ATO JOBKEEPER AUDIT TARGETS

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ATO JOBKEEPER AUDIT TARGETS

The JobKeeper subsidy has progressed beyond the rush for eligibility and entered its second phase: compliance. Late last month, the Australian Taxation Office (ATO) released guidance highlighting where the regulator will focus its compliance resources.

The JobKeeper estimates error
Hindsight is a dangerous lens as Treasury discovered last month announcing that the number of employees expected to be covered by the JobKeeper scheme was overstated in the original announcement by approximately 3 million. The overstatement reflects “the level and impact of health restrictions not having been as severe as expected and their imposition not having been maintained for as long as expected at the time,” the Treasury statement says.

At the time of the Treasury estimates, not long after the country went into lockdown, we simply did not know what to expect. The first stimulus measures had been announced and long queues formed in front of Centrelink offices. Supermarket shelves were being stripped of essentials. Alarming daily global updates showed the virus spreading unimpeded in many parts of the world. China demonstrated the need for fast, severe and extended lockdowns to remove the possibility of community transmission. For Australia, there was no appetite to wait and see what might happen as other countries with devastating death rates did. We acted swiftly and we have reaped the benefits of that action with a low death rate, albeit at an economic cost. For many businesses, estimating the potential impact of the pandemic, the expectations were the same – fast, severe and extended. Now, with the JobKeeper scheme entering a compliance phase, we need to go back and point to the facts that supported the estimates declared to the ATO.

The ATO’s JobKeeper targets
The ATO is looking carefully at businesses that appear to have made adjustments to their circumstances to meet the JobKeeper eligibility requirements where, if those adjustments had not been made, the entity would have been ineligible or had lower JobKeeper payments. Or, where adjustments have been made to enable another entity or subcontractor to meet the decline in turnover test.

Industries or businesses that have not experienced adverse trading conditions and those that appear to have increased staff numbers are likely to be looked at closely. In its guidance, the ATO sets out a series of examples that are likely to attract their attention:

  • Increase in staff – where the number of staff the business reports have increased beyond levels that were previously required to run the business prior to 1 March 2020.
  • Deferring supplies – in industries unlikely to be adversely impacted by the pandemic, the business agrees with its customers to defer making supplies, resulting in the company’s projected GST turnover declining to the level required to meet the turnover test.
  • Bringing forward supplies – in industries unlikely to be adversely impacted by the pandemic, the business brought forward supplies to be able to meet the decline in turnover test in a following month or quarter.
  • Restructures – the example given by the ATO is a company that leases assets to third parties. The leasing business is generally unaffected by the pandemic. However, the business restructures and transfers the assets of the business to a new company. It then withholds the payment of dividends from the new company to the business resulting in a decline in the turnover of the business.
  • Management fee manipulation – where inter-entity management fees are charged, the timing of the fee is changed to meet the decline in turnover test.
  • Reduction in payments to subcontractors – where a business has reduced or deferred payments to subcontractors to enable them to meet the decline in turnover test. The ATO has stated that they will review the business and the subcontractors.
  • JobKeeper used to reduce cost of supplies to customers – in this scenario, the business and its customers agree to reduce, waive or defer payments to enable the business to meet the decline in turnover test. JobKeeper is then used to fund the reduction in payments. In effect, JobKeeper is paying for the payment reduction.

Low risk scenarios
If your industry or business has been adversely impacted by the pandemic, regardless of your structure or arrangements, it is unlikely the ATO will review your situation unless there has been an obvious attempt to increase JobKeeper payments.

To add certainty, the ATO notes that where a service entity that employs staff for a related entity has reduced management fees, either because the service agreement has been changed to reduce the fee by an amount that is proportional to the reduction in the trading entity’s external turnover,  staff have been stood down, or where the related entities cannot afford to pay the fee, and the industry is adversely impacted by the pandemic, the ATO will not generally seek to apply compliance resources.

What happens if you got it wrong?
If your structure or the way you have accessed JobKeeper is on the ATO target list, this does not mean that there is a problem.

Eligibility to JobKeeper is generally based on an estimate of the negative impact of the pandemic on an individual business’s turnover. Some will experience a greater decline than estimated while others will fall short of the required 30%, 50% or 15%. There is no clawback if you got it wrong as long as you can prove the basis for your eligibility going into the scheme.

For those that, in hindsight, did not meet the decline in turnover test, you need to ensure you have your paperwork ready to prove your position if the ATO requests it. You will need to show how you calculated the decline in turnover test and how you came to your assessment of your expected decline, for example, a trend of cancelled orders or trade conditions at that time.

Manage your JobKeeper compliance
Monthly declarations of your current and projected GST turnover are due within fourteen days of the end of each relevant month.

It’s important to ensure that you have paid eligible JobKeeper staff at least $1,500 during each JobKeeper fortnight. If you pay employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.

