Budget 2020-21 Update

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Road to Recovery?

The 2020-21 Federal Budget is a road to recovery paved with cash.
 
Key initiatives include:
  • Personal income tax cuts from 1 July 2020
  • A $4 billion ‘JobMaker’ Hiring Credit to encourage businesses to take on additional employees aged 16 to 35 years old
  • $110 billion in infrastructure investment over 10 years
  • Immediate deductions for business investment in capital assets
  • Changes to how companies can manage losses

Access to generous tax concessions for a wider range of businesses

 
Please contact your client manager directly by phone on (02) 8543 6800 or email for more information.

Superannuation Guarantee Amnesty Ends 7 September 2020

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Do you need to apply for the superannuation guarantee amnesty? If yes, you need to act now.
 
If you have unpaid super to your employees, you must apply for the amnesty no later than 7 September 2020 to avoid incurring penalties or paying administration fees.
 
To be eligible for the amnesty you will need to meet the following criteria
 
Have unpaid super between 1 July 1992 to 31 March 2018.
Have not been informed the ATO is examining or intends to examine your SG obligation for the above period.
You have not already advised the ATO of the shortfall.
You must lodge your application no later than 7 September 2020
 
You will be able to claim a tax deduction for the super amnesty amounts paid to the ATO by 7 September 2020.
 
Click Here for Further Information
 
https://www.ato.gov.au/business/super-for-employers/superannuation-guarantee-amnesty/#Superguaranteeamnesty
Please contact our office urgently if you require assistance on (02) 8543 6800.

JobKeeper 3.0

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JOBKEEPER 3.0

The Treasurer has announced further changes to JobKeeper, following on from our Newsletter ‘JobKeeper 2.0’ on 23 July 2020.

SUMMARY OF KEY POINTS

1. The relevant date of employment will move from 1 March 2020 to 1 July 2020, which increases the number of employees able to access JobKeeper.

2. JobKeeper payments from 28 September 2020 – 3 January 2021:
Eligibility will be dependent on a 30% reduction in actual turnover between 1 July 2020 and 30 September 2020.
Note: This is for business with an aggregated turnover of $1billion or less. See link below for details on larger businesses and not for profits.

3. JobKeeper payments from 4 January 2021 to 28 March 2021:
Eligibility will be dependant on a 30% reduction in actual turnover between 1 October 2020 to 31 December 2020.

4. Payment rates reduced to $1,200 per fortnight from 28 September 2020 and $1,000 per fortnight from 4 January 2021. Note that there are further reductions in payments for employees working less than 20 hours per week.

For further details please refer to the Treasury Fact Sheet Here.
Did you find this newsletter useful? If yes, please feel free to forward it onto a business colleague or friend.
If you have any concerns regarding your circumstances please contact your client manager on (02) 8543 6800 or email them directly.

Business Matters Newsletter – Q3 2020

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Click here to download the Business Matters Newsletter Issue Q3 2020

JobKeeper 2.0

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JOBKEEPER 2.0

The Government announced on Tuesday an extension of the JobKeeper program to 28 March 2021 but with tighter access and reduced rates. From 28 September 2020, employers seeking to claim JobKeeper payments will need to reassess their eligibility and prove an actual decline in turnover.

If your business currently receives JobKeeper, your arrangements will generally remain unchanged until 27 September 2020.

