevant eligibility criteria is satisfied.
Editor: Importantly, such lump sum superannuation withdrawals under this new compassionate ground of release will not be taxable to the recipient (i.e., they will be tax-free). Also, according to the Government, the amount withdrawn will not affect Centrelink or Veteran’s Affairs payments.
Reducing the minimum drawdown amounts for superannuation pensions
The Government will be temporarily reducing the superannuation minimum drawdown amounts for account-based pensions and similar products by 50% for the 2020 and 2021 income years.
Editor: This basically means that the total minimum annual pension amount that a superannuation fund is otherwise required to pay to a member receiving a pension from the fund (e.g., an account-based pension) will be reduced by half for these two income years.
Reducing social security deeming rates
From 1 May 2020, the Government will be reducing both the upper and lower social security deeming rates by a further 0.25 percentage points. This is in addition to the recent 0.5 percentage point reduction, resulting in an overall reduction to the social security deeming rates of 0.75 percentage points.
On this basis, as of 1 May 2020, the upper deeming rate will be reduced from 3% to 2.25%, and the lower deeming rate will be reduced from 1% to 0.25%.
Editor: These reductions reflect the low interest rate environment and its impact on the income from savings. Broadly speaking, the social security deeming rates apply (for ‘income test’ purposes) to determine the amount of income that an individual is ‘deemed’ (or taken to) earn from
financial investments (e.g., cash deposits and listed securities), irrespective of the actual amount of income (e.g., interest income and dividend income) earned by the individual. In most cases, the deeming rates apply for the purposes of applying the Age Pension ‘income test’.
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., thedate 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.
COVID-19: Federal Government Stimulus Provides Tax Support for Businesses
The Federal Government has so far announced two targeted stimulus packages to assist Australian businesses and individuals to deal with the impact of COVID-19 or coronavirus.
The measures have the potential to provide significant cash flow benefits to businesses in the short term funded predominantly through the tax system.
Here are the tax measures that apply to businesses and how they can claim the benefits:
Expansion of instant asset write-off
The Government has increased the instant asset write off threshold from $30,000 per asset to $150,000 per asset, and extended access to the write off to all businesses with an aggregated annual turnover of less than $500 million.
This measure will apply to all purchases made from 12 March 2020 to 30 June 2020.
Note that this tax break is not an immediate cash hand-out, but rather is a deduction that reduces taxable profit. Therefore, taxable business will only obtain the cash flow benefit when they lodge the 2020 tax return, although they can vary the March and June 2020 quarters PAYG tax instalments to obtain an immediate cash flow benefit.
Business investment incentive – accelerated depreciation deductions
Where asset purchases are not eligible under the above instant asset write off provisions, an additional 50% of the asset cost will be deductible in the year of purchase. Existing depreciation rules would continue to apply to the balance of the asset’s cost.
Business with an aggregated annual turnover of less than $500 million will be able to access this investment incentive for assets acquired from 12 March 2020 to 30 June 2021.
Like the instant asset write-off, this take break is not an immediate cash hand-out and therefore can only be claimed as a deduction through the tax system
PAYG withholding support for SME employers & not-for-profits
SME employers and eligible not-for-profit organisations (including charities) with an annual aggregated turnover of less than $50 million which employ workers will have access to a tax credit of up to $50,000 of the PAYGW declared in the April and June 2020 activity statements. Similar rules apply for SME’s and not-for-profits that lodge activity statements monthly.
A minimum credit of $10,000 will apply even if there is no requirement to deduct PAYGW.
An additional credit will apply in the July – October 2020 period, where eligible entities will receive an additional amount equal to the total of all Credits they have received up to the six period ending 30 June 2020. Accordingly, eligible businesses and not-for-profits will receive a total credit ranging from a minimum of $20,000 up to a maximum of $100,000.
These credits will be automatically applied to the business or instalment activity statement and any refund will reportedly be paid within 14 days of lodging the activity statement.
Business owners who operate through companies or trusts may consider paying themselves an additional salary or bonus rather than taking a dividend or trust distribution in order to take advantage of this measure. Note on-costs including payroll tax, workcover and the superannuation guarantee will apply.
Cash payments to SME employers – subsidies for apprentices and trainees
Small businesses with less than 20 full-time employees that employ apprentices and trainees can apply for a wage subsidy of up to 50% of an apprentice’s or trainee’s wages for the 9-month period from 1 January 2020 to 30 September 2020.
The subsidy will also be available to new employers who retain apprentices of another small business where that other small business could not. However, it is not clear whether the new employer also needs to be a small business for tax purposes.
Small businesses will need to register a claim for the subsidy before 31 December 2020 and satisfy an assessment by an Australian Apprenticeship Support network provider.
While the subsidy only covers the period to 30 September 2020, this may result in a significant cash flow saving to a business looking to make an investment in certain skilled workers.
The ATO has announced a number of specific concessions that may be available to businesses impacted by the coronavirus including:
deferring (by up to four months) the payment date of amounts due through the BAS (including PAYG instalments), income tax assessments, fringe benefits tax assessments and excise;
allowing businesses on a quarterly reporting cycle to opt into monthly GST reporting to get quicker access to GST refunds;
allowing businesses to vary PAYG instalment amounts to zero for the April 2020 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;
remitting any interest and penalties, incurred on or after 23 January 2020, that have been applied to tax liabilities; and
working with affected businesses to help them pay their existing and ongoing tax liabilities by allowing them to enter into low interest payment plans.