For the first two JobKeeper fortnights (30 March-12 April, 13 April-26 April), employers had an extension until 8 May to make the JobKeeper payments to eligible employees. For the remaining JobKeeper fortnights, employees will need to receive at least $1,500 by the end of each JobKeeper fortnight or the monthly equivalent of $1,500 per fortnight. Depending on your pay cycle, this may require some adjustments each month.

If you have any concerns regarding your circumstances please contact your client manager on (02) 8543 6800 or email them directly.

NSW GOVT – $10,000 GRANTS FOR BUSINESSES SEVERELY IMPACTED BY COVID-19

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NSW GOVT – $10,000 GRANTS FOR BUSINESSES SEVERELY IMPACTED BY COVID-19

To be eligible, businesses will need to:

  • Be highly impacted by the Public Health Order 2020 (COVID-19 Restrictions on Gathering & Movement) and experience a decline in turnover of at least 75% compared to the equivalent period (of at least 2 weeks) in 2019.
  • Have between 1-19 employees and a turnover of more than $75,000 pa.
  • Have a payroll below the NSW Govt 2019-20 payroll tax threshold of $900,000 (i.e. not pay payroll tax)

Small businesses will be able to apply online shortly through Service NSW at:
https://www.service.nsw.gov.au/campaign/covid-19-help-small-businesses

ATO JOBKEEPER AUDIT TARGETS

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JOBKEEPER
STEP BY STEP DETAILS FROM ATO ON HOW TO ACCESS IT

The ATO late yesterday released specific detail on exactly how you can access JobKeeper for your business.  Below is the summary of what you need to do or CLICK HERE for the full ATO detail.

Please note that as further information will be released from the ATO, we will amend and make updates as required.

You may have pre-registered for JobKeeper, but you will be able to officially enrol in the JobKeeper scheme from 20 April 2020, using an online form on the ATO website. After you enrol, you will later identify your specific eligible employees and submit the information to the ATO.

If you have pre-registered with the ATO for an update on the JobKeeper Payment, you will soon receive a notification from the ATO when the online enrolment is available.

SUMMARY OF STEPS TO ACCESS JOBKEEPER

STEP NUMBER ACTION ITEM RESPONSIBLE PERSON COMPLETED (Y/N)
1 Register your interest and subscribe for JobKeeper payment updates
2 Check you and your employees meet the eligibility requirements
3 Continue to pay at least $1,500 to each eligible employee per JobKeeper fortnight (the first JobKeeper fortnight is the period from 30 March to 12 April)
4 Notify your eligible employees that you are intending to claim the JobKeeper payment on their behalf and check they aren’t claiming JobKeeper payment through another employer or have nominated through another business
5  Send the JobKeeper employee nomination notice to your nominated employees to complete and return to you by the end of April if you plan to claim JobKeeper payment for April. Keep this on file. https://www.ato.gov.au/Forms/JobKeeper-payment—employee-nomination-notice/
6 From 20 April 2020, you can enrol with the ATO for the JobKeeper payment using the Business Portal and authenticate with myGovID. You must do this by the end of April to claim JobKeeper payments for April
7 In the online form, provide your bank details and indicate if you are claiming an entitlement based on business participation, for example if you are a sole trader
8 Specify the estimated number of employees who will be eligible for the first JobKeeper fortnight (30 March – 12 April) and the second JobKeeper fortnight (13 April – 26 April)

SOME COMMON TOPICS/QUESTIONS

  1. How toCalculatea Fall in Turnover for the First Fortnight Starting 30 March 2020

To work out your fall in turnover, you can compare either:

  • actual GST turnover for March 2020 with actual GST turnover for March 2019
  • projected GST turnover for April 2020 with actual GST turnover for April 2019
  • projected GST turnover for the quarter starting April 2020 with actual GST turnover for the quarter starting April 2019

Essentially this basic test compares the GST turnover of any single month from March to September 2020, or the quarters that start on 1 April 2020 or 1 July 2020, with the corresponding period in 2019. (Noting that you are only eligible from the date the turnover test is passed, JobKeeper is not backdated).

How you choose to project your fall in turnover is not dependent on whether you report on a quarterly or monthly BAS, though you can do that if it is easier. The turnover calculation is based on GST turnover, but there are some modifications, including disregarding GST grouping (where two or more associated business entities operate as a single GST group). The ATO will provide more information soon about applying the turnover test.

  1. JobKeeper Payment –Employee Nomination Notice

    Before you enrol for the JobKeeper Payment, you need to complete the JobKeeper employee nomination noticeto:

  • notify your eligible employees that you intend to participate in the scheme, and
  • ask them if they agree to be nominated and receive payments from you as part of the scheme.