Jobkeeper Payments
Eligibility
To continue receiving JobKeeper payments, employers will need to reassess their eligibility with reference to actual GST turnover for the June and September 2020 quarters (for payments between 28 September to 3 January 2021), and again for the June, September and December 2020 quarters (for payments between 4 January 2021 to 28 March 2021).
Eligible employers
The broad eligibility tests to access JobKeeper remain the same with an extended decline in turnover test.
  • On 1 March 2020, carried on a business in Australia or was a non‑profit body pursuing its objectives principally in Australia; and
    • before the end of the JobKeeper fortnight, it met the decline in turnover test*:
      • >15% for an ACNC-registered charity (excluding universities, or schools within the meaning of the GST Act – these entities need to meet the basic turnover test)
      • > 50% for large businesses:
        • aggregated turnover for the test period is likely to be $1 billion or more, or aggregated turnover for the previous year to the test period was $1 billion or more (a small business that forms part of a group that is a large business must have a >50% decline in turnover to satisfy the test).
      • ­>30% for all other qualifying entities.
    • And, was not:
      • on 1 March 2020, subject to Major Bank Levy for any quarter ending before this date, a member of a consolidated group and another member of the group had been subject to the levy; or
      • a government body of a particular kind, or a wholly-owned entity of such a body; or
      • at any time in the fortnight, a provisional liquidator or liquidator has been appointed to the business or a trustee in bankruptcy had been appointed to the individual’s property.

1 March 2020 is an absolute date. An employer that had ceased trading, commenced after 1 March 2020, or was not pursuing its objectives in Australia at that date, is not eligible.*Additional tests apply from 28 September 2020.

Additional decline in turnover tests
To receive JobKeeper payments from 28 September 2020, businesses will need to meet the basic eligibility tests and an extended decline in turnover test based on actual GST turnover.

 * Alternative tests potentially apply where a business fails the basic test and does not have a relevant comparison period.

Most businesses will generally use their Business Activity Statement (BAS) reporting to assess eligibility. However, as the BAS deadlines are generally not due until the month after the end of the quarter, eligibility for JobKeeper will need to be assessed in advance of the BAS reporting deadlines to meet the wage condition for eligible employees. However, the ATO will have discretion to extend the time an entity has to pay employees in order to meet the wage condition.

Alternative arrangements are expected to be put in place for businesses and not-for-profits that are not required to lodge a BAS (for example, if the entity is a member of a GST group).

Alternative tests
The Commissioner of Taxation will have discretion to set out alternative tests that would establish eligibility in specific circumstances where it is not appropriate to compare actual turnover in a quarter in 2020 with actual turnover in a quarter in 2019, in line with the Commissioner’s existing discretion.
Eligible employees
Employee eligibility will remain broadly the same but the value of the payment will change from 28 September based on average weekly hours in February 2020.
  • On 1 March 2020:
    • Was aged 16 years and over; and
    • If the individual was aged 16 or 17, was either financially independent or was not undertaking full-time study;
    • Was an employee other than a casual, or was a long-term casual*; and
    • Was an Australian resident (under the meaning of the Social Security Act 1991), or a resident for tax purposes and held a Subclass 444 (Special category) visa**.
  • And, at any point during the JobKeeper fortnight:
    • Was an employee of the employer; and
    • Was not an excluded employee:
      • An employee receiving parental leave pay or dad and partner pay; or
      • An employee receiving workers compensation payments in relation to total incapacity.
  • And, has provided the JobKeeper Payment Employee Nomination to the employer:
    • Agreeing to be nominated by the employer as an eligible employee under the JobKeeper scheme; and
    • Confirming that they have not agreed to be nominated by another employer; and
    • If they are a long-term casual, they do not have permanent employment with another employer.
*A ‘long term casual employee’ is a person who has been employed by the business on a regular and systematic basis during the period of 12 months that ended on 1 March 2020 (1 March 2019 to 1 March 2020). These are likely to be employees with a recurring work schedule or a reasonable expectation of ongoing work.
Assessing if an employee has worked 20 hours or more

JobKeeper payments from 28 September 2020 are paid at a lower rate for employees who worked less than 20 hours per week on average in the four weeks of pay periods before 1 March 2020.

The Commissioner of Taxation will have discretion to set out alternative tests for those situations where an employee’s or business participant’s hours were not usual during February 2020. Also, the ATO will provide guidance on how this will be dealt with when pay periods are not weekly.

Can I keep getting JobKeeper until September?

If your business and your employees passed the original eligibility tests to access JobKeeper, and you have fulfilled your wage requirements, you can continue to claim JobKeeper up until the last JobKeeper fortnight that ends on 27 September 2020.