Importantly employers still need to meet their ongoing super guarantee obligations for their employees.
Temporary early release of superannuation
Certain individuals affected by the coronavirus can access up to $10,000 of their superannuation in 2019-20 and a further $10,000 in 2020-21. Individuals will not pay tax on amounts released and the money they withdraw will not affect Centrelink or Veterans’ Affairs payments. The criteria for accessing super early is that any one of the following conditions need to be satisfied:
You are unemployed.
You are eligible to receive a Jobseeker payment, Youth Allowance for jobseekers, Parenting Payment (which includes the single and partnered payments), special benefit or Farm Household Allowance.
You were made redundant on or after 1 January 2020.
Your working hours were reduced by 20 per cent or more on or after 1 January 2020.
If you are a sole trader, your business was suspended, or there was a reduction in your turnover of 20 per cent or more on or after 1 January 2020.
Individuals eligible for early release can apply directly to the ATO through the myGov website, where they will need to certify that the above eligibility criteria are satisfied.
This information is provided as a guide only and is not intended to constitute advice whether legal or professional. You should obtain appropriate advice concerning your particular circumstances.
Adel EL Hassan & Co and its representatives disclaim all liability for any loss or damage to any person or organisation, whether a user of this site or not, for the consequences of anything done or omitted to be done by any such person relying on this information.
Fresh $66bn package reveals bigger cash payments, access to super
Larger cash payments to small businesses and temporary access to superannuation have now been revealed in the second tranche of the government’s economic support package in response to the coronavirus threat.
Prime Minister Scott Morrison has now unveiled a $66.1 billion support package, just 10 days after he announced an initial $17.6 billion package that included a supercharged instant asset write-off and SME cash payments.
The second stimulus package will now build on the initial tax-free cash payments to small and medium businesses, rising to up to $100,000, with a minimum payment of $20,000, up from the previously announced $25,000 and $2,000 limits.
The measure, which will be available to entities with aggregated annual turnover munder $50 million that employ workers, has also now been extended to not-for profits and charities.
The enhanced scheme will be delivered in two phases: Firstly, with employers set to receive a first payment equal to 100 per cent of their salary and wages withheld, up to a maximum of $50,000, when businesses lodge their activity statements for the 28 April and 28 July quarterly due dates.
Eligible businesses that pay salary and wages will receive a minimum payment of $10,000, even if they are not required to withhold tax.
Secondly, an additional payment equal to the first payment will be made after businesses lodge their BAS by the 28 July and 28 October quarterly due dates.
For example, a business that receives $50,000 for the period up to June will subsequently receive another $50,000 for the period up to September upon lodgement of their BAS.
Monthly BAS lodgers will receive the first payment for the March 2020, April 2020, May 2020 and June 2020 lodgements, with a 300 per cent calculation in the March activity statement to provide the same treatment as quarterly lodgers.
The second payment for monthly BAS lodgers will be released once they lodge their June 2020, July 2020, August 2020 and September 2020 lodgements.
All entities are required to be active to receive the payment, with the measure set to benefit around 690,000 businesses employing around 7.8 million people, and around 30,000 NFPs.
The expanded scheme is estimated to cost $31.9 billion over the forward estimates period.
Temporary insolvency relief
Directors will now be temporarily relieved of their duty to prevent insolvent trading with respect to any debts incurred in the ordinary course of the company’s business, with the measure set to run for six months.
According to Treasury, egregious cases of dishonesty and fraud will still be subject to criminal penalties. Any debts incurred by the company will still be payable by the company.
Further, the government will increase the current minimum threshold for creditors issuing a statutory demand on a company under the Corporations Act 2001 from $2,000 to $20,000 for six months.
The statutory time frame for a company to respond to a statutory demand will also be extended temporarily from 21 days to six months.
Likewise, the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will temporarily increase from its current level of $5,000 to $20,000.
The time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.
Sole trader support
The government will establish a new $550 fortnightly coronavirus supplement payment.
Permanent employees who are stood down or lose their employment, sole traders, the self-employed, casual workers and contract workers will be able to access the new coronavirus supplement under expanded access to the JobSeeker Payment, formerly known as Newstart.
The supplement will also be paid to both existing and new recipients of the JobSeeker Payment, Youth Allowance jobseeker, Parenting Payment, Farm Household Allowance and Special Benefit.
The payments, set to commence from 27 April, are expected to cost the budget $14.1 billion.
Access to superannuation
Employees who have been made redundant, or those who have their working hours reduced by 20 per cent or more, or sole traders whose businesses have been suspended or see a reduction in turnover by 20 per cent or more will also now be allowed to access up to $20,000 of their superannuation.
Eligible individuals will be able to apply online through myGov to access up to $10,000 of their superannuation before 1 July 2020, and be able to access up to a further $10,000 from 1 July 2020 for approximately three months.
The government will also reduce the minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019–20 and 2020–21 income years.
The measure, similar to the approach taken in the 2008 global financial crisis, will benefit retirees by reducing the need to sell investment assets to fund minimum drawdown requirements.
Deeming rates for pensioners will also be reduced by another 0.25 of a percentage point.
To date, $189 billion has now been thrown to stop the economic fallout of the coronavirus crisis, including the first $17.6 billion package, the Reserve Bank of Australia and the government’s $105 billion pledge to the banks, and the latest $66 billion stimulus package.