Next steps:

  • Download the JobKeeper employee nomination notice
  • Both you and the nominated employee need to complete the form. You do not need to send this notice to the ATO, however you should keep a record to document that your employee has agreed that you claim the JobKeeper Payment for them.

Note: You should not use this JobKeeper employee nomination notice if you are intending to claim JobKeeper payments for an eligible business participant for example a partner in a partnership, an adult beneficiary of a trust or a shareholder or director of a company or a sole trader. A different nomination process will be required.

3. Business Owners Actively Engaged In Their Business

Other businesses in the form of a company, trust or partnership can also qualify for JobKeeper payments where a business owner (a shareholder, adult beneficiary or partner) is actively engaged in the business, or a director is actively engaged in the business.

The ATO will provide more information soon about the eligibility of these businesses for the JobKeeper payment.

4. Employees who have been Terminated

If you terminated an employee after 1 March 2020, you can re-engage them and they will be eligible if they met the eligibility criteria on 1 March 2020.

If you want to claim the JobKeeper payment for employees you have re-engaged, you will need to:

  • confirm they want to be re-hired and participate in the JobKeeper scheme with you
  • re-engage the employees you want to claim for
  • ask them to complete the JobKeeper employee nomination notice and return it to you. You are required to keep this form as part of your record keeping obligations under the law
  • start paying them a minimum of $1,500 (before tax) for each fortnight they are employed and you claim for

You will only be paid a JobKeeper payment for employees from the fortnight they were re-engaged. You cannot claim retrospectively for employees you re-engage

  1. Confirmation ofEligible Employeesyou will Claim JobKeeper Payment For
    (available from 4 May 2020 onwards)

    You or a registered tax agent can apply for the JobKeeper payment for your eligible employees:

  • Step 2 – Ensure you have paid each eligible employee a minimum of $1,500 per JobKeeper fortnight before tax
  • Step 3 – Identify your eligible employees in the application form by:
    • selecting employee details that are prefilled from your STP pay reports if you report payroll information through an STP enabled payroll solution, or
    • manually entering employee details in ATO online services or the Business Portal if you do not use an STP enabled payroll solution, or
    • using a registered tax agent who will submit a report on your behalf through Online services for agents.
  • Step 4 – Submit the confirmation of your eligible employees online and wait for your confirmation email or SMS showing it has been received
  • Step 5 – Notify your eligible employees you have nominated them
  • Step 6 – The ATO will pay you the JobKeeper payment for all eligible employees after receiving your application
  • Step 7 – Each month you will need to reconfirm that your reported eligible employees have not changed through ATO online services, the Business Portal or via your registered tax agent. This will ensure you will continue to receive the JobKeeper payments from the ATO. You do not need to retest your reported fall in turnover, but you will need to provide some information as to your current and projected turnover. This will be done in your monthly JobKeeper Declaration report
  • Step 8 – If your eligible employees change or leave your employment, you will need to notify us through your monthly JobKeeper Declaration report
  1. When toPay Your Employees
  • You should pay your employees for each JobKeeper fortnight you plan to claim for. The first fortnight is from 30 March – 12 April and each JobKeeper fortnight follows after that
  • For the first two fortnights (30 March – 12 April, 13 April – 26 April), the ATO will accept the minimum $1,500 payment for each fortnight has been paid by you even if it has been paid late, provided it is paid by you by the end of April. This means that you can make two fortnightly payments of at least $1,500 per fortnight before the end of April, or a combined payment of at least $3,000 before the end of April.
  • If you usually pay your employees less frequently than fortnightly, the payment can be allocated between fortnights in a reasonable manner. For example, if you pay your employees on a monthly pay cycle, your employees must have received the monthly equivalent of $1,500 per fortnight.

Again, here are the relevant ATO links for you:

It’s great to see some detail from the ATO on JobKeeper.  We know you will have questions on this, talk to us for any clarification that you need.

 

7. Services NSW $10K Grant – Applications Now Open

Applications are now open for the NSW Government’s $10K grant for businesses experiencing a decline in turnover of >75% of revenue in a 2 week period – see link below for full application details.

https://www.service.nsw.gov.au/transaction/apply-small-business-covid-19-support-grant

We understand this is a stressful time. Please contact your manager at HYD Advisory for further information on (02) 8543 6800 or email them directly.

FINALLY SOME CLARITY FOR COMMERCIAL LANDLORDS & TENANTS

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FINALLY SOME CLARITY FOR COMMERCIAL LANDLORDS & TENANTS

Please see below an outline of what this means for you and your CASHFLOW

NEW MANDATORY COMMERCIAL TENANCY CODE

On Tuesday 7 April the National Cabinet agreed on a mandatory commercial tenancy code for any businesses that:

  • have a turnover of $50 million pa. or less
      and
  • are also eligible for the JobKeeper program (turnover reduction of 30% or more – and meeting ATO eligibility requirements yet to be determined).

Under the code Landlords are prohibited from terminating leases or calling on the tenant’s security.The scheme will implement a combination of rental waivers and rental deferrals for commercial tenants.

Landlords will be required to reduce lease payments in proportion to the reduction in the Tenant’s business revenue.

The waiver is the reduction in the rent payable, and has to be a minimum of 50% of the percentage decline in the revenue of the business. This does not have to be repaid.

The deferral, that is the rental payments that will need to be made (ie. caught up) at a later date, must be spread over the remaining time on the Lease or a minimum of twenty four months, whichever is the greater at the end of the pandemic.

If a tenant has less than twenty four months on the Lease, for example three months, they would still have at least 2 years to make any deferred rent payment.

There will be a binding Mediation Amendment code rolled out in each State and Territory to deal with any disagreements.

Let’s give three examples of how this code may apply.

Example 1
Johnny runs a fruit and vegetable shop at a large shopping centre. He has seen a decline in trade due to the lessening numbers of people attending the shopping centre. The decline has been approximately 20%.

Johnny is not eligible for JobKeeper but would like to talk to his Landlord about a reduction in rent.

In Johnny’s case the code would not be applicable to him and any negotiation will need to be done directly with the Landlord and subject to the existing Lease.

Example 2
Mark runs a gym. Mark has had to shut his gym due to the Coronavirus crisis.
Mark has started offering online programs which means his revenue has not decreased by 100% but has decreased by 70%. Mark pays $10,000 a month in rent for his gym.

Under the code, Marky Mark will be entitled to pay the Landlord only $3,000 per month during the “hibernation” period (ie. $7,000 per month reduction, based on 70% turnover reduction x $10,000 a month original rent).

Once the “hibernation” period has ended, Mark will be required to pay back the deferred amount i.e. 50% of the reduction to the Landlord above of $7,000 per month) over a period of no less than twenty four months. In Mark’s case this being $3,500 per month.

Overall rent saving /waiver to tenant is 35% of the original rent payable during the pandemic period (based on 50% share of the percentage decline of 70% in the revenue of the business).

Example 3
Anna runs a childcare centre. Anna’s revenue has dropped by 50% due to the Coronavirus crisis.

Anna is entitled during the period of “hibernation” to pay her Landlord only 50% of the rent. Anna currently pays $20,000 per month and is therefore only required to pay $10,000 per month during the hibernation period (ie. $10,000 per month reduction, based on 50% turnover reduction x $20,000 a month original rent).

Once the hibernation has ended, Anna will be required to pay $5,000 per month that was the deferred amount (ie. 50% of the reduction to the Landlord of $10,000 per month) over a period of not less than twenty four months.

As an example, if the hibernation period goes for six months, her waived rent would be $30,000 (6 months x $5,000 per month) her deferred amount would also be $30,000. Upon resumption of normal trade she may repay her rent as follows:

• $20,000 per month plus the deferred amount over a period of twenty four months being $1,250 per month, so that she pays $21,250 per month.

Overall rent saving /waiver to tenant is 25% of the original rent payable during the pandemic period (based on 50% share of the percentage decline of 50% in the revenue of the business)

VARIATION OF / AMENDMENDMENT TO LEASE IS REQUIRED

In relation to all the above examples we believe it is CRITCIAL that any agreement reached be in writing and signed by both parties so that all parties have a document to rely on in the future.

Our recommendation is that this is done by way of a Deed of Amendment to the Lease or an Agreement to Vary the Lease drafted by a Qualified Lawyer.
We understand this is a stressful time. Please contact your manager at HYD Advisory for further information on (02) 8543 6800 or email them directly.

TOP 10 GOVERNMENT STIMULUS INITIATIVES – FOR BUSINESS OWNERS  (AS AT 7 APRIL 2020)

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TOP 10 GOVERNMENT STIMULUS INITIATIVES – FOR BUSINESS OWNERS
(AS AT 7 APRIL 2020)

  • The Jobkeeper Payment & Cashflow boost for employers are the most significant initiatives for business owners (points 1 & 2).
  • There are 8 further measures that may be of benefit to you and are worth being aware of (points 3-10).
  • We will discuss these strategies in detail when we speak with you upon preparing/reviewing your March IAS/BAS in coming weeks, with follow-up advice in your April/May tax planning reviews.
SUMMARY OF INITIATIVES

1. JOBKEEPER PAYMENT

  • FORTNIGHTLY PAYMENT OF $1,500 PER ELIGIBLE EMPLOYEE FOR 6 MONTHS – KEEPS STAFF EMPLOYED

2. CASHFLOW BOOST FOR EMPLOYERS

  •  TAX FREE PAYMENTS/CREDITS OF BETWEEN $20K AND $100K

3. ATO PAYMENT DEFERRALS

4. ATO CREDIT VARIATIONS & PAYMENT RELIEF OPTIONS

5. NSW PAYROLL TAX – WAIVER

6. NSW GOVT – $10,000 GRANTS FOR BUSINESSES SEVERELY IMPACTED BY COVID-19

7. APPRENTICES & TRAINEES – WAGE SUBSIDY

8. GOVT BACKED SME LOAN GUARANTEE SCHEME (OF UP TO $250K)

9. EARLY RELEASE OF SUPERANNUATION

10. INSTANT ASSET WRITE OFF & ACCELERATED DEPRECIATION

 

FOR MORE DETAIL – SEE BELOW

1. JOBKEEPER PAYMENT
  • FORTNIGHTLY PAYMENT OF $1,500 PER ELIGIBLE EMPLOYEES FOR 6 MONTHS TO KEEP STAFF EMPLOYED
The Government will provide eligible employers with a payment of $1,500 per fortnight for each eligible employee for 6 months. If your turnover has reduced by more than 30% to a comparable period (of at least one month) a year ago, or you believe this may occur in coming months, you must register your interest in the program.

Purpose – to assist employers to continue to retain and pay their staff.

We note Parliament has yet to pass the legislation – following the Easter long weekend, we expect to have further clarity.

Click below to register your details:

https://www.ato.gov.au/general/gen/JobKeeper-payment/

2. CASHFLOW BOOST FOR EMPLOYERS – TAX FREE PAYMENTS/CREDITS OF BETWEEN $20K AND $100K

Businesses that employ staff (including the owners), may be eligible to receive a total payment/credit of up to $100k (with a minimum total payment of $20k) from the ATO.
At HYD we are developing a “cashflow boost” calculator which we will use when preparing/reviewing your March IAS/BAS – to show you the value of this to you in your specific circumstances, as well as expected timing.

The first phase (commencing the period ending 31 March 2020) ensures that eligible employers receive a credit up to a maximum amount of $50K. The second phase (commencing June 2020), ensures that employers receive another series of credits, equal to the credits they received under the first phase.

The credits will automatically be calculated by the ATO and employers must lodge their March 2020 activity statement to trigger the entitlement.

PAYG Withholding Registration must have been established prior to 12 March 2020. Please note you will receive a cash payment if the net result of your BAS (i.e. net GST position & plus any other amounts owing) is a refund and you don’t owe the ATO any other monies.  Otherwise you will receive a credit to your ATO account.

3. ATO PAYMENT DEFERRALS

We can apply for a payment deferral up to 14 September 2020 for new debts incurred after 23 January 2020. This applies to BAS (including PAYG instalments), income tax assessments (businesses & individuals) and FBT. No interest or penalties will apply.

These deferrals are not automatic and must be applied for.

Critical – It is a requirement that all ATO lodgements are up to date and are kept up to date.

4. ATO CREDIT VARIATIONS & PAYMENT RELIEF OPTIONS

We can apply for a refund of September and December 2019 PAYG instalments already paid (business & personal) to reflect the downturn in your trading conditions, which may result in a refund for you.

We can also apply for a variation of your March 2020 PAYG instalments.

5. NSW PAYROLL TAX – WAIVER

Our current understanding is that your annual liability will be reduced by 25% when you lodge your annual reconciliation.

OSR’S initial advice is that no payment will be required for the months of March, April or May 2020.

You can continue to pay if you choose to do so – and whilst you are not required to enter your wages information, they advise that you continue to use the monthly calculator, as it will assist you when completing your annual reconciliation in July.

6. NSW GOVT – $10,000 GRANTS FOR BUSINESSES SEVERELY IMPACTED BY COVID-19

To be eligible, businesses will need to:
  • Be highly impacted by the Public Health Order 2020 (COVID-19 Restrictions on Gathering & Movement) and experience a decline in turnover of at least 75% compared to the equivalent period (of at least 2 weeks) in 2019.

 

  • have between 1-19 employees and a turnover of more than $75,000 pa.
  • have a payroll below the NSW Govt 2019-20 payroll tax threshold of $900,000 (i.e. not pay payroll tax)
Small businesses will be able to apply online shortly through Service NSW at:
https://www.service.nsw.gov.au/campaign/covid-19-help-small-businesses

7. APPRENTICES & TRAINEES – WAGES SUBSIDY

Employers (with less than 20 full time employees), who retain an apprentice or a trainee who was in training with the employer as at 1 March 2020 – may be entitled to Govt wage subsidies 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 subsidy is $21,000 per eligible employee.

Employers can register for the subsidy from early April 2020. Employers will be able to access the subsidy after an eligibility assessment is undertaken by an Australian Apprentice Support Network (AASN) provider.

8. GOVERNMENT BACKED SME LOAN GUARANTEE SCHEME (OF UP TO $250K)

 
Under the Scheme, loans of up to $250k will be provided to businesses to provide them with working capital to help pay business overheads, wages, rent etc. The Government will provide Lenders with a Guarantee for 50% of the loan. The loans will be for a period of up to 3 years, with an initial 6-month repayment holiday.

We have been advised that the loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan. We understand from NAB that an interest rate of 4.5% pa. will be payable on these loans. If you’re interested, contact your relationship manager at your bank for further details.

9. EARLY RELEASE OF SUPER

From mid-April, individuals in financial distress may (subject to firstly meeting strict requirements) be able to access up to $10,000 of their super before 30 June 2020 and a further $10,000 after that date.

The withdrawals will be tax free.

Broadly, in order to qualify you must be:

  • Unemployed; or
  • After 1 January 2020 made redundant; or
  • Your working hours were reduced by 20% or more.
For those eligible to access their Super, you can apply directly through the myGov website from mid-April.

10. INSTANT ASSET WRITE OFF & ACCELERATED DEPRECIATION

Broadly, the instant asset write-off threshold will be increased from $30,000 to $150,000 (GST exclusive cost) for assets installed and ready for use before 30 June 2020.

In addition, there will be accelerated depreciation available for assets installed and ready for use before 30 June 2021 – allowing an immediate deduction of 50% of the cost of the asset, with existing depreciation rules applying to the balance of the asset’s cost.

If you are considering utilising these concessions, please check with us beforehand as there is some detail in the rules to consider.

JOBKEEPER PAYMENTS AND ATO DEFERRALS

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JOBKEEPER PAYMENTS AND ATO DEFERRALS

PLEASE READ THE BELOW IMPORTANT UPDATES – NOTE – IT IS CRITICAL TO THE BELOW THAT ALL ATO LODGEMENTS (INCLUDING INCOME TAX AND BAS) ARE KEPT UP TO DATE

JOBKEEPER PAYMENTS

The Prime Minister yesterday announced a $130bn JobKeeper payment to support Australian businesses impacted by COVID-19.

As you would appreciate, we have been inundated with phone calls and emails in relation to this over the last 12 hours.

In summary, the Government will provide employers with $1,500 per fortnight for each employee for up to 6 months.   If your turnover has reduced by more than 30% relative to a comparable period a year ago, or you believe your turnover will reduce by 30% over the coming months, you must register your interest in the program.

STEP 1

By registering your interest, you will be kept up to date with all criteria and information to be provided to the ATO in relation to this incentive – it is essential to do this so you don’t miss out!

Please click the below link to register your details:

https://www.ato.gov.au/general/gen/JobKeeper-payment/

We note the above has not been legislated as yet and are expecting the finer details to be provided over the coming weeks.  As the above becomes legislated, we will be in touch to discuss further.

For further information, please click here

 

TO PAYMENT DEFERRALS

The ATO are offering a range of payment deferrals, as detailed below.  Please note, in order for us to apply for this, all ATO lodgements (including BAS and Income Tax) must be up to date.

  1. Payment deferrals of up to six months available for new debts incurred on or after 23/01/2020 – these debts can be deferred up to 14/09/2020.
  2. Lodgements must be made by the due date.
  3. No interest or penalties applicable to debts incurred on or after 23/01/2020.
  4. Payment deferral applies to BAS (including PAYG instalments), income tax assessments and FBT.
  5. Payment deferral does NOT apply to super guarantee debts – these must still be paid on time .
  6. Future payment deferrals are not available before incurring debt.
  7. This is not a blanket deferral, it is only available for businesses affected by COVID-19 and it must be applied for.

$1,500 JobKeeper Subsidy

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Click here to download the information on the $1,500 JobKeeper Subsidy

Autumn 2020 Newsletter – Profit Matters

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Click here to download the Autumn 2020 Newsletter Profit Matters

THE SECOND $66.1 BN STIMULUS PACKAGE: WHAT YOU NEED TO KNOW

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The Government recently released a second, $66.1bn stimulus package that aims to boost income support payments, introduce targeted changes to the superannuation rules, provide cash flow support of up to $100,000 for small business employers and relax corporate insolvency laws.

The stimulus measures proposed were passed through Parliament, however, we are still waiting for the final details to be provided. If over the next 24 to 48 hours we are advised of any critical variances, we will be in touch.

The Prime Minister has warned there are no “quick solutions” and that businesses should prepare for 6 months of disruption.

For Business

  • Tax-free payments up to $100,000 for small business and not-for-profit employers. An increase in the previously announced initial tax-free payments for employers to a maximum of $50,000. In addition to this a second round of payments will be made up to a maximum of $50,000, accessible from July 2020.
  • Solvency safety net. Temporary 6-month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000 and an increase in the time companies have to respond from 21 days to 6 months. Directors also are provided with temporary relief from personal liability for trading while insolvent for 6 months.
  • Access to working capital. Introduction of a Coronavirus SME guarantee scheme protecting financial institutions by guaranteeing 50% of new loans to SMEs.
  • Sole traders and self-employed eligible for Jobseeker payment. The eligibility criteria to access income support relaxed for the self-employed and sole traders.
  • Temporary relief from some Corporations Act requirements.
For Individuals
  • Early release of superannuation. Individuals in financial distress are able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.
  • Temporary reduction in minimum superannuation drawdown rates. Superannuation minimum drawdown requirements for account-based pensions and similar products reduced by 50% in 2019-20 and 2020-21.
  • Deeming rates reduced. From 1 May, superannuation deeming rates reduced further to a lower rate of 0.25% and upper rate of 2.25%.
  • Supplements increased, access extended and eased for 6 months from 27 April 2020:
    • A temporary coronavirus supplement of $550 will be paid to existing income support recipients (people will receive their normal payment plus $550 each fortnight for 6 months).
    • A second one-off stimulus payment of $750 will be paid automatically from 13 June 2020 to certain income support recipients (in addition to the payment made from 31 March 2020).
    • Eligibility for access to income support eased to include sole traders and the self-employed, and to those caring for someone infected or in isolation.
    • Waiting periods and assets tests temporarily waived.
  • Bankruptcy safety net. Temporary 6-month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor from $5,000 to $20,000.
The Government has flagged that additional stimulus packages will be required.

In Detail: Support for Business

Tax-free payments up to $100,000 for employers

  • From: 28 April 2020
  • Eligibility: Small and medium business entity employers and not-for-profit entities, with an aggregated annual turnover under $50 million.
The Government has increased the previously announced measures to provide cash flow support to business.Now, eligible businesses with a turnover of less than $50 million will initially be able to access tax-free cash flow support, with the minimum amount being increased to $10,000 and the maximum amount increased to $50,000 (previously $2,000 to $25,000). However, additional support will be provided in the July – October 2020 period so that eligible entities will receive total minimum support of $20,000 and up to $100,000.

In order for a business to qualify for this support, PAYG Withholding Registration must have been established prior to 12 March 2020. The rules are more flexible for charities because the Government recognises that new charities might be established in response to the pandemic.

The cash flow support measures will be provided in the form of a credit in the activity statement system. The support will be provided in two phases.

  • The first phase ensures that eligible employers receive a credit equal to 100% of the PAYG amounts withheld from salary and wages paid to employees during the relevant period, up to the maximum amount of $50,000.
  • The second phase ensures that eligible employers receive another series of credits, equal to the credits that were received under the first phase. For example, if a business received $40,000 of credits in the first phase it will receive a further $40,000 of credits in the second phase. These additional credits will be spread over two or four activity statement periods, depending on whether the employer lodges on a quarterly or monthly basis.

If a business pays salary and wages to employees but is not required to withhold any tax then a minimum payment of $10,000 will be made in the first phase and a further payment of $10,000 will be made in the second phase.

The credits are automatically calculated by the ATO and employers will need to lodge an activity statement to trigger the entitlement. If the credit puts the business in a refund position the excess amount will be refunded by the ATO within 14 days.

Businesses that lodge activity statements on a quarterly basis will be eligible to receive credits in the first phase for the quarters ending March 2020 and June 2020. Credits in the second phase will be available for the quarters ending June 2020 and September 2020. The minimum $10,000 payment will be applied to the first lodgement.

Businesses that lodge on a monthly basis will be eligible for the credits in the first phase for the March 2020, April 2020, May 2020 and June 2020 lodgements. Credits in the second phase will be available for the June 2020, July 2020, August 2020 and September lodgments. The minimum $10,000 payment will be applied to the first lodgement.

Eligibility for the measure will be based on prior year turnover. We will have to wait for the legislation for the finer details.

Not-for-profit employers, including charities, with an aggregated turnover under $50 million will also be able to access the cash flow support.

Solvency safety net
A safety net has been put in place to protect businesses in temporary financial distress as a result of the pandemic by lessening the threat of actions that could unnecessarily push them into insolvency and force the winding up of the business. These include:
  • A temporary 6 month increase to the threshold at which creditors can issue a statutory demand on a company from $2,000 to $20,000.
  • The time a company has to respond to statutory demands will increase from 21 days to 6 months.
  • For 6 months, directors will be provided with temporary relief from personal liability for trading while insolvent.
  • See also bankruptcy safety net below.

It will be more important than ever for business to stay on top of their debtors.

Debts incurred will still be payable by the business. Only those debts incurred in the ordinary course of the business will be subject to the safety net measures.

Access to working capital for SMEs – supporting lenders
The Government has announced a Coronavirus SME guarantee scheme that will guarantee 50% of new loans to SMEs up to $20 billion. These loans are new short-term unsecured loans to SMEs.SMEs with a turnover of up to $50 million will be eligible to receive these loans.

The Government will provide eligible lenders with a guarantee for loans with the following terms:

  • Maximum total size of loans of $250,000 per borrower.
  • The loans will be up to three years, with an initial six month repayment holiday.
  • The loans will be in the form of unsecured finance, meaning that borrowers will not have to provide an asset as security for the loan.
Loans will be subject to lenders’ credit assessment processes with the expectation that lenders will look through the cycle to sensibly take into account the uncertainty of the current economic conditions.
This latest measure builds on the previous initiatives to ensure small business can access capital, including:
Sole traders and self-employed eligible for Jobseeker payment
The eligibility criteria to access income support payments will be relaxed to enable the self-employed and sole traders whose income has been reduced, to access support.More:

Temporary relief from Corporations Act requirements
The Treasurer has been given a temporary instrument-making power to amend the Corporations Act to provide relief or modifications to specific compliance obligations.

ASIC has announced measures for those companies with a 31 December financial year that need to hold their AGMs by 31 May 2020, providing a two month no action period and enabling hybrid virtual AGMs.

Early release of superannuation
From mid-April, individuals in financial distress will be able to access up to $10,000 of their superannuation in 2019-20, and a further $10,000 in 2020-21. The withdrawals will be tax-free and will not affect Centrelink or Veterans’ Affairs payments.To be eligible to access your superannuation you need to meet the following requirements:

  • you are unemployed; or
  • you are eligible to receive a job seeker payment, youth allowance for jobseekers, parenting payment (which includes the single and partnered payments), special benefit or farm household allowance; or
  • on or after 1 January 2020:
    • you were made redundant; or
    • your working hours were reduced by 20% or more; or
    • if you are a sole trader — your business was suspended or there was a reduction in your turnover of 20% or more.

For those eligible to access their superannuation, you can apply directly to the ATO through the myGov website from mid-April.

More:

Temporary reduction in minimum superannuation drawdown rates

Superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.
Age Default  minimum drawdown rates (%) Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Under 65 4 2
65-74 5 2.5
75-79 6 3
80-84 7 3.5
85-89 9 4.5
90-94 11 5.5
95 or more 14 7
The upper and lower social security deeming rates will be reduced further. As of 1 May 2020, the upper deeming rate will be 2.25% and the lower deeming rate of 0.25%.More: Providing support for retirees

Time-limited fortnightly $550 ‘coronavirus supplement’

For the next 6 months, the Government is introducing a new Coronavirus supplement to be paid at a rate of $550 per fortnight. This supplement will be paid to both existing and new recipients in the eligible payment categories.

The payment will be made to those receiving:

  • Jobseeker payment (and those transitioning to the jobseeker payment)
  • Youth allowance jobseeker
  • Parenting payment
  • Farm household allowance
  • Special benefits recipients
In addition, eligibility to income support payments will be expanded to:
  • Permanent employees who are stood down or lose their job
  • Casual workers
  • Sole traders
  • The self-employed
  • Contract workers who meet the income test
The Government notes that these criteria could include those required to care for someone affected by the Coronavirus.Asset testing has also been reduced and will be waived for 6 months. Income testing will still apply.

The payment is not available if you have access to any employer entitlements such as annual or sick leave or income protection insurance.

More:

Second $750 payment to households

The Government is now providing two separate $750 payments to social security, veteran and other income support recipients and eligible concession card holders residing in Australia (see the full list here). The payment will be exempt from taxation and will not count as income for the purposes of Social Security, Farm Household Allowance and Veteran payments.
  • Payment 1 from 31 March 2020 (previously announced on 12 March): Available to people who are eligible payment recipients and concession card holders at any time between 12 March 2020 to 13 April 2020;
  • Payment 2 from 13 July 2020: Available to people who are eligible payment recipients and concession card holders on 10 July 2020.
The payments will be made automatically to those that meet the criteria.More:
Payments to support households

Bankruptcy safety net

A temporary 6 month increase to the threshold for the minimum amount of debt required for a creditor to initiate bankruptcy proceedings against a debtor will increase from $5,000 to $20,000. In addition, the time a debtor has to respond to a bankruptcy notice will be temporarily increased from 21 days to six months.

Where someone declares their intention to enter voluntary bankruptcy, the period of protection from unsecured creditors will be extended from 21 days to 6 months.

More:

We understand this is a stressful time please contact your manager for further information on (02) 8543 6800.

Temporary relief for financially distressed businesses

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Click here to download the Temporary relief for financially distressed businesses