ATO assistant commissioner Andrew Watson said in a recent interview, “Once you’re in, you’re in to the end of September. If you meet the eligibility test once, you’re in it for the whole time.” The original eligibility test was a once only test although there are ongoing conditions that need to be satisfied for each JobKeeper fortnight.

JobSeeker and other support

Coronavirus supplement

The Coronavirus supplement will continue, albeit on a reduced rate of $250 per fortnight (from $550), from 25 September until 31 December 2020 for eligible individuals.
27 April to 24 September 2020 $550 per fortnight
25 September to 31 December 2020 $250 per fortnight
Eligibility remains the same. That is, those receiving:
  • JobSeeker Payment (and all payments transitioning as a result of JobSeeker Payment)
  • Youth Allowance
  • Parenting Payment (Partnered and Single)
  • Austudy
  • ABSTUDY Living Allowance
  • Farm Household Allowance
  • Special Benefit
  • Eligible New Enterprise Incentive Scheme participants
  • Department of Veterans’ Affairs Education Schemes
The eligibility criteria and some of the tests for access to income support is changing.
Eligibility and access
The expanded eligibility criteria for the Jobseeker Payment and the Youth Allowance Jobseeker will continue to apply until 31 December 2020:
  • Permanent employees who have been stood down or lost their jobs (and are not receiving payments from an employer or through insurance),
  • Sole traders, the self-employed, casuals or contractors who meet the income and assets tests.

In addition, if you receive JobSeeker or Youth Allowance payments, the amount you can earn before impacting income support has been increased to $300 per fortnight from 25 September 2020 until 31 December 2020.

However, a number of restrictions have been reintroduced.

Reintroduction of assets and partner income tests

From 25 September 2020, the assets test and the Liquid Assets Waiting Period (applies to those with assets such as cash savings worth over $5,500 for singles or $11,000 for singles with children and partnered people) will be reintroduced for access to income support payments.

In addition, partner income testing will resume from 25 September, albeit with higher thresholds than those pre coronavirus. That is, you will not be eligible for income support if you are not earning an income but your partner earns $3,086.11 per fortnight or $80,238.89 per annum. The partner income test taper rate will increase from 25 cents for every dollar of partner income earned over $996 per fortnight to 27 cents for every dollar of partner income earned over $1,165 per fortnight.

Reintroduction of job seeking requirements
Job seeking requirements that were suspended from 24 March 2020 have been introduced from 9 June 2020. The mutual obligation requirements include:
  • Voluntary job searches
  • At least one phone or online appointment with a jobseeker’s employment services provider
  • Voluntary participation in activities, either online or in person, and
  • No payment suspensions or penalties for failure to comply.
Waiting periods continue to be waived
Some waiting periods for access to income support will continue to be waived until 31 December 2020:
  • The one-week ordinary waiting period is waived.
  • The newly arrived resident’s waiting period for new migrants (previously four years). Claimants will still need to meet residency requirements, that is they will need to hold a permanent visa. Affected claimants will need to serve the remainder of this waiting period at the end of the period the Coronavirus Supplement is paid for.
  • The Seasonal Work Preclusion Period for those who are eligible for the Coronavirus supplement -this applies to those who finished seasonal, contract or intermittent work in the six months prior to claiming income support.
If you have any concerns regarding your circumstances please contact your client manager on (02) 8543 6800 or email them directly.

 

Winter 2020 Newsletter – Profit Matters

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Click here to download the Winter 2020 Newsletter Profit Matters

Government Stimulus for SMEs PODCAST

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Show Me the Money! Let’s Torque

On the tip of everyone’s tongue in the SME world are 4 words – show me the money! The government stimulus package is the lifeboat that we have all been waiting for.

It’s come out in bits and pieces, and as usual, the devil is in the detail. Our host Angela Vithoulkas grills Craig West – a regular panellist, and our expert guest Mark Pinhorn, Partner & Director of HYD Advisory.

Mark is a strategic accountant, an experienced entrepreneur and a business owner. We asked Mark to simplify the stimulus package and the lifelines being offered to SME’s to help them battle the financial impacts of COVID-19 – simple English as opposed to the deliberately complicated language of government.

 

Listen to the Podcast now >>

COVID 19 Stimulus: $25,000 home builder scheme

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HOMEBUILDER: WHAT IS IT AND HOW DO YOU ACCESS IT?

The Government has announced grants of $25,000 to encourage people to build a new home or substantially renovate their existing home. 

There are a few complexities to this grant that both home builders/renovators and the building industry need to be across before jumping in and signing a new contract on the expectation that the grant will apply.

The grants will be distributed by the revenue office of the State or Territory where you live or plan to live.

The HomeBuilder scheme targets the residential construction market by providing tax-free grants of $25,000 to eligible owner-occupiers, including first home buyers, to build a new home or substantially renovate their existing home.

Eligibility
Eligibility criteria apply to the individuals applying for the grant and the building project:

Individual eligibility
The HomeBuilder scheme is available to owner occupiers including first home buyers. It is not accessible to owner builders, developers or investors.

To be eligible you need to be:

  • An individual (not a company or trust); and
  • 18 years of age or older; and
  • An Australian citizen.

And, you need to meet the income test. To be eligible, you cannot earn more than:

  • Individuals – $125,000 based on your 2018-19 or later tax return
  • Couples – $200,000 based on both of your 2018-19 or later tax returns

The building project eligibility
The building contract must be signed between 4 June 2020 and 31 December 2020. And, the construction or renovation must commence within three months of the contract date.

The grants are available if you build a new home or renovate a home to live in (your principal place of residence) where:

New home* The property value (house and land) does not exceed $750,000
Renovation** Substantially renovate your existing home, where:

  • The renovation contract is between $150,000 and $750,000, and
  • The value of your existing property (house and land) does not exceed $1.5 million

* house, apartment, house and land package, off-the-plan, etc.
** renovation works must be to improve the accessibility, safety and liveability of the dwelling. It cannot be for additions to the property (such as swimming pools, tennis courts, outdoor spas and saunas, sheds or garages (unconnected to the property)).

 

If you own or have purchased land but have not signed a contract to build your home, you may meet the eligibility criteria if you:

  • Own a property (house and land), and knock down the house to rebuild – this will be counted as a substantial renovation, and therefore subject to the renovation price range of $150,000 to $750,000 provided the total value (house and land) of the property does not exceed $1.5 million pre-renovation;
  • Own vacant land before 4 June 2020, and then build, the total value of the land and new build cannot exceed $750,000; or
  • Buy the land after 4 June 2020, and then build, the total value of the land and build cannot exceed $750,000.

 

Integrity measures and pricing

Building contracts must be at arms-length, that is, the parties cannot be related or connected.

Renovations or building work must be undertaken by a registered or licenced building service ‘contractor’
(depending on the state or territory you live in) and named as a builder on the building licence or permit.

When it comes to price, the terms should be commercially reasonable, and the contract price should not be inflated compared to the fair market price. The rules enable the purchaser to request that the builder demonstrate that the contract price for the new build or substantial renovation is no more than a comparable product (measured by quality, location and size) as at 1 July 2019.

 

Interaction with first home owner grant schemes

The HomeBuilder grant does not exclude first home buyers from accessing other grants and concessions such as the First Home Owner Grant, stamp duty concessions, the First Home Loan Deposit Scheme, and First Home Super Saver Scheme.

Problem areas

As the building contract is entered into before the grant is approved, it will be important that the grant is not essential to finance the building project, just in case the grant is not approved.

In addition, as the builder needs to commence work within three months of the contract date, it will be important to ensure that the contract recognises the commencement dates.

The material and contents provided in this publication are informative in nature only.  It is not intended to be advice and you should not act specifically on the basis of this information alone.

Please don’t hesitate to contact your client manager on (02) 8543 6800 if you have any questions.

Business Matters Newsletter – Q2 2020

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Click here to download the Business Matters Newsletter Issue Q2 2020

